E-Commerce with Chinese Characteristics: How SHEIN, Temu, and TikTok signal a Retail Revolution in the West for 2024.
While the user experience (UX) of e-commerce in the West has largely remained static over the past two decades, recent developments suggest a potential shift on the horizon. In just the past few weeks, three separate narratives have surfaced, hinting at significant changes for Western online retailers come 2024:
SHEIN seems to be getting ready for an IPO — at a pretty lofty valuation.
Last week, for a brief period, the market value of PDD (China’s third-largest e-commerce player) surpassed that of Alibaba for the first time ever.
TikTok has lots of job openings for e-commerce specialists in Europe.
How are these stories connected?
In the past, online retailers in the West have mostly followed Amazon’s lead: e-commerce was always about trying to make shopping easy and efficient, but also a little boring. In China, on the other hand, retailers want to make shopping exciting by providing entertainment and experience.
The head of global e-commerce of a big FMCG brand once told me, for him Amazon’s focus on price as the only differentiating factor destroys brand value, while Alibaba’s and JD’s platforms create it. As a result, luxury brands such as Gucci or Burberry, which would never sell on Amazon, are very happy to be on Tmall Luxury Pavilion.
But these superior user experiences never made it to Western consumers because, historically, Chinese e-commerce giants like Alibaba and JD saw the West primarily as a sourcing market. They were not really interested in selling anything to Western consumers directly. When I visited Alibaba’s headquarters in Hangzhou five years ago, it was obvious that no one there even considered introducing a platform like Tmall to European markets. Inferior AliExpress was all we got. Europe looked too small and fragmented to make a serious effort.
But the landscape is rapidly changing.
PDD becoming worth more than Alibaba has probably sent shock waves through Alibaba’s headquarters. There executives know exactly why this happened: because of the success of Temu, PDD’s western subsidiary. Only one year old, Temu has already made billions in revenue, resulting in the stock price surge.
At the same time, Bytedance, which has been steadily increasing its presence in the Chinese e-commerce market, is now aiming to achieve a similar success in the US. TikTok shops are already generating an estimated $70 million in weekly GMV and will probably come to Europe in 2024.
Temu, TikTok, and SHEIN have proved that there is a lot of money to be made in the West and pose a serious challenge to established players like Amazon or Zalando. Their response has largely remained static, lacking significant innovation and failing to effectively counter the new entrants. At the same time, a stagnant domestic market in China is forcing Alibaba and JD to innovate in order to maintain their growth narratives for global investors.
A potential strategy for these Chinese giants could be to stop fooling around with anaemic projects like AliExpress or Ochama and start a more aggressive expansion into Western markets — following SHEIN & Temu, but with very different target groups.
What would happen if Alibaba or JD would start to sell those high-margin Western brands to Western consumers — but with the superior Chinese e-commerce UX? For the first time, Western brands would have an online retail platform that prioritizes brand experience over mere transactional efficiency. And Western consumers would get a welcome relief from Amazon’s dullness.
Sounds intriguing. But how likely is it to happen, given the past reluctance of these companies to expand beyond their domestic markets?
Three weeks ago, we learned that JD seems to be interested in buying MediaMarktSaturn — which would turn China’s second-biggest E-Commerce company into a real player in European retail. Even if Haniel doesn’t end up selling, this indicates that JD is considering previously unthinkable actions, which might force Alibaba’s hand, possibly accelerating the launch of TMall Europe.
Or how about a really bold move: a potential acquisition of MediaMarktSaturn by JD could prompt Alibaba to buy the remnants of Galeria Karstadt Kaufhof and turn it into a European version of Intime - saving Germany's inner-city shopping districts in the process.
Not likely, I know. But an interesting thought experiment, isn't it?
In scenarios like this, Western incumbents would face a dual threat: the aggressive pricing strategies of fast-moving companies like SHEIN and Temu, and an enhanced shopping experience from Chinese E-Commerce giants.
If this does happen, 2024 could be the start of a transformative era for Western retail, marked by increased competition and innovative consumer experiences.
Then companies like Zalando or Otto, perhaps even Amazon, might suddenly feel like small fish surrounded by giant sharks who smelled blood in the water from prey snared by SHEIN and Temu.
Interesting times ahead. 2024 surely won't be boring. 🚀
Do you want to know more about relevant retail trends in China (like Discovery-driven E-Commerce, Social Retail or C2M) and what Western companies do to counter and use them?
Then check out this special section on my website: Re-Thinking E-Commerce
