Despite The Fast Fashion App Topping The US Charts, Shein's Lead Is Under Fire

Shein took more than a decade for it to catch up to Zara, owned by Inditex SA, as the world's leading fast-fashion retailer. As a result, a new online start-up aims to surpass Shein - at least on one important measure - within the next year.

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Founded by Chinese giant PDD Holdings Inc., Temu is a shopping platform owned by the Chinese e-commerce giant. Last month's report set a lofty sales target for Shein's North American business to achieve a gross merchandise value that matches that of Shein between now and September 1st. Several sources, who requested not to be identified because they are not authorized to speak publicly, say the company will celebrate its entry into the US market on September 1, to mark the anniversary.

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The move is Temu's first step towards dominating the online shopping market in the future. Having made impressive inroads into the less-covered lower-tier segments of the Chinese market dominated by Alibaba Group Holding Ltd. and JD.com Inc., PDD is now hoping that its fledgling app will be able to drive a longer-term business in the overseas market.

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It was said that Temu views Shein as the most important competitor it will face in the short-term, and aims to surpass its dominance within the next few years, according to the people. The firm, however, is ultimately aiming to compete against the global behemoths Amazon.com Inc. and eBay Inc., which sell everything from clothes to kitchenware, according to sources.

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For much of the past few months, Temu's downloads have been soaring on Apple's US app store, where it has been the most downloaded app for much of the past few months. It is estimated that the firm generated about $500 million in gross merchandise volume (GMV) in the US during its first five months of operation, according to data analytics firm YipitData. Almost $200 million was sold in January alone, according to the sales data presented in the report. Temu launched in Canada in February, its second market. 

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Abe Yousef, a senior analyst at app tracker Sensor Tower, said the app's formula of ultra-low prices and flash sales has proved attractive during a recession. As of January, Temu has been downloaded 24 million times since its inception, and it has gathered an estimated 11 million monthly active users, a 47% increase over the December shopping season, according to Yousef.

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“Considering that Temu is well-positioned to continue its aggressive growth strategy among US consumers in spite of the current macroeconomic environment and the support of its parent company, PDD Holdings, Temu is well-positioned to continue its aggressive growth strategy,” he concluded.

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Rising Star

In spite of the difficulty in obtaining comparable data on closely held Shein's finances, the few details that have been revealed so far indicate Temu's aggressive expansion is necessary to meet the company's target.

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In terms of sales, Shein is already at the top of the fast-fashion market in the United States, far surpassing its rivals Zara and H&M, according to YipitData. Trade Algo reported last month that Shein is predicting global GMV to reach $80.6 billion in 2025, an increase of 174% over what it was in 2017. It is estimated that the company's revenue could reach $58.5 billion in 2025, up from $22.7 billion in 2018, according to a report citing a management presentation that was shown to investors.

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The Temu staff have not been given a daily sales goal, as it is a figure that is kept under tight lock and key by the senior management team. As a result, the company has told them to shift their focus away from growing their app's and website's user base and instead focus on increasing the amount of money customers spend on their apps and websites, the people said.

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Requests for comment were not responded to by the company.

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Despite Shein's rapid success, many newcomers still want to get a piece of the pie when it comes to the booming e-commerce market, but Temu is widely seen as the most serious competitor in the space. Currently, the latter is headhunting Shein employees and targeting suppliers, in addition to leveraging the deep pockets, extensive supply chains, and expertise — specifically in the area of consumer data, which allows for rapid changes to product offerings — of parent company PDD, which already controls roughly 13% of Chinese online retail through Pinduoduo.

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There is no doubt that both Temu and Shein offer products that are inexpensive, and easy to obtain, but Temu operates more like a marketplace than a self-run brand like Shein. Temu does not manage the design and production of the products but rather recruits suppliers to provide a list of products, which Temu selects from, and then allows a store to be launched on its platform based on the products available from the suppliers. After the seller sends their products to Temu's warehouses in China, the company takes care of delivering the products, marketing and promoting them, as well as providing after-sales support. 

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Popularity Boom

Temu is betting that a large marketing campaign will drive sales growth in the coming months. This company made its first appearance on the Super Bowl advertising stage in mid-February when it aired two 30-second ads - which usually cost millions of dollars to produce and air - that featured a trendy shopper dancing and twirling in a variety of outfits in an array of colors. The company is also rolling out social marketing practices that are similar to Pinduoduo's strategies in China, including offering discounts, cash rewards, and free gifts to customers who refer friends in exchange for referrals. 

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It appears that the strategy has been paying off, with visits to its website surpassing those to Shein's in January. In the long run, Temu could also become part of a small group of Chinese-owned internet services that have been successful in the US, including Aliexpress, which belongs to Alibaba, and TikTok, which belongs to ByteDance Ltd.