WHAT SHEIN TAKES AGAINST PINDUODUO TEMU

PINDUODUO SET ITS SIGHTS ON SHEIN

The menacing Pinduoduo has become SHEIN's biggest opponent.

Since its launch in North America in September last year, Pinduoduo's TEMU has grown all the way, surpassing SHEIN to the top of the North American shopping app list in less than two months. In December 2022, TEMU downloads exceeded 10 million, becoming the most downloaded APP, dominating the list so far.

At the same time, TEMU is attacking everywhere, "storming" more international areas one after another. In February this year, TEMU launched the Canadian station, and on March 13, it officially entered the Australian market, and the next stop seems to be landing in the UK.

WHAT'S MORE, MANY OF TEMU'S ACTIONS ARE DIRECTED SPECIFICALLY AT SHEIN.

The first is the category, just as Taobao started with women's clothing, SHEIN's high growth overseas also relies on the women's clothing category. TEMU can see from the LOGO that the main footwear and bag clothing category, which is the same as SHEIN, and also adopts a very aggressive new strategy: as long as it is the same as SHEIN, Temu will be prioritized on the shelf.

The second is low prices, SHEIN swept the North American market by relying on extremely low prices, in order to keep prices down, SHEIN's profit margin is only 7%. TEMU is a replica of Pinduoduo's route in China, not only exempting the threshold fee and deposit for opening a store, but even eliminating the draw, shortening the settlement time, and the logistics cost is also greatly subsidized, and the seller only needs to bear the delivery cost on time.

In addition, Pinduoduo has the headquarters of TEMU in Guangzhou, competing in the same city as SHEIN, and at the same time offering 2-3 times the salary to recruit people from SHEIN, which can be described as-for-tat. There is even news that TEMU has set an amazing sales target to surpass SHEIN in GMV in a single day by September this year.

COMPARED TO AMAZON, TEMU IS A MUCH BIGGER THREAT TO SHEIN. Because the rise of SHEIN itself is aimed at the sinking market, it is a kind of "leakage" type of dislocation competition. TEMU is on the same track as SHEIN, and it is also a overseas enterprise, and it is very familiar with this set of domestic play, and understanding its enemies is the most terrifying.

So, in the face of Pinduoduo's TEMU, what cards does SHEIN have in his hand to play?

WHAT DOES SHEIN TAKE AGAINST PINDUODUO?

AS A "SENIOR" WHO WENT TO SEA EARLIER, SHEIN DID NOT SHOW WEAKNESS AND TOOK TEMU TO COURT AS SOON AS HE CAME UP.

IN DECEMBER 2022, SHEIN FILED A LAWSUIT AGAINST TEMU, ALLEGING THAT TEMU MADE "FALSE AND DECEPTIVE REMARKS" ABOUT SHEIN WHILE PROMOTING TEMU THROUGH SOCIAL MEDIA INFLUENCERS, AND USING SOCIAL MEDIA UNDER THE IMPERSONATION SHEIN TO INDUCE CUSTOMERS TO DOWNLOAD TEMU'S APP.

IN LAYMAN'S TERMS, SHEIN SUSPECTS THAT TEMU IS LOOKING FOR INTERNET CELEBRITIES TO DISCREDIT HIM AND TAKE THE OPPORTUNITY TO PROMOTE TEMU.

However, such lawsuits often end up being unresolved and cannot set off big storms, and at most can only express SHEIN's tough attitude, which does not play a substantive role and is not an effective means to block TEMU.

In the face of TEMU's offensive, SHEIN also relies on its own excellent supply chain.

Although TEMU benchmarks SHEIN in many aspects, the models of the two are very different, TEMU's typical platform e-commerce, while SHEIN is an independent site. In order to be able to stand up independently, SHEIN adopted the "small order fast return" model and blazed a trail of his own.

The so-called small order fast return is to first batch different styles of products for market testing, and then according to market feedback, the "explosive models" in it are quickly returned to achieve profit maximization while reducing inventory risk, killing two birds with one stone.

In the small order fast return mode, SHEIN's manufacturers can complete the design, patterning, and manufacturing in only 7 days at the earliest, and because the account period turns faster last week, SHEIN's partner manufacturers are often willing to accept hundreds of small orders for production, so the speed and flexibility can far surpass brands such as H&M and ZARA, and stand out from the fast fashion field.

What's more worth mentioning is that SHEIN also has its own MES process management system, through which SHEIN can standardize thousands of suppliers who were originally scattered and have different process standards. Moreover, the system was developed from the supplier's point of view, and the experience is quite comfortable.

In contrast, TEMU's overseas market supply system is not yet mature, and it cannot attack SHEIN's moat in a short period of time.

In addition to the supply chain, another card of SHEIN is membership. The membership system has been proven to stabilize sales and improve user stickiness, and has long become the standard for e-commerce platforms.

In the case of Amazon, Amazon members spend an average of $1,400 a year, providing Amazon with a stable profit growth curve, compared to $600 for non-members. Today, Amazon's paid membership has exceeded 200 million.

In December 2022, SHEIN launched its first membership service in the United States, "SHEINCLUB", with a quarterly subscription fee of $6.99 and exclusive 95% off on more than 100,000 items, as well as other discounts.

If SHEIN can have enough members, it will not only stabilize the confidence of investors, but also prevent users from flowing out to TEMU. So the battle for members, SHEIN had to fight.

Iron also needs to be hard by itself

Strong fortresses are always breached from the inside. SHEIN'S OWN PROBLEMS SHOULD BE PAID MORE ATTENTION TO THAN PINDUODUO'S OFFENSE.

On Trustpilot, an e-commerce review service, overseas consumers rated SHEIN very polarized, with 61% of users giving 4- and 5-star positive reviews, and 32% giving 1- and 2-star negative reviews, with the bad reviews mainly focusing on quality issues.

Many users have reported that the quality of SHEIN's products is uneven, such as buying four or five low-priced clothes, two of which are of particularly good quality, but the others are not good when worn a few times.

The source of this problem may be upstream in the supply chain. Suppliers with SHEIN said that the development order cycle of SHEIN is 5 days, and delivery must be made within 5 days. But they have limited staff, and if they want to meet the deadline, they can only rush to work. If you want to hire more people, at the price given by SHEIN, there will be no profit at all.

As a result, this systemic problem has had a significant impact on SHEIN. In April 2022, SHEIN's valuation was still $100 billion, but today it is only $64 billion, a third of the valuation has been lost.

At the same time, SHEIN's revenue growth rate in 2020 is very fast, as high as 211%; In 2022, it will only be 52.8%, and the growth rate will slow down significantly. Even, SHEIN's net profit declined for the first time, with a net profit of $700 million in 2022, down 36% year-on-year.

OF COURSE, SHEIN IS NOT WITHOUT THINKING OF WAYS TO BREAK THE GAME. Last year, SHEIN began to expand its categories beyond apparel and made tentative price increases to control quality. But now the emergence of Pinduoduo, a fierce rival, has put SHEIN in a dilemma: if it fights a price war with Pinduoduo, then the low profit margin cannot obtain the favor of capital; If the transformation and upgrading, then it is likely to be seized by Pinduoduo and lose the basic market.

SHEIN's situation is very similar to Taobao ten years ago, while wanting to go branded, but unwilling to give up the sinking market, which eventually indirectly contributed to the rise of Pinduoduo.

I wonder if this time Pinduoduo can replicate the previous route overseas and seize food on SHEIN's territory?

Author | Clear air