Chinese sellers on overseas shopping sites, from Temu to Amazon.com, are struggling to turn a profit during this year’s Black Friday sales, as fierce competition and narrowing margins take a toll on their earnings.
A clothing factory owner in the southern trade hub of Guangzhou, surnamed Xie, said Black Friday sales at his Temu store plunged 30 per cent from last year. Another clothing factory worker surnamed Xu, who is in charge of the firm’s Temu business, said the shop offered a 10 per cent discount on products from Black Friday to Cyber Monday, but sales volume was only around 20 per cent higher than usual.
“There wasn’t much profit,” Xu said on Thursday on the sidelines of a Temu event in Guangzhou, capital of southern Guangdong province.
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Since their respective launch in the US in 2022 and 2023, Temu and fast-fashion giant Shein have kicked off an e-commerce war, dangling steep discounts and free shipping to entice shoppers into buying US$10 shirts and US$3 earrings mailed directly from China.
“Though initial estimates show an increase in overall [consumer] spending during this shopping season, there has been competitive pressure due to the emergence of Chinese e-commerce platforms,” said Justin Koh, Shanghai-based director at consultancy AlixPartners. This year’s sales period also started earlier than ever, he added.
Chinese sellers say they are finding it harder to make a profit on overseas shopping sites, such as Temu. Photo: AFP alt=Chinese sellers say they are finding it harder to make a profit on overseas shopping sites, such as Temu. Photo: AFP>
Shein is currently offering discounts of up to 90 per cent on more than 300,000 items through the end of the year. Temu is plastering tags like “Last Day to Save” and “Limited Time Offer” all over its site to woo customers.
Meanwhile, ByteDance‘s fast-rising e-commerce service, TikTok Shop, invited rap star Nicki Minaj to host a live-streamed shopping event on November 24, selling nail extensions from her Pink Friday Nails brand. It broke TikTok Shop records with 3.6 million viewers and 20,000 orders, according to the platform.
In the first half of November, Chinese-backed shopping platforms surpassed their US rivals in terms of sales growth, according to data from Earnest Analytics. Sales at TikTok Shop, Temu and Shein were up 213 per cent, 18 per cent and 16 per cent, respectively, from the previous year. In contrast, sales at Amazon rose by a modest 0.5 per cent, albeit from a much larger base.
Still, merchants said they are finding it much harder to make money this year on both US and Chinese-backed shopping platforms. A Shenzhen-based furniture supplier surnamed Zhang, who sells on Amazon and Wayfair, said recent sales have jumped by two to threefold, “but that’s far from what we saw in 2021, when Black Friday brought a fivefold increase in sales on Amazon in one day”.
Holiday shoppers in New York. Photo: Getty Images via AFP alt=Holiday shoppers in New York. Photo: Getty Images via AFP>
Zhang said he also had to spend 50 per cent more to place advertisements on Amazon. Profitability dropped from above 50 per cent in previous years to just over 10 per cent this time, even though he stopped offering big discounts, Zhang added.
“The cost of operating on Amazon has been climbing,” said Moira Weigel, a social scientist at Harvard University who conducts research on the online marketplace ecosystem.
Sellers on Amazon are responsible for their own marketing fees, fulfilment costs and salaries for employees with e-commerce expertise. In contrast, Chinese platforms have introduced so-called full-custody or half-custody services, which handle much of the operational burden for merchants, according to Weigel.
Temu is one site that offers such options. Guangzhou factory owner Xie said his store runs on the full-custody model, meaning that Temu takes care of everything from pricing to logistics. But the site has set prices so low – sometimes way below cost – that Xie had no choice but to remove a third of the 300 items he had listed.
A US Postal Service employee at work during the start of the holiday mail rush following Black Friday and Cyber Monday. Photo: Getty Images via AFP alt=A US Postal Service employee at work during the start of the holiday mail rush following Black Friday and Cyber Monday. Photo: Getty Images via AFP>
Driven partly by slowing domestic demand, Chinese e-commerce players have flocked to overseas markets like the US, capitalising on the sprawling supply network at home. Amid heightened geopolitical tensions and competitive pressure, however, these companies face increasing challenges in maintaining growth.
PDD Holdings, operator of Temu and its Chinese sibling Pinduoduo, posted a lower-than-expected 44 per cent increase in third-quarter revenue. “Our top-line growth further moderated amid intensified competition,” vice-president of finance Jun Liu said at the time.
Quarter-on-quarter growth in gross merchandise value on Temu was estimated to have slowed to 15 per cent or below in the three months ended September, compared with around 50 per cent in the previous quarter, according to Chinese media outlet 36Kr.
Shein, which is looking to float its shares in London, is also experiencing a business slowdown. Its revenue growth fell to 23 per cent in the first half this year from 40 per cent last year, The Information reported last month.
Adding to the uncertainty, US president-elect Donald Trump pledged late last month to impose a 25 per cent tariff on all products entering the US from Mexico, Canada and China.
Despite questions on whether budget shopping sites like Temu and Shein can sustain their business model built on cut-to-the-bone pricing, rival Amazon has decided to enter the fray.
In November, the US e-commerce giant launched Haul, a new section on its main site that offers goods priced under US$20, targeting budget-conscious shoppers. It is inviting Chinese vendors already operating on Amazon to join the new platform.
