TEMU USA sued SHEIN again, and cross-border competition began to "flip the table"

According to foreign media reports, TEMU, a subsidiary of Pinduoduo, filed a lawsuit in a court in the District of Columbia on December 13, accusing rival SHEIN of using "mafia-style intimidation" to coerce suppliers who also cooperate with TEMU.

Boston-based WhaleCo Inc (operating as TEMU in the United States) claimed that China-based Singapore-based rival SHEIN abused intellectual property legislation to prevent merchants and suppliers from working with TEMU, according to the filing.

In the document, which was filed by TEMU, it was also mentioned that SHEIN had detained merchant representatives in its office for several hours, confiscated their electronic devices, and threatened merchants with penalties if they did business with TEMU.

According to a report by Yicai, it was also mentioned in the public indictment that when TEMU was launched in the United States, SHEIN began to revise the "Exclusive Trading Agreement" to seize the intellectual property rights of suppliers, among which TEMU believes that the "Exclusive Trading Agreement" has three key revisions worth noting:

The Supplier shall allow SHEIN to publish, display, copy, improve or otherwise use the Supplier's products and related styles, force the Supplier to transfer the intellectual property rights of the images, photos or videos of such products to SHEIN, and prohibit the Supplier from using or displaying any of the same styles (as on the SHEIN platform) on any third-party platform.

TEMU argues that SHEIN's exclusive deal agreement with ultra-fast fashion suppliers unduly seized the suppliers' intellectual property rights to prevent the suppliers from listing and selling similar products on TEMU or other retail platforms.

"We sued SHEIN because their behavior has escalated recently. They began to illegally detain merchants, forcibly ask for their mobile phones, steal our merchant accounts and passwords, steal our trade secrets, and force merchants to leave our platform. According to foreign news reports, a spokesperson for TEMU confirmed that the alleged violations involved Chinese suppliers.

In addition, the lawsuit also alleges that SHEIN poached TEMU's core marketing and advertising business personnel.

"We believe that this lawsuit has no merit, and we will actively defend ourselves," SHEIN responded to this, according to foreign news reports.

China's cross-border e-commerce goes overseas and faces competition from all over the world. However, at present, it seems that the competition between China's cross-border platforms is even more tragic, and it has reached the point of directly "flipping the table". Behind this legal action, there is a game about the cross-border e-commerce market structure.

The back wave pushes the front wave

As the most high-profile cross-border e-commerce platform at present, the contradiction between SHEIN and TEMU has been around for a long time.

As early as December 2022, SHEIN filed a lawsuit against TEMU in a U.S. court, alleging that TEMU allowed KOLs on social media to make derogatory remarks about themselves, and TEMU also tried to induce consumers to believe that TEMU was brand-related to SHEIN, so as to deceive customers into downloading the TEMU app.

In March this year, SHEIN once again accused TEMU of plagiarism and infringement, accusing TEMU of trademark counterfeiting and infringement, copyright infringement, commercial defamation, and unjust enrichment. TEMU, ON THE OTHER HAND, COUNTERED THAT SOME OF THE ALLEGEDLY INFRINGING IMAGES WERE NOT REGISTERED, SO SHEIN FAILED TO FULFILL ITS COPYRIGHT CLAIMS.

Subsequently, TEMU also launched a counterattack. In July this year, TEMU filed an antitrust lawsuit against SHEIN in the federal court in Boston, arguing that SHEIN "used its dominant market power to force clothing manufacturers to sign exclusive agreements with them to prevent them from cooperating with TEMU". In addition, SHEIN also sent a large number of false notices of copyright infringement to TEMU, disrupting the sales of its products. As a result, more than 10,000 products have been removed from the shelves since October last year.

In October of this year, SHEIN and TEMU submitted a joint statement to the courts of Chicago and Boston, asking the judges to dismiss the two cases in which the two sides had sued each other "without prejudice", and the two sides temporarily "truce".

Behind the-for-tat confrontation between the two platforms, it also fully reflects the fierce competition between cross-border e-commerce in the North American market. It also means that the two platforms with low prices as their core selling point are inevitably head-to-head.

After all, before TEMU entered the U.S. market, SHEIN was in the limelight in the field of cross-border e-commerce for a while.

Since 2018, with the advantage of low prices, SHEIN has successively entered the United States, France, the United Kingdom, Japan and other countries and regions, and surpassed ZARA and H&M, occupying 30% of the market share of fast fashion in the United States.

According to data from Apptopia, a mobile intelligence company, SHEIN's installs will exceed 229 million in 2022, surpassing Amazon to become the most downloaded app in the United States. In April 2022, SHEIN's valuation has risen to $100 billion, making it the second largest company after ByteDance and SpaceX.

The arrival of TEMU threatens SHEIN's existing market structure.

As a latecomer, TEMU has been learning Xi SHEIN's strategy. According to Bloomberg, when TEMU was launched in the United States in September last year, it set a goal of surpassing SHEIN in terms of total merchandise value within one year.

The back wave pushes the front wave. By the end of January 2023, TEMU has been downloaded nearly 20 million times worldwide, of which North American users account for more than 90%.

On February 13 this year, TEMU appeared in the "Super Bowl", known as the Spring Festival Gala in the United States, and according to media reports, this move has brought 20 million new users to TEMU one after another. Even TEMU has issued a public statement that Super Bowl ads are 10 times better than the average ad.

In the following March, TEMU released a signal to the market, aiming to surpass SHEIN's North American market in GMV by September 1 this year, and will invest 20 billion yuan. By July, TEMU had spent more than $10 million on Facebook and Google in a single day.

With the support of good performance, TEMU began to enter more countries and regions. On April 21, TEMU was officially launched in the UK, and since then, TEMU has successively opened sites in Germany, the Netherlands, Italy and other European countries. At present, the TEMU platform has reached more than 40 countries, and the daily export volume of Duoduo cross-border parcels exceeds 400,000, with an average daily cargo weight of about 600 tons.

ACCORDING TO MEDIA REPORTS, WITHIN A YEAR OF ITS LAUNCH, TEMU WAS LAUNCHED IN 47 COUNTRIES AROUND THE WORLD, WITH 200 MILLION APP DOWNLOADS AND 120 MILLION PEOPLE OPENING IT IN SEPTEMBER, HALF OF WHOM WERE FROM OUTSIDE THE UNITED STATES.

On the other hand, SHEIN itself has encountered challenges.

In 2022, SHEIN's revenue will be $22.7 billion, a year-on-year increase of 52.8%, compared with the 211% increase in 2020 and the 60% increase in 2021. In addition, in 2022, SHEIN's net profit declined for the first time.

According to data from China Merchants Securities, from March to August 2022, the number of daily active users of SHEIN only maintained a single-digit month-on-month growth for many months. In July 2022, SHEIN even experienced a 4% month-on-month decrease in DAU.

Because of this, in the latest round of financing in February this year, SHEIN's valuation fell to around $65 billion, evaporating by more than one-third.

On the other hand, TEMU is shaking SHEIN's market position with lower prices. According to the data released by Zheshang Securities, TEMU can achieve 53%-80% of the price of SHEIN in various categories such as shoes and clothing.

In such a competition, in March 2023, among the top five app store programs in the United States, TEMU ranked first, and SHEIN ranked fourth.

SHEIN is gradually opening up under pressure

In the face of the fierce attack of latecomers, SHEIN is also making changes.

The most significant change is that the SHEIN platform process has been significantly accelerated. In May this year, SHEIN officially opened the platform model, mainly for home, beauty and electronic products, which are also the products sold by TEMU in the US market. Even Xu Yangtian, the founder who has always been low-key and mysterious, rarely publicly said, "More third-party sellers will be introduced through the platform model." ”

According to media reports, SHEIN has a wait-and-see attitude internally about whether it is a platform, and even held a debate tournament to discuss, and the arrival of TEMU has accelerated this process.

However, this also poses greater challenges to SHEIN, including a series of infrastructures such as logistics, warehousing, and back-end management, which need to be further built, and also face more complex audits, traffic distribution, and the reshaping of merchant management mechanisms.

However, SHEIN's platform-based transformation is not entirely to compete with TEMU, but is closer to Amazon from the perspective of model.

In the research report, Essence Securities described the differences between the two platforms as follows: SHEIN includes three operating models: the new proprietary model, the full custody model, and the POP model, of which the new proprietary model is the dominant one; the TEMU model is similar to the full custody model of SHEIN, which is a quasi-proprietary operation model rather than a pure platform, and the final pricing of commodities is determined by TEMU.

Under the new self-operated model, SHEIN requires brands to have the ability to have an annual GMV of more than $200W in a single or multiple Amazon stores. And unlike TEMU's full custody model, brand merchants who settle in SHEIN have more operational permissions.

The person in charge of a cross-border daily use brand said that they have settled in SHEIN, but they will not consider TEMU for the time being, unless TEMU opens up the operation of the store and allows the brand to ship in the United States. "I'm going to run it myself, and I won't leave it to them, because then the user experience will be good. ”

In order to further attract merchants to settle in, SHEIN has officially launched the Million Seller Program, which will help 10,000 sellers around the world achieve annual sales of more than $1 million and 100,000 small and medium-sized sellers reach $100,000 in the next three years.

However, although the platform operation strategy is different, the price competition still does not stop. According to media reports, some SHEIN investment promotion personnel said that under the competition, SHEIN buyers will reduce prices to a certain extent. Some sellers speculate that SHEIN may conduct price comparisons within TEMU and advocate bidding.

For the pattern of China's cross-border e-commerce going overseas, it is too early to comment on the wins and losses only based on the current war situation. However, in the fierce competition, how to grasp the sense of legal boundaries is an important lesson for these cross-border e-commerce upstarts. (This article was first published on the Titanium Media App, author | Xie Xuan, editor - Fang Yu)