Temu and SHEIN US users close in on Amazon

Users of China-originated e-commerce (EC) platforms such as “Temu” and “SHEIN” have increased dramatically in the United States. The combined number of users of the two apps rose to about 110 million in October, a fourfold increase in a year and nearly 90 percent of the largest platform, Amazon in the United States. While U.S. imports to China, mainly for industrial use, have declined, consumer support for the two apps, which sell cheap Chinese-made groceries, is growing, and the U.S. government is stepping up its vigilance.

Nihon Keizai and data.ai, a research firm based in the United States, analyzed the number of monthly users and downloads of major e-commerce apps by national borders. Looking at the overall number of users worldwide in October, Amazon grew 4% year over year, while Temu and SHEIN combined soared to 2.6 times.

The fastest growth is in the United States. In terms of the proportion of US users in the world, Temu is 41% and SHEIN is 18%, both more than Amazon (15%). Temu sells groceries, while SHEIN sells a wide range of goods centered on clothing. Both apps are now generating nearly five times as many new downloads in the US as Amazon.

Since starting its service in September 2022, in just one year, Temu has surpassed competitors such as eBay and SHEIN in the United States in terms of the number of users. SHEIN, who has been engaged in e-commerce in the United States for nearly 10 years, has also doubled the number of users in the last year.

Temu is a unit of Pinduoduo Holdings, which operates the ecommerce platform Pinduoduo in China, while SHEIN is run by Singapore-based companies that have started in China. Both use autonomous supply chains focused on cross-border transactions that ship cheap goods made in China directly overseas. With cross-border transactions, transactions can be conducted even if there are no offices or facilities at the distribution location.

Business-to-business trade between the United States and China has stalled because of successive embargoes. In terms of the proportion of goods imported to the United States, China was overtaken by Mexico in January-June 2023, falling from the top spot for the first time in 14 years. On the other hand, consumers seeking cheap goods in the face of inflation are increasing personal imports from China.

The U.S. is Amazon’s largest market, but the number of users in October was down 8 percent from a year ago and 15 percent from two years ago. The total time spent on apps decreased by 20 percent from a year ago. On the other hand, the two Chinese companies’ app usage time surged 12 times that of a year ago, showing that they are stealing customers from Amazon.

Both apps are expanding their coverage around the world. In Japan, Temu began offering services in July, and SHEIN also opened a store in Tokyo in 2022. In Japan, the number of users of SHEIN and Temu rose 2.1 times in October from a year earlier. They are 60 percent of Amazon and 40 percent of Rakuten, respectively, and have a smaller presence than in the U.S., but the number of monthly app downloads is nearly six times that of Amazon.

Zhao Weilin, senior researcher at Itochu Research Institute, said of Chinese e-commerce, “efficient logistics and easy-to-use application development capabilities go hand in hand with direct contact with overseas consumers.” In addition to the current price increase, the company said that it is catering to the demand of domestic consumers who are seeking cheaper products.

However, Temu and SHEIN also have many products that are suspected of infringing trademark and copyright rights. Sweden’s Hennes & Mauritz (H&M) filed a lawsuit against SHEIN for copyright infringement, among other things, on the grounds that the designs were copied.

In the United States, the rise of Chinese-funded services is causing concern. In June, a bipartisan congressional commission issued a report that singled out Temu and SHEIN for possible involvement in forced labor in Xinjiang. Considering the tariff exemption system for individuals, it is highly likely that more than 30 percent of the goods exempted in 2022 will be products of two companies.

As for Chinese-funded apps, calls for restrictions on short video app TikTok are intensifying over security concerns. In the United States, it has been banned from use on public terminals in government agencies, and Montana has passed a state law prohibiting the business.

Anupan Chand, a professor at Georgetown University in the United States who is familiar with technical regulations, said, “It is difficult to imagine that even e-commerce will enter the framework of ‘security’, but pointed out that the rise of cheap Chinese e-commerce poses a threat to the US retail industry and Amazon, and may become the object of anti-dumping measures in the future.”