Fast-fashion giant Shein’s throne challenged by rival with one of hottest US apps

Shein’s rapid success has paved the way for a raft of newcomers wanting to get into the booming e-commerce market. PHOTO: REUTERS

BEIJING – It took Shein a decade to catch up with Inditex’s Zara as the world’s top fast-fashion retailer. Now, a new online upstart wants to topple Shein, at least on one measure, within a year.

Temu, a shopping platform owned by Chinese e-commerce heavyweight PDD Holdings, set a lofty sales target for its North American business last month: Report at least a single day of gross merchandise value (GMV) that tops Shein’s between now and Sept 1 to mark the anniversary of its entry into the US market, according to people familiar with the matter.

It is the first step in Temu’s broader plans to dominate the online shopping landscape. The company views Shein as its biggest rival in the near term, and wants to surpass its dominance within the next few years, said the sources. But the firm, which sells anything from clothes to kitchen supplies, is ultimately aiming to take on global behemoths and eBay, they added.

Temu’s growth is already surging and it has been one of the top-ranked apps in the United States for months. The firm achieved about US$500 million (S$673 million) in GMV in the US during its first five months of operation, according to data analytics firm YipitData. In January alone, sales were almost US$200 million, the data showed. Temu was launched in Canada, its second market, in February.

Comparative data on closely held Shein’s finances is difficult to obtain, but the scant details that have emerged indicate that Temu’s target requires its rapid pace of expansion to accelerate.

Shein already dominates the US fast-fashion market, far surpassing rivals Zara and H&M, according to YipitData.

The Financial Times reported in February that Shein predicts global GMV will grow to US$80.6 billion in 2025, up 174 per cent from 2022. Revenue could increase to US$58.5 billion in 2025, up from US$22.7 billion in 2022, according to the report, which cited a management presentation shown to investors.

Temu’s regular employees have not been given a daily sales target – it is a figure held tightly among senior managers. They have instead been told to shift from growing the base of users for their app and website to devising ways to boost how much customers spend, the sources said.

Shein’s rapid success has paved the way for a raft of newcomers wanting to get into the booming e-commerce market, but Temu is widely viewed as the most serious competitor.

The latter is already headhunting Shein employees and targeting suppliers, while also leveraging the deep pockets, extensive supply chains and expertise – particularly in consumer data that allows rapid changes in offerings – of parent PDD, which already controls some 13 per cent of Chinese online retail via its Pinduoduo platform.

While both firms are synonymous with cheap, easy-to-get products, Temu operates more like a marketplace than a self-run brand like Shein. It does not handle design and production, instead recruiting suppliers to offer a list of products, which it selects from and then allows a store to open on its platform. After sellers send products to Temu’s warehouses in China, the company takes care of delivery, marketing and promotion, and after-sales services.

Temu is betting that a huge marketing campaign will drive sales growth. The company made its Super Bowl advertising debut in mid-February, running two 30-second spots – which typically cost millions of dollars to produce and air – that featured a trendy shopper twirling and dancing in an array of outfits. It is also rolling out social marketing practices that are similar to Pinduoduo’s strategies in China, including offering discounts, cash rewards and gifts to customers who refer their friends.

The strategy is bearing fruit, with visits to its website surpassing those of Shein in January. If Temu is able to sustain its momentum, it will join just a handful of Chinese-owned Internet services to have succeeded in the US, including Alibaba’s AliExpress and ByteDance’s TikTok. BLOOMBERG

Join ST's Telegram channel and get the latest breaking news delivered to you.