According to experts, discount e-commerce is expected to rule the world during the crucial forthcoming Christmas shopping season in the West and Singles’ Day in China.
Platforms in China, the largest e-commerce market in the world, have recently spoken of a “value-for-money battle” fueled by financial uncertainty and a slower-than-anticipated retail rebound after the easing of COVID-19 limits in late 2017.
While this is happening, consumers in much of the rest of the world—from Southeast Asia to North America and Europe—are under the spell of quickly expanding platforms like PDD Holdings’ (PDD.O) Temu and Bytedance’s TikTok Shop, which import low-cost goods from China at a time when many people are concerned about the cost of living.
China has always been a significant exporter of a wide range of consumer goods. Still, its most recent export trend—its e-commerce marketplace dynamics—to the rest of the globe has upended the online retail industry.
The final quarter of the year, encompassing the crucial Christmas season and China’s biggest shopping festival, appears to be shaped by low-cost platforms in China and foreign corporations shipping from the country.
“These marketplace dynamics that first emerged from China, or were invented in China, are now dominating the Western world,” said Sharon Gai, a former global key accounts head at Alibaba and the author of “E-commerce Reimagined.”
“(Other online retailers) are seeing this insurgence of these cheap Chinese goods that are flooding in from the likes of Temu and Shein and their boats have been rocked,” she claimed. They are unsure about their ability to compete.
However, the trend toward low-cost platforms is not occurring in a vacuum; it is partly supported by macroeconomic challenges facing different markets, such as China’s economic slowdown and inflation that is putting pressure on consumer spending.
Fast-rising discount rivals like Pinduoduo and Douyin in China and Temu and Shein, which have expanded their services to markets in Latin America, some Asian markets, and countries from Canada to Australia, are investing billions of dollars in subsidies and discounts to gain market share among customers who prefer to buy $10 dresses and $5 headphones over more expensive items.
Amazon plans to increase discounts during its “Prime Big Deal Days” on Oct. 10-11.
“From an e-commerce standpoint, you definitely notice the massive amounts of discounting that are currently occurring, even on Amazon,” Humphrey Ho, U.S. managing partner at digital marketing agency Hylink Digital, said.
With the entry of TikTok Shop, which in the United States will likewise focus on Chinese-made items, as Shein and PDD Holdings’ Temu have done with success, the fight for the bottom of many marketplaces will only grow more fierce.
During the American Christmas season, TikTok Shop is already preparing retailers to give significant discounts and promotions. The business is eliminating merchant fees to cover the expenses of such discounts and entice additional sellers to move their goods to TikTok Shop and away from Amazon.
Indonesia is considering outright banning e-commerce on social media to safeguard offline retailers in response to worries that TikTok Shop will swamp the market with inexpensive items.
VACUUM VALUE
A void at the low-cost end of e-commerce that has been there for a while is filled by the growth of inexpensive online companies’ market share internationally; in the past, many of the world’s prominent platform firms concentrated on selling higher-margin products to generate profitability.
The web experience for cheap retailers was lacking. According to tech researcher Rui Ma, who focuses on Chinese and American businesses, Discount retail still has a ton of space to develop.
Executives all around the world are now concentrating on pricing pressures as low-cost internet merchants grab more and more market share. During a conference call with investors last month, Trudy Dai, CEO of Taobao and Tmall Group, stated that the “value-for-money battle will continue and will be an area of major investment” in response to the Chinese e-commerce giant Alibaba’s most recent quarterly profits report.
Although industry giants JD.com and Alibaba grew more quickly than anticipated in their most recent quarters, PDD Holdings outpaced them with a 66% year-over-year revenue increase as its international shopping site, Temu, and discount e-commerce platform Pinduoduo continued to experience strong growth overseas.
Although current structural and macro conditions have facilitated this race to the bottom, a change in larger trends may also result in a change in focus for both e-commerce platforms and customers.
“Inside China, the platforms are only now responding to a crisis in customer confidence. Because they are experiencing financial instability, consumers in the West are looking for cheaper goods, according to Ho.
“Consumers will always look to upgrade if the economy is doing well. If the economy starts to improve, that might impact and slow the expansion of these platforms (centered on discounts).
