The trend of online shopping is projected to accelerate over the next five years in the global market. Driven by the pandemic, consumers worldwide have continued to shop for products online in 2022. Improved logistical infrastructure, access to cheaper products, and wider internet penetration are among the various factors that will keep aiding the growth of the online commerce industry in 2023. To capitalize on the growing market worldwide, Chinese firms are approaching global expansion by leveraging social commerce strategies.
Both Shein and Temu, two of the Chinese e-commerce platforms, are seeking to make rapid inroads in the global market by expanding operations in countries like New Zealand, Australia, and Latin America. PPD Holdings, which owns Temu, announced that the firm will roll out its cross-border e-commerce platform in Australia and New Zealand in March 2023. Shein, on the other hand, is actively hiring for various positions in Mexico, Brazil, Ireland, Belgium, and Turkey.
- Both Temu and Shein are trying to build a business model that is centered around the idea of offering low-priced goods and products to consumers. The strategy has allowed both of these e-commerce giants to record rapid growth. Temu, for instance, has gained widespread traction among North American shoppers with its low-priced strategy. Higher inflation and the rising cost of living meant that more shoppers were looking for discounted offerings, aiding the growth of Temu in the United States and Canada.
With its launch in Australia and New Zealand, Temu is expected to follow the same strategy of providing consumers with low-priced items compared to other e-commerce marketplaces. To attract sellers in the two Oceanian countries, Temu also announced that it will exempt merchants from commission and guarantee fees. Furthermore, the online shopping service will also make the goods listed for shoppers in North America available to consumers in Australia and New Zealand. For Shein as well, offering low-priced items will be the way forward to penetrate the Latin American and other global markets in 2023.
In addition to their low-priced strategy, both Temu and Shein are expected to spend heavily on marketing and promotional campaigns to build awareness and drive penetration among consumers in these newer markets. In the United States, Temu ran a Super Bowl commercial to accelerate its penetration and awareness among online shoppers in the North American market.
Alongside their strategy of low-priced items and marketing spending, Temu and Shein do not depend on local infrastructure. This has allowed the two e-commerce giants to expand rapidly in the global market. Temu, for instance, allows Chinese vendors to sell to shoppers in these global markets. These vendors ship products directly to international customers with the need of storing products in warehouses in the United States, even though the firm is based in a North American country.
In 2023, both of these e-commerce firms are expected to increase their focus on social commerce initiatives to drive growth in the newer international markets. For Temu, the shift in business model from e-commerce to social commerce will be part of the strategy to replicate the success in China.
- Through Pinduoduo and the community group buying strategy, PDD Holdings has gained widespread traction among online shoppers in the Chinese market. Consequently, in 2023, PayNXT360 expects Temu to adopt the community group buying strategy to further accelerate its growth in the North American markets and the Oceanian countries, where it launched in March 2023.
- Shein has also recorded strong growth in the global market by investing in digital marketing and social commerce initiatives. Consequently, PayNXT360 expects the firm to further increase its investment in the area of influencer marketing and social commerce from the short to medium-term perspective, as part of its strategy to gain market share in Latin America and other countries.
For Shein, localized initiatives are also expected to play a significant role in its global expansion, in 2023. Especially, in the Latin American region, the firm is expected to partner with local brands to accelerate its expansion in countries like Brazil and Mexico. Kuaishou, another Chinese-based social commerce firm, has adopted a localization strategy to expand market share in the Latin American region in 2022. In other markets, like the ones in Europe, Shien is expected to adopt a marketplace strategy to compete with the likes of Amazon and other players in the category.
While both of these firms are seeking to rapidly expand their presence in the global market, their connection to China is expected to lead to concerns surrounding data privacy and security. Similar to the ones that have been raised with respect to TikTok and its connection with the Chinese government. Consequently, as these firms continue to grow and expand their global presence, PayNXT360 expects that the scrutiny of these firms will also increase from the short to medium-term perspective. In India, Shein has been already banned from conducting operations owing to concerns regarding national security.
Regardless of the growing scrutiny on the Chinese e-commerce and social commerce firms, both Shein and Temu are expected to make further inroads in the global online shopping sector in 2023 and social commerce initiatives are expected to be a major growth driver for these firms from the short to medium-term perspective. As a result, PayNXT360 maintains a positive growth outlook for the global social commerce market over the next three to four years.