Caixin Weekly | Temu, SHEIN, AliExpress, and TikTok E-commerce Four Little Dragons Battle Overseas Markets (AI Translation)
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文｜财新周刊 包云红
By Bao Yunhong, Caixin Weekly
文｜财新周刊 包云红
By Caixin Weekly's Bao Yunhong
In 2023, China's e-commerce industry has produced its "Four Little Dragons" in overseas markets: Pinduoduo's Temu, fast fashion retailer SHEIN, Alibaba's AliExpress, and TikTok's e-commerce platform TikTok Shop.
根据市场分析机构data.ai近期发布的报告，2023年，购物类App中，全球下载量和下载量增速最快的前两名都是Temu和SHEIN；速卖通的下载量和下载量增速分列第三、第四；而TikTok是同期全球下载量最大的社交应用，全球月活用户超过10亿。
According to a recent report by market analysis firm data.ai, in 2023, the top two shopping apps in terms of global downloads and download growth are Temu and SHEIN. AliExpress ranks third and fourth, respectively, in download volume and growth. Meanwhile, TikTok is the most downloaded social application globally during the same period, boasting over 1 billion monthly active users worldwide.
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- In 2023, China's top overseas e-commerce platforms, dubbed the "Four Little Dragons" (Temu, SHEIN, AliExpress, and TikTok Shop), have made significant global strides.
- These platforms accounted for over one-third of China’s cross-border e-commerce GMV, impacting markets with low-priced goods and shifting logistics and trade models.
- Compliance and regulatory challenges are major hurdles, with focus on intellectual property, tariffs, and geopolitical tensions shaping the strategies of these Chinese firms.
In 2023, China's e-commerce industry has made significant strides in overseas markets, producing its "Four Little Dragons": Temu (Pinduoduo), SHEIN, AliExpress (Alibaba), and TikTok Shop [para. 1]. A report by data.ai highlights that Temu and SHEIN topped global downloads and growth for shopping apps, with AliExpress ranking third and fourth, respectively. TikTok became the most downloaded social application worldwide, with over 1 billion monthly active users. For 2023, China's exports reached 23.77 trillion yuan, a 0.6% year-over-year increase, while cross-border e-commerce exports hit 1.83 trillion yuan, marking a 19.6% year-over-year rise. China's exports further improved in the first quarter of 2024 with a 4.9% year-over-year growth [para. 2].
The "Four Small Dragons" have fueled the growth of cross-border exports. HSBC's March 2024 report noted that Temu, launched in September 2022, achieved a GMV of $16.5 billion in 2023, while SHEIN's GMV was estimated at close to $45 billion by an insider. Combined, the GMV of these four companies accounted for over one-third of China's total cross-border e-commerce GMV of $350 billion in 2023, with projections set at $500 billion by 2025 [para. 3][para. 4].
Efforts by the Chinese government to support foreign trade expansion include the "cross-border e-commerce + industrial belt" model [para. 5]. Traditionally, Amazon dominated the cross-border e-commerce platform for Chinese companies. However, Temu, SHEIN, and AliExpress have been increasing their global presence. Temu saw 185 million global average monthly unique visitors in early 2024, compared to AliExpress with 164 million and Amazon at 428 million [para. 6].
Chinese platforms are focusing on niche markets that U.S. e-commerce has not fully penetrated, such as low-cost items and non-standard fashion products, causing significant market shifts [para. 9][para. 10]. For instance, the U.S. discount retailer 99 Cents Only Stores ceased operations partly due to competition from Temu [para. 12]. Innovations like Temu's "full consignment" model have lowered industry barriers and impacted traditional logistics structures [para. 14][para. 15].
Compliance has become a crucial area for Chinese e-commerce platforms due to increasing scrutiny and regulations in international markets [para. 33]. TikTok, for instance, faces substantial regulatory challenges, including a U.S. ban unless it separates from ByteDance [para. 34][para. 62]. Similarly, cross-border e-commerce platforms have been accused of exploiting de minimis provisions to avoid tariffs and inspections [para. 43].
Platforms are attempting to adopt semi-managed models to enhance logistical efficiency and meet regulatory demands. This model includes shipping directly from overseas warehouses, reducing delivery times, and handling large items unsuitable for air freight [para. 28]. For instance, SHEIN and Temu have been engaging local logistics and warehousing to support semi-managed services [para. 27].
Competition among the "Four Little Dragons" is intense, exemplified by legal disputes between SHEIN and Temu over issues such as copyright infringement [para. 65]. Temu's adherence to a low-price strategy mirrors Pinduoduo's model, focusing on rapid turnover and consumer price competitiveness [para. 67].
Despite the emergence of these platforms, Amazon remains pivotal, especially with its advanced logistics systems and market dominance [para. 79]. Many merchants diversify their presence across multiple platforms due to varying profit margins and competitive pressures, underscoring the evolving landscape of cross-border e-commerce [para. 110].
China's cross-border e-commerce platforms are increasingly targeting factory-based sellers from industrial belts, aiming to establish global brands and navigate complex regulatory environments [para. 113][para. 125]. The "Four Little Dragons" continue to innovate and expand, reshaping global e-commerce dynamics while balancing between growth and compliance in a challenging geopolitical landscape [para. 146][para. 157].
- Pinduoduo
- Temu, a subsidiary of Pinduoduo, launched in September 2022 and rapidly expanded to 66 countries and regions. By 2023, Temu contributed significantly to Pinduoduo's impressive revenue growth, with the company reaching a total revenue of 247.639 billion yuan, a 90% year-on-year increase. Temu's success is attributed to its extreme low-price strategy, mirroring Pinduoduo's domestic approach.
- Temu
- Temu, launched by Pinduoduo in September 2022, has rapidly expanded to 66 countries and regions. It achieved a GMV of $165 billion in 2023 using a low-price strategy. Temu targets low-cost, white-label products and employs a "full-managed" model, providing comprehensive logistics and return services, which has significantly impacted the international air freight structure. Temu is also pushing for a "semi-managed" model.
- SHEIN
- SHEIN, a leading Chinese cross-border e-commerce platform, has become the third-largest online fashion retailer in the U.S., with 2023 U.S. fashion sales of $8.1 billion. It leverages China’s “small order quick return” supply chain flexibility and has expanded through acquisitions like Forever 21 and Missguided. SHEIN's growth strategy includes empowering acquired brands and third-party merchants with its digital supply chain capabilities.
- Alibaba
- Alibaba's international digital commerce business, AliExpress, saw rapid growth in 2023, with four consecutive quarters of over 40% year-on-year increase. In Q4, AliExpress achieved over 60% year-on-year order growth. AliExpress Chocie is directly competing with Temu by attracting brand merchants and enabling merchant bidding.
- AliExpress
- AliExpress, owned by Alibaba, is one of China's rapidly growing cross-border e-commerce platforms. In 2023, it achieved a 60% year-over-year increase in orders during the fourth quarter. Competing with Temu, AliExpress has introduced a choice program attracting brand merchants and encouraging price competition. It is part of Alibaba International Digital Commerce Group, which saw over 40% growth across four consecutive quarters in the fiscal year 2023.
- TikTok Shop
- TikTok Shop, a key player among China's "Four Little Dragons" in cross-border e-commerce, had a global GMV of approximately $136 billion in 2023. Most of its revenue came from Southeast Asia. In September 2023, it officially launched in the U.S. and is on the cusp of significant growth, despite facing strict regulations and operational challenges in markets like Indonesia and the U.S.
- Amazon
- Amazon remains a key platform for Chinese cross-border e-commerce. In 2023, Amazon held a 39.6% market share in the U.S. and is projected to grow further. Its FBA logistics system offers unmatched fulfillment services. Amazon competes in mid-to-high price ranges and maintains its market position through stringent compliance and logistics capabilities.
- Walmart
- The article mentions that SHEIN is the third-largest online fashion retailer in the U.S., following Amazon and Walmart. It also notes that companies like Gold Cicada Curtains from Zhejiang focus on markets including Amazon and Walmart, in addition to TikTok Shop and Temu.
- Lazada
- The article mentions that Lazada is one of the platforms where the cross-border merchant Yinghua Intelligent operates, alongside Temu, SHEIN, AliExpress, and TikTok Shop. However, it does not provide further specifics about Lazada's performance or role within the wider context of Chinese cross-border e-commerce "Four Little Dragons."
- Forever 21
- In 2023, SHEIN acquired a stake in Forever 21's parent company SPARC. SHEIN utilized its flexible "small order quick return" supply chain model to empower acquired brands like Forever 21, aiming to boost their operations and expand its influence in the fashion market.
- Missguided
- In 2023, SHEIN acquired the British fashion brand Missguided as part of its strategy to rapidly expand its market presence. The acquisition allows SHEIN to inject its flexible and fast-turnaround supply chain capabilities into Missguided, enhancing its overall operational efficiency and competitiveness.
- 99 Cents Only Stores
- In early April 2024, the American discount retailer 99 Cents Only Stores, with over 40 years of history, announced the closure of all its 371 chain stores, and its parent company filed for bankruptcy protection. The chain primarily sold household goods, overlapping heavily with Temu's product categories and price ranges.
- PingPong
- PingPong is a global payment platform that has witnessed a significant increase in users who simultaneously engage in traditional B2B trade and cross-border e-commerce. In the first quarter of 2024, this user base grew by 53 percentage points year-on-year, with Guangdong's cross-border payment users doubling. PingPong's China e-commerce GM, Zheng Zhikun, noted that Amazon remains a primary platform while sellers diversify across new platforms for expanded reach.
- Before 2023：
- Temu was launched in September 2022.
- By 2023：
- SKUs for SHEIN, Temu, AliExpress, and TikTok Shop were considered the 'Four Little Dragons' in China's overseas e-commerce market.
- 2023：
- China's total exports grew to 23.77 trillion yuan with a 0.6% YoY increase.
- April 25, 2023：
- China's State Council issued the 'Opinions on Promoting Stable Scale and Optimized Structure of Foreign Trade.'
- June 2023：
- Temu took actions to strengthen product qualification certifications and enforce fines for violations.
- August 2023：
- Pinduoduo announced the formation of a Legal and Compliance Committee.
- September 2023：
- TikTok Shop officially launched in the U.S.
- March 2024：
- HSBC reported on the GMV achievements of Temu, AliExpress, SHEIN, and TikTok in 2023.
- First Quarter of 2024：
- China's exports grew 4.9% YoY.
- April 3, 2024：
- U.S. discount retailer 99 Cents Only Stores announced closure and bankruptcy filing.
- April 5, 2024：
- DHS announced intensified inspections of de minimis provision-exempt parcels.
- April 24, 2024：
- President Joe Biden signed a bill banning TikTok in the U.S.
- April 2024：
- Amazon started addressing 'variant violations,' leading to suspensions of some seller accounts.
- By 2024：
- Overall trajectory and regulatory responses of the 'Four Little Dragons' continued to evolve.
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