The explosive progress of Temu, the U.S. arm of Chinese language e-commerce big Pinduoduo , might spell hassle for some main retailers, in accordance with Financial institution of America. Temu presents merchandise immediately from producers worldwide, permitting it to maintain prices and costs low. It generated gross sales of round $12 billion in 2022, equal to 12% of Goal’s gross sales, in accordance with the Wall Avenue financial institution’s evaluation of bank card knowledge. Simply six months in the past, Temu’s gross sales have been solely 4% of Goal’s. Shoppers have welcomed Temu’s speedy progress, however opponents are prone to lose market share and will see smaller earnings within the close to future. “Retailers focusing on younger adults at low value factors are significantly weak,” mentioned Financial institution of America’s analysts, led by Thomas Thornton, in a be aware to purchasers on Nov. 17. The analysts say Temu’s progress has been fueled by aggressive promoting utilizing influencers, social media and search, with every day lively customers reaching 40% of Amazon’s stage. Retailers in danger The BofA analysts say retailers competing on value alone are significantly uncovered to Temu’s disruption. They counsel Outdated Navy and Kohl ‘s non-public manufacturers are “prone to being out-priced.” Style-oriented firms like Revolve , City Outfitters , and American Eagle is also undercut on value, the financial institution mentioned. European retailers aren’t proof against Temu’s disruption both. Financial institution of America believes on-line trend retailers like Boohoo and Asos are weak to shedding their market share, whereas H & M is extra uncovered than Zara mother or father Inditex , which might leverage provide chain pace and better costs. Regardless of the broad dangers to Western retailers, Financial institution of America cautioned that Temu’s speedy growth is probably not sustainable in the long run if the urge for food for losses and advert spending by its mother or father wanes. Nevertheless, Pinduoduo is predicted to develop advert spending once more in 2024, which might assist Temu keep away from slowing down within the medium time period, the analysts mentioned. Insulated retailers In the US, the analysts counsel Walmart and Goal have benefits that ought to insulate them. These embody long-standing shopper belief, notion of product high quality, and ease of entry. Financial institution of America additionally thinks 5 Under will probably be resilient as its worth proposition goes past value. Similar to the grocers, 5 Under’s in-store expertise creates urgency and drives repeat visits in a method on-line procuring doesn’t, the analysts mentioned. Individually, analysts at UBS funding financial institution additionally see Temu’s progress in an identical vein. “Total, we expect the danger that Temu will considerably disrupt many of those retailers is restricted,” the Swiss financial institution’s analysts wrote in a be aware to purchasers on Nov. 20. UBS mentioned Costco , ULTA , House Depot , Lowe ‘s, and auto half retailers have been the “most insulated” from the rise of the Chinese language e-commerce app. — CNBC’s Michael Bloom contributed to this report.
