Shulou(Shulou.com)11/24 Report--

With the flow, the profit is low.

Author / IT Times reporter Jia Tianrong

Editor / Qian Lifu Sun Yan

Domestic cross-border e-commerce giants are racing in overseas markets.

Launched in the North American market in September last year, it topped the list of free shopping apps on the iOS platform in the United States a month later, and five months later it appeared in the Super Bowl of the "Spring Festival Gala." the rise of Temu can be called a "blitzkrieg". It has been downloaded more than 7000 times, surpassing Amazon and Wal-Mart.

Not only Temu is popular, but SHEIN, another cross-border e-commerce platform based in China, entered the US market as early as 2017 and quietly grew into a global cross-border e-commerce unicorn in a few years, with a valuation of $100 billion in 2022.

SHEIN adopts a unique "small single fast reverse" supply chain model, while Temu is a full escrow model, which achieves remarkable results with extremely low price and efficient operation.

But for businessmen, they "love and hate" the platform, and their low profit margins make some businesses hesitant to enter the platform. The two platforms are also "tired of each other". Temu and SHEIN have been "torn" for a long time, but they will eventually return to the competition of the supply chain.

1. Is it sweeping the overseas market? give me a cut! " Are you familiar with such a scene? Many years ago, pinduoduo became popular in China by virtue of the bargaining model, and quickly "opened up and expanded his territory."

Today, the trend has swept abroad, with social platforms such as Twitter and Facebook full of foreigners begging for a "cut", as well as brainwashing ads, discount codes and other "viral" marketing. Today, pinduoduo's cross-border e-commerce platform Temu is constantly expanding its new sites around the world, becoming the new "top stream" of cross-border e-commerce App.

In July, after launching its site in Japan, Temu soon took the second step in expanding its Asian market, officially launching its South Korean site. According to reports, the prices of goods sold by the Temu South Korean platform are mainly in the price range of 1000 won to 30000 won (about RMB 50.168), which is much lower than that of other mainstream Korean e-commerce platforms, and offers large coupon discount activities as well as free freight and free delivery services prominently on the home page.

So far, pinduoduo Temu has opened 27 overseas markets around the world, including Asia, Europe, North America, Latin America, Oceania and many other regions.

Compared with Temu, which is famous for its strong marketing social network, another cross-border e-commerce platform, SHEIN, appears somewhat mysterious and low-key, from wedding dress foreign trade to fast-fashion women's wear independent station, and now full-category e-commerce. Since entering the US market in 2017, SHEIN has quietly grown into a global cross-border e-commerce unicorn in just a few years.

Different from traditional e-commerce, SHEIN adopts a unique "small single fast reverse" supply chain model, which uses a very small single volume to test the market, adjusts the plan according to consumer feedback, its flexible supply chain enables it to produce new products quickly, and attracts a large number of young users through global marketing. Globally, SHEIN has a huge fan base on social media platforms such as Facebook, Instagram and TikTok, and the effect of online celebrities is obvious.

The fully managed model first launched by Temu is famous for its extremely low price and efficient operation effect. Under the full escrow mode, the merchant is only responsible for the supply, and the rest of the pricing, operation, logistics and after-sales links are handed over to the platform. This model brings worry-free operation for factory sellers with obvious advantages in the supply chain. Temu has attracted a large number of factory sellers to settle in, established an absolute price advantage, and successfully gained a firm foothold.

Temu's GMV reached $635 million (4.56 billion yuan) in May, according to research firm YipitData.

2. Low-profit "dissuade" merchants for merchants, the rise of cross-border e-commerce such as Temu and SHEIN has brought them new development opportunities, and many of the first batch of people who "eat crabs" have already tasted the benefits. But now, many businesses have concerns about whether they can make money or not, so they are hesitant to enter the platform.

Zhao Yuan (a pseudonym), a businessman engaged in cross-border e-commerce in the home industry, believes that from the merchant's point of view, any valuable traffic tool needs to be grasped, but according to her observation, the performance-to-price ratio of the major cross-border e-commerce platforms has yet to be considered.

Zhao Yuan believes that the advantage of platforms such as Temu and SHEIN is that the platform facilitates low-cost drainage through high investment in traffic. At the same time, some categories need to be invited before businesses can move in, so homogenization competition is relatively less. These are the bright spots that attract businessmen. But because the profit margin is too low, it will make many businesses feel discouraged. "High-quality platforms will bring their own traffic, and high-quality suppliers will also create traffic, which is mutual achievement." Zhao Yuan said.

Zhao Yuan told the IT Times that some colleagues chose to join the platform because historical experience shows that the operating cost of moving in early is much lower than that of staying late. However, after some consideration, Zhao Yuan did not do so: "the profit margin is too low, by contrast, factory-based foreign trade companies may be more suitable to move into these platforms."

Another businessman said: "regardless of whether I make money or not, I will clear the stock and use it to find it really fragrant." Inventory overstocking is a near-fatal core contradiction in both manufacturing and textile and clothing enterprises. for many foreign trade companies, these cross-border e-commerce platforms can help them ease inventory pressure. "the balance between low profit margins and inventory waste or even losses is self-evident." This person said.

On the other hand, the full escrow model of cross-border e-commerce also gives some merchants a sense of powerlessness. Wang Xiang (a pseudonym), who is engaged in cross-border e-commerce such as clothing accessories, has been stationed on the platform for four months. all he has access to is "delivery", and even the audience and target market of his own products on the platform are "not very clear".

Wang Xiang told the IT Times that at first he chose to give it a try because he saw that people around him were doing platform-like cross-border e-commerce. In the sales process, Wang Xiang is only responsible for uploading the product store and setting the purchase price, which is selected by the buyer of the platform and then shipped to the designated warehouse, and all other operational sales processes are operated by the platform personnel.

As for the effect of entering Temu, Wang Xiang said that it was "average". On the contrary, it was the platform's sales strategy that had a certain impact on itself: "some people will return the whole delivery with one defective product in a package, wasting a lot of manpower and material resources. Moreover, the price of the platform is so low that we have no profit to make."

3. The struggle for the "roll king" is surging, and the undercurrent between the platforms is also surging.

Just recently, Temu filed a new lawsuit in the federal court in Boston, accusing SHEIN of violating the US antitrust law and intensifying market competition. According to Temu's indictment, SHEIN had more than 75 per cent of the US ultra-fast fashion market by 2022. SHEIN uses its dominant market position to force clothing manufacturers to sign exclusive agreements, which leads to higher prices of Temu goods and fewer products for consumers to choose from, hindering its expansion in the ultra-fast fashion market in the United States.

Before that, SHEIN had accused Temu of working with online celebrities to denigrate SHEIN on social media.

At the beginning of entering the US market, Temu regarded SHEIN as its biggest competitor. In order to adjust the low price strategy frequently for standard SHEIN,Temu, the price of goods is even reduced to 53% of SHEIN, and the price of some goods is even as low as 30%. With its constant penetration of low-price tactics, Temu has successfully achieved an excellent performance of nearly 20 per cent in US sales over SHEIN.

AliExpress also fought a "turnaround" by quickly following the fully-hosted model. As of March 2023, the overall user size of AliExpress increased by 45% year-on-year, and the number of orders increased by 50% year-on-year, a record high. AliExpress even surpassed the local e-commerce platform Coupang in the South Korean market, winning the first place in shopping App downloads.

Data.ai, a third-party data agency, recently released a ranking of iOS users in global shopping App. SHEIN ranked 2nd, Alibaba Global Express ranked 7th, pinduoduo Temu ranked 17th, and Douyin overseas version of TikTok also took the lead in its cross-border business.

After taking the lead in testing the waters in Indonesia in October 2022, TikTok Shop Mall has fully landed in Southeast Asia in the first half of this year. TikTok, a short video social software, plans to launch its own e-commerce platform in August to sell Chinese-made products in the United States, according to the Wall Street Journal.

According to the report, TikTok is seeking to replicate the success of SHEIN and Temu in the United States, and the TikTok e-commerce platform will also be responsible for the storage and transportation of Chinese manufacturers and merchants in the United States.

When the "four Little Dragons" are "rolled up" overseas, it is bound to lead to ebb and flow again. In fact, whether it is a litigation war or a price war, the game between cross-border e-commerce will eventually return to the competition of the supply chain.

On the other side of the supply chain, whether it is clearing inventory or fighting for traffic, it is not regarded as the victim of the "volume" of the platform, and the decisive reason for businesses to cast their final vote is to see real profits.

This article comes from the official account of Wechat: IT Times (ID:vittimes), by Jia Tianrong

Welcome to subscribe "Shulou Technology Information " to get latest news, interesting things and hot topics in the IT industry, and controls the hottest and latest Internet news, technology news and IT industry trends.