- Kyle Chua
Chinese Online Retailers Target U.S. and Europe Amid Slow Domestic Growth
Chinese online retailers aren't letting the trade tensions between Washington and Beijing stop them from tapping new markets.
According to Nikkei Asia, the likes of Alibaba Group and ByteDance are making strong overseas pushes in countries like the U.S. and Spain. The former launched a new marketplace in Spain, Miravia, while the latter rolled out TikTok Shop in the U.S. late last year. Pinduoduo, meanwhile, is preparing to launch its Temu e-commerce site in Canada and Spain after entering the U.S. market in September.
The timing of the moves seem suspect, considering how the U.S. government continues to ramp up scrutiny of Chinese tech products and services, specifically TikTok. There's also the concern of how Alibaba and Pinduoduo, among others, can compete with more established competitors in the markets they're entering – Amazon in the U.S. and Inditex in Spain.
But analysts who spoke to Nikkei Asia believe that the moves make sense as they come amid slowing domestic user growth. China's retail industry took huge hits under the country's "Zero-Covid" policy, hampering not only manufacturing activities but also consumer sales. While the second-largest economy has since opened back up, it still seems to be reeling from the impact the strict lockdown measures had on the market.
What's more, there are thousands of Chinese sellers who may now be looking for a new retail home – some were kicked out of Amazon for fabricating reviews, while others left voluntarily. These sellers can fit right in Temu or Shein, points out Alex Zhang, Senior Vice President at Xingyun Group, a Shenzhen-based startup that provides a host of supply chain and distribution services to Chinese companies that want to sell goods overseas.
"It's also easier for Chinese sellers to communicate with Chinese e-commerce platforms," added Zhang. "Chinese supply chain sellers, as well as their clients, are accelerating their overseas push these [past few] years."
Chinese online retailers target Spain as a gateway market due to it having relatively lax regulations and convenient sea transportation. Zhang believes some companies are also motivated by the success AliExpress found there. Meanwhile, the U.S. is said to have a more lucrative and more integrated online shopping market.
Entering the aforementioned markets, however, won't come without some challenges, one of which is user growth. Temu, for instance, won't be able to leverage WeChat and gamify shopping the same way its Chinese counterpart Pinduoduo did in its domestic market – a strategy that proved to have been instrumental in the e-commerce giant's meteoric rise in China. In the U.S. and Spain, it might have to be a bit more aggressive in spending on marketing to gain new users.
Depending on the market, there could also be some regulatory challenges.
"Temu faces a more challenging regulatory environment than Pinduoduo, which is not only driven by the strained U.S.-China relations, but also by increasing emphasis on data privacy, fraud and ESG [environmental social and governance] issues," said Eric Chen, an analyst who publishes on the investment platform Smartkarma.
"These all may make it difficult for Temu to enjoy the efficiency edge that Pinduoduo does."
Alibaba Group, Pinduoduo and ByteDance are making strong overseas pushes in countries like the U.S. and Spain amid slowing user growth in their domestic market of China.
Chinese online retailers target Spain as a gateway market due to it having relatively lax regulations and convenient sea transportation.
Meanwhile, the U.S. is said to have a more lucrative and more integrated online shopping market.