AliExpress and Temu,

the Amazon of China

Online retailers are threatening brick-and-mortar sellers from behind the scenes. If you feel like you’re quietly losing customers, and it seems like every other store is experiencing the same, you should be suspicious of online retailers. There are two online companies in China that offer direct-from manufacturer goods for best prices and fast shipping. Along with their strength, we’ll look at their weaknesses and how you can exploit them as a brick-and-mortar seller.

AliExpress and Temu: who are they?

AliExpress: It launched in 2010 and now has 100 million users worldwide. While it is far behind Amazon’s 300 million users, Aliexpress offers similar products and services at a fraction of the price of Amazon. By sourcing goods directly from Chinese manufacturers, the company achieved unbeatable price competitiveness. They also offer exceptional customer service, including full refunds if an item is damaged in transit or arrives late.

Temu: The parent company is PDD Holdings (hereinafter referred to as Pinduoduo). Temu’s mobile app launched in September 2022, and in just four months, it became the eighth most downloaded app in the U.S., eventually rising to the top. One of the reasons Temu has spread so quickly is that it fulfills the desire to buy things without having to worry about your wallet. Temu’s slogan is “Shop like a billionaire.” They sell their products at an unbelievably low price to begin with, and they also offer additional discounts for first-time users and a substantial amount of credit every day. Literally, you worry little about money while shopping. Temu offers free returns within 90 days for a full refund. What if delivery is delayed? You’ll get an unconditional $5 credit for a delay even if just a day.

-AliExpress and Temu’s strategy

1. Full-consignment is a win-win for sellers and consumers

Fully consigned fulfillment is a revolutionary way of selling where sellers ship their products to a distribution center in China, and the platform manages everything from pricing to marketing, shipping, and after-sales service. This will significantly lower the barriers for small and medium-sized companies in China to reach the global consumers.

As a seller, you can focus on product development and manufacturing because the platform takes care of the overall sales operations, and you can also analyze data like sales and returns to keep your product competitive. Cost saving from this division of labor is passed on to the consumer. This innovative fully consigned fulfillment has so far benefited both merchants and consumers.

The fully consigned fulfillment approach involves an innovative distribution system that utilizes the platform’s own warehouses to deliver directly to consumers. The system greatly simplify the process of shipping ordered goods, allowing you to export products immediately after a customer places an order in just a few steps. While other competitors still have delivery times of over a month, Temu has dramatically reduced its delivery time to just one week by utilizing the fully consigned approach. Fast delivery is not only a convenience for consumers, but also an important factor in making online platforms more competitive.

3. Discount, discount, discount! Aggressive marketing strategy

Temu’s parent company, Pinduoduo, was a latecomer to the online market in China, but its unique vision and aggressive marketing strategy quickly made it the number two online retail platform in China. The company grew rapidly in the early days, allocating 100% of their revenue to advertising, and in the first half of 2023, they reported a net profit of KRW 3.9 trillion, showing the stability of their business.

In addition to a Super Bowl commercial, the crown jewel of advertising in the U.S., Pindududu created a branded song and promoted it on the radio, and placed banner ads on various social media platforms and popular sites with offers such as “90% off” and “$100 credit”. This aggressive marketing strategy is also seen in AliExpress, which has sent a strong message to consumers, raised awareness of its products, and established a strong presence in the global market.

-Limitations of online retail

According to FOX News, the Better Business Bureau has already received more than 1,300 customer complaints about Temu, including claims about data theft. A class action lawsuit filed in New York even claims that Temu intentionally steals users’ personal information. More recently, Temu’s parent company, Pinduoduo’s Android app contained malicious software that exposed users’ personal information to cyber threat. This has also led to widespread concern about the Temu app.

Both AliExpress and Temu have very low scores from reviewers on a website called Trustpilot, with scores of 2.6 and 3.2 out of 5, respectively. The reviews pointed out the followings.

1. Differences between product photos and actual products: AliExpress often uses filtered images, so when you receive a product, it’s hard to tell if it’s what you ordered.
2. Inaccurate product descriptions: In addition to appearance, product descriptions are often inaccurate.
3. Poor quality: The quality of the product you receive is often not up to your expectations.

    4. Positive reviews on the price: The price tag is keeping consumers happy.

3. U.S.-China relation

Global dynamics can create barriers for AliExpress and Temu. Currently, U.S. authorities are monitoring the spread of TikTok. There are concerns that Chinese apps could be used to collect sensitive data by the Chinese Communist Party. While TikTok denies any improper use of data, Washington is considering banning TikTok for the public, after a ban for the government employees.

AliExpress and Temu are likely to face similar issues. The two Chinese online retailers must overcome challenges related to regulation and trust issues in other countries, such as the U.S., for the global market.

How beauty supplies are responding

As online retail platforms dominate the market, their strengths and weaknesses have become apparent. Keeping an eye on changing consumer and market trends and being flexible is key to responding to the rise of online retailers. Here are a few specific ways beauty supplies can do to fend off the growth of online retailers.

    1. Online shopping aggregation to enter the lion’s lair

Retailers can build their own online shopping website or join existing popular online marketplaces to give consumers multiple options to purchase their goods. It’s important to have a website that highlights your popular brands and products and provide an easily accessible online shopping experience for your customers.

    2. Boost your digital marketing with Temu-like aggressiveness

Retailers need to invest in digital marketing to increase their visibility in the online marketplace. Use social media, search engine optimization (SEO), email marketing, and more to keep the word out about new and popular products in your store.

    3. Enhancing the exclusive customer experience

Improve your customer experience to deliver a satisfying shopping experience both in-store and online. Customer experiences can include product try-ons or marketing devices that uses fragrance or memorable event. You can transfer the consumer trust to the online marketplace and offer friendlier and faster customer service, easier payment methods, transparent return policies, and so on.

    4. Tailored service through data analysis

Retailers should focus on providing personalized services by analyzing consumers’ buying patterns, preferences, etc. Through data analysis, you can predict spending trends and make product recommendations, discount offers, and birthday and wedding anniversary coupons to keep your customers happy.

    5. Strengthening collaborations and partnerships to grow together

Retailers can leverage their existing distribution networks to strengthen collaborations and partnerships with online platforms. Local online marketplaces can collaborate to provide more choices for local consumers and jointly solve problems such as shipping and logistics.