Shein and Temu are battling to win over young consumers in the US.
Both companies are using low prices and a huge selection of inventory to entice shoppers, but they're going about it in slightly different ways.
Temu, owned by Chinese e-commerce giant PDD Holdings and headquartered in Boston, emphasizes lightning deals on a wide range of products, including clothing, homewares, car accessories, electronics, and musical instruments. Shein, which was founded in China in 2008 and is now based in Singapore, focuses on selling clothing that it can launch quickly to keep up with the latest trends. Shein has reportedly been considering an IPO as it has grown in popularity in the US.
Temu and Shein share a target audience in Gen Z, and the competition has been heating up in recent months, with each company filing lawsuits against the other alleging unfair business practices.
Though Temu has only been available in the US since September 2022, it has already overtaken Shein in terms of US web traffic and purchasing visits, according to Similarweb data shared with Insider.
Temu has also outpaced Shein when it comes to purchasing visits, measured by the total number of visits to web pages where customers make a purchase.
Temu's advertising spending could help explain its traffic growth. UBS analysts estimated in December that Temu spends nearly $500 million each fiscal quarter on marketing and promotions — through social media, display ads, and paid search — in order to grow its customer base.
"The proportion of web traffic driven by direct and organic search remains below the industry average, and significantly below Amazon," UBS analysts wrote in a research note published Tuesday. "In spite of its rapid growth, this suggests that Temu has yet to establish itself as a 'go-to' channel for the average US consumer."
"However, Temu's customer retention rate is at a similar level to competitor Shein, which has already established itself in the e-commerce space," the analysts wrote.
Representatives for Temu and Shein did not return Insider's request for comment.
Both emerging platforms have a ways to go before they overtake incumbent e-commerce disruptor: Amazon.
According to Similarweb, 93% of users who visit Temu also browse on Amazon. However, only 8% of Amazon's audience also visits Temu. Amazon's website sees around 2 billion visitors and 150 million purchasing visits each month.
Both Shein and Temu also trail significantly behind Amazon when it comes to conversion, or the rate at which visitors to a store's webpage actually complete a purchase. Shein and Temu hover around 5% conversion, while Amazon is much higher at nearly 12%.
In their research note published Tuesday, UBS analysts argued that Shein and Temu might not pose much of a risk to other established retailers, either. They cited customer complaints about slow and inconsistent shipping times for Temu and concerns about environmental standards for Shein.
"While these players offer compelling prices on a wide selection of general merchandise, they have inconsistent customer experiences," the analysts wrote. "Our conclusion is that the perception of the risk is seemingly greater than the reality."
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