A Chinese budget shopping app aired its first ever U.S. ad on February 12 during the Super Bowl, the U.S. National Football League’s annual championship game. Its name is Temu, which is owned by Pinduoduo, an app targeting lower-income consumers by offering heavily discounted products. Just under six months old at that point, Temu was already one of the most downloaded free apps in the U.S. on Apple’s App Store and Google Play.
The 30-second commercial, which ran twice, featured a curly-haired woman trying on a stream of outfits, all available at killer discounts, with the simple touch of her smartphone. Its final message asked 100 million U.S. viewers to “download Temu and shop like a billionaire.”
Most Super Bowl 30-second ad spots cost between $6 million and $7 million, making Temu’s 60 seconds on the air one of the most expensive ad slots in the history of the event.
Mind-blowing price tags
Following its introduction in the U.S. in September 2022, Temu soon became popular with shoppers, overtaking American e-commerce giant Amazon and Chinese fast fashion brand SHEIN. In 2023, Temu has so far further accelerated its expansion, opening its Canada site in February and entering Australia and the United Kingdom in March, and plans to fully cover the 27 countries of the European Union within the next 12 months.
“There is a gap to sell products from more cost-effective supply chains in China to American consumers,” Qin Tianyi, investment director at angel investment firm ZhenFund, told China Newsweek. He believes Temu’s strategy for entering overseas markets is clear, because “the U.S. market lacks a Taobao.” Founded by Alibaba Group, Taobao is one of the world’s leading online marketplaces and arguably an integral part of Chinese society.
According to figures from the U.S. Department of Commerce, total e-commerce sales volume in the U.S. came in at roughly $1.03 trillion in 2022, up 7.7 percent from the previous year, exhibiting comparatively low growth compared with previous years.
However, global management consulting firm McKinsey & Company reported that the total uplift in e-commerce penetration, from the onset of COVID-19 until March 2022, was 33 percent. People began shopping online in droves at the start of the pandemic, when they didn’t have much of a choice. But the McKinsey report indicated many people have since continued to enjoy the convenience that e-commerce offers. Even when brick-and-mortar stores reopened, spending in online channels continued to climb.
And in light of the country’s persistent inflation and subsequent decline in consumer confidence, cost effectiveness has become an important factor in consumer decision-making.
The COVID-19 pandemic has greatly reduced the spending capacity of overseas markets. While the traffic in China’s domestic market has peaked, the penetration rate of online consumption in the overseas markets needs to be increased, meaning Chinese Internet giants should seek expansion overseas.
Figures from American analytics firm Sensor Tower showed that as of March, Temu had more than 50 million registered users and 20 million active users, generating an average monthly turnover of $1 billion—exceeding that of SHEIN. The latter, which has been engaged in the overseas market for more than a decade, now realizes it faces an opponent it can no longer ignore.
In an interview with The Economic Observer, a weekly Chinese newspaper offering news and commentary on politics, economy, finance and culture, Cui Lili, Executive Director of the Institute of E-Commerce under the Shanghai University of Finance and Economics, said that in the North American market long dominated by Amazon, Temu’s swift climb to success has indicated how the company has poured a lot of money into expanding its overseas market share.
This year’s Super Bowl commercial aside, the app has launched extensive ad campaigns across social media platforms such as Facebook, Instagram and TikTok. In January alone, Temu distributed at least 6,400 Facebook advertisements, The Economic Observer further reported.
“Establishing brand awareness in overseas markets is the hardest part,” Cui said. According to her, China’s cross-border e-commerce firms should fully play to their respective abilities and in reality already do initiate differentiated marketing strategies.
For instance, SHEIN relies on thousands of smaller suppliers that create small batches of inexpensive apparel; TikTok has combined content, creators and commerce to become an online shopping destination; Temu’s bargain prices are an experiment in cutting out intermediaries by allowing Chinese vendors to sell their products directly to American consumers.
“It is workable for these Chinese cross-border e-commerce platforms to expand their shares in overseas markets, as ‘all roads lead to Rome’,” Cui added.
World-class?
Yu Xuehui, head of the Cixi E-Commerce Association in Ningbo, Zhejiang Province, told China Newsweek that the competitiveness of a mature cross-border e-commerce platform lies in not its prices, but in its branding based on a lower price-performance ratio. “Chinese merchants have recognized that to establish themselves in the international market, they need to have reliable products and build a trustworthy brand,” he said.
According to Yu, the early stages following establishment do allow e-commerce platforms to attract new users with low prices, but this model will not work well at every turn or in the long run. Sustainable development will come about only when all parties involved are able to turn a profit.
Hong Yong, an associate researcher with the E-Commerce Institute under the Chinese Academy of International Trade and Economic Cooperation, stated China’s cross-border e-commerce platforms still have a long way to go before they can become super platforms like Amazon.
“Amazon is committed to providing fast and reliable logistics and delivery services to ensure user experience and loyalty. China’s cross-border e-commerce platforms need to strengthen their capability in this regard,” Hong told China Newsweek.
“Moreover, Amazon has become a well-known brand among global consumers and enjoys both a high reputation and credibility. Chinese cross-border e-commerce platforms may improve their brand awareness and reputation by providing high-quality goods and services and actively engaging in social media marketing and brand promotion,” he added.
According to Hong, challenges and uncertainties will only increase as China’s cross-border e-commerce platforms go global and the industry further develops. “Chinese cross-border e-commerce enterprises must redesign their operations accordingly in overseas markets, given cultural backgrounds, consumption habits, legal systems, etc., all differ. They need to overcome these differences to ensure their products, marketing and services are in line with local regulations,” Hong said.
-The Daily Mail Beijing Review
