Temu and Shein, the discount darlings from China, are shaking up the U.S. e-commerce scene, making Wall Street sit up and take notice. Their rapid rise is putting pressure on giants like Amazon (AMZN), Meta (META), and eBay (EBAY), as investors brace for the upcoming earnings reports from these major players.
Surging Popularity and Competition
Temu and Shein have stormed the American market with rock-bottom prices and aggressive marketing. Thanks to the huge popularity of their cheap clothes like $10 tops and $5 biker shorts, Shein, valued at $66 billion, makes up 20% of the global fast-fashion market by sales. Temu, which launched in the U.S. in 2022, has flooded online ads and brought us a wide array of affordable everyday products. According to Coresight Research, this boom has really helped boost China’s e-commerce industry.
This has ramped up competition for established e-commerce firms like Amazon, eBay, and Etsy. A Temu spokesperson told CNBC that these Chinese giants are leveraging a trade loophole—known as the de minimis exception—that lets packages under $800 enter the U.S. duty-free. Amazon’s top public policy executive, David Zapolsky, told CNBC that it is a “concerning trend” that might need regulatory attention.
Earnings Reports Under the Microscope
As Amazon (AMZN), Meta (META), eBay (EBAY), and Etsy (ETSY) prepare to announce their earnings, Temu and Shein’s impact is a hot topic. Amazon, for instance, is expected to report revenue of around $148.6 billion for the second quarter, with a notable 63% increase in net income due to cost-cutting measures.
Yahoo Finance notes that while Amazon is focusing on faster deliveries to counteract rising competition, the rise of discount retailers like Temu, which offers much cheaper prices due to its direct shipping model, is a serious challenge. The logistics of shipping directly from overseas can result in longer delivery times, but this approach allows Temu to offer significant savings compared to traditional retailers and Amazon.
Ad Spending and Market Dynamics
Meta has benefited from the ad spending of Temu and Shein, though there are signs Temu might be scaling back its marketing efforts. Barclays data suggests that new shopper numbers for Temu peaked in late 2023 but have since declined. This could be a concern for Meta, which has seen a slowdown in ad revenue growth. On the other hand, eBay’s CEO, Jamie Iannone, remains confident that its unique offerings distinguish it from the competition.
The Long-Term Picture
While Temu and Shein’s rapid rise is notable, some analysts, such as those at Bank of America, believe that their slower shipping times might limit their long-term success. Amazon, for example, is already looking to launch its own discount store, capitalizing on the same trade loophole that Temu and Shein use.
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