Chinese fashion apps conquer the US market

It is very significant that 3 of the 5 most downloaded shopping apps in the US market are Chinese… a prelude to a trend that, barring immediate political intervention (such as the banning of Shein and Tik Tok in India) can only grow in the future. future, given the success they have among those who rule in all this, the final consumers. And in this consumer dictatorship in which we live, it was already coming that, for example, the ultra-fast fashion brand Shein, firmly installed in generation Z, was going to be the first Chinese global brand born by and for the Internet.

Shein was the latest evolution of the direct e-commerce model from China and the first to become a leading purely online brand in an industry as digitally trend-setting as fashion. Others like AliExpress and Wish came before but their lack of logistics skills made Chinese sellers themselves more confident in Amazon’s logistics granularity. The difference with Shein is that it addresses the entire supply chainfrom design and prototype to manufacturing and shipping, in a verticalization that looks more like a brand store than a random and chaotic selection of products.

The common denominator of all digital businesses is his analogy with an onion: The first layer is the initial model, the one that launches them to success in the form of millions of monetizable users via advertising and/or sales commissions. From then on, all of them, from the GAFAMs to the BATs (the B of Baidu on the international stage can be replaced by Bytedance, the unknown matrix of Tik Tok, omnipresent daily in more than 30 million users and that has already reached over 1 billion downloads), they need to add additional layers of value, that is, additional revenue models. The voracity of Wall Street is not satiated with orderly and organic growth, but rather with promises of exponential growth based on multiple combinations. And from the initial fashion it goes to home and beauty, with which we went from being a niche company to a very real threat to what was offered by the company that, let’s not forget, started selling books under a retail model: Amazon. And Shein is significant because, when analyzed, we see that it is a combination of the best of Amazon, Wish, Zara and social networkss, but with an even more disruptive potential than any previous model, due to the efficiency of its direct-to-consumer value chain.

This potential of Shein is marked above all by its absolute dominance as a symbiotic client of the another great dominator of the last 5 years: Tik Tok. Amazon has never been able to take advantage of social networks in the same way that Google and Meta have not been able to extract any juice from ecommerce. In the dazzling cycle changes to which the digital world has accustomed us, we may be witnessing another turn of the screw and facing the new bosses of the world of ecommerce in the immediate future…

Beyond the usual (although justified) criticism of these winning models (sustainability, environmental impact, child labour, counterfeits, copies, etc.), the truth is that these platforms have achieved unprecedented penetration in international markets thanks to the winning factor of Internet: the price.

Graphical user interface, Graph, Application, Line graph Automatically generated description

Source: Marketplace Pulse

Well, to this select group of internationalized Chinese companies (the two above plus Aliexpress and Wish) is added a new player with, if possible, even greater potential: Temu, which was the most downloaded shopping app in the US in October, ahead of Amazon, Shein and Walmart when it was launched in the app stores only in early September…..It is something like the international version of Pinduoduo and its goal is to be the leading platform for bringing Chinese-made products to Western consumers, once again competing on what matters online: price.

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Graph, Line graph Automatically generated description

Source: Marketplace Pulse

Let’s remember what is the business model of its parent company, Pinduoduo, listed on the American stock market since 2018, one of the giants of the giants of the social and interactive e-commerce from China. It processed $383 billion in GMV from 868 million active buyers in China in 2021. Pinduoduo built its business on group buying, social commerce, and gaming, all under a consumer-to-manufacturer (C2M) model.

In the fight without quarter between the masters of the Chinese barracks, Alibaba and Tencent, a new model had been introduced only 4 years ago that meant reducing (even more) the traditional value chains and putting the entire distribution sector in check ( and, probably, to the brand concept itself) in the short-medium term.

Pinduoduo started in 2015 to lead a new digital distribution scheme called C2M (Consumer To Manufacturer) with a value proposition that never fails on the Internet: offer the consumer cheaper products. How? Through group purchases, a system that can be fully viralized on social networks (We Chat, in this case) in which friends and family get together to obtain a volume discount on products delivered directly from manufacturers, without any additional intermediary. The consumer gets ridiculous prices and the manufacturers (if they manage to resolve the inevitable conflict with the traditional channel) have an effective model for reaching the consumer, keeping the traditional distribution margin.

The model also represents a unique option to be able to offer infinite customizations of the product in which, basically, “consumers ask, the manufacturer delivers”.

Temu assumes a version, still primitive with respect to her Chinese sister, of a a concept that, in the immediate future, will integrate the manufacturer’s direct prices with the community logic of social networks: the greater collaboration with my friends, the better prices. Of course, in the US market it already offers 16 categories to choose from, including fashion, jewelry, home and gardening, electronics, office supplies, pet supplies… and even industrial supplies, giving like someone who doesn’t want the thing, a lap of nut to B2B, scarcely transactional to date…..). In short, if already more than 50% of Amazon Sellers worldwide are Chinese, this type of model can provide even more disintermediation opportunities for those who have the upper hand in the future: the manufacturers (who, despite all efforts, remain majority Asian).

Worst of all, the current macroeconomic context contributes nothing to these models but a tailwind: the closer we are to stagflation, the greater the interest of citizens in seeking cheap prices, in a virtuous circle that does not favor the interests of Western companies and that it represents pure gasoline for these new disruptive distribution models.

And Europe? Without present or future digital champions, its main metrics in the digital economy are the number of sanctions imposed on the GAFAM (Chinese companies, for the moment, venture little into the European bureaucratic hell, beyond the bet of Aliexpress), the amount and quality of administrative obstacles for the creation (and maintenance) of companies and in increasing the levels of inefficiency of public management to suffocating extremes. Let others innovate…

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