How to keep up with the Temu and Shein market grab in Europe

The rapid rise of Temu and Shein in the global eCommerce market has posed significant challenges for small and medium-sized enterprises (SMEs) worldwide. These retail giants have leveraged aggressive pricing strategies, extensive product catalogs, and substantial advertising budgets to capture significant market share. As a result, SMEs must adopt innovative strategies to stay competitive.

In this article, we'll explore actionable tactics to help you compete with Temu and Shein, focusing on differentiation, improving website conversion rates, and optimizing customer acquisition costs (CAC).

Main chapters:

1. The Strategy of Temu and Shein
2. How do Temu and Shein Affect European eCommerce?
3. 7 Strategies to Compete with Temu and Shein

The Strategy of Temu and Shein

1. Competitive Online Marketing Budgets

• Shein spent approximately $1.5 billion on ads across various platforms in 2023.
• Temu invested around $1.2 billion on Meta's platforms alone in the same year.
• Facebook's average CPM for ads rose to $14.90 in 2022, up from $12.20 in 2020. That is more than 22% in just two years.

2. Competitive Pricing and Market Share

Aggressive Pricing Strategies:

• • • Temu and Shein are known for their low prices, which are possible due to their economies of scale and efficient supply chains. This aggressive pricing puts pressure on SMEs with local or regional footprints, which often struggle to compete on price alone.

Market Penetration:

• • • Both companies have rapidly expanded their market presence through heavy marketing and promotional campaigns. Their ability to capture significant market share quickly leaves less room for smaller players to establish or maintain their foothold.

3. Consumer Expectations and Preferences

Wide Product Range:

• • • These platforms offer a vast array of products, catering to diverse consumer preferences. This wide selection can make it challenging to match the variety and meet evolving consumer demands.

Fast Fashion Business Model:

• • • Shein, in particular, is known for its fast fashion model, constantly updating its product lines with the latest trends. This fast turnover rate sets high expectations among consumers for frequent new arrivals, pressuring local retailers to speed up their product cycles, often at unsustainable costs.

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4. Market Dynamics and Consumer Behavior

Brand Loyalty and Customer Acquisition:

• • • The aggressive marketing tactics and promotional discounts employed by Temu and Shein can shift consumer loyalty away from smaller, local brands. SMEs often lack the marketing budgets to compete effectively and attract new customers.

Convenience and User Experience:

• • • Enhanced user experiences on these platforms, including user-friendly interfaces, seamless checkout processes, and reliable customer service, set a high bar. Many smaller businesses might struggle to provide a similar level of convenience and service quality.

How do Temu and Shein Affect European eCommerce?

The presence of Temu and Shein in the European market significantly affects the other players, particularly through their influence on advertising and social media dynamics. Here's a detailed look at how these changes manifest:

1. Increased Advertising Costs

Higher Bidding Prices:

• • • Temu and Shein have substantial advertising budgets, allowing them to outbid smaller players for prime ad placements. This increased competition drives up the cost-per-click (CPC) and cost-per-impression (CPM) for digital ads on platforms like Google and Facebook, making it more expensive for SMEs to run effective campaigns.

Premium Ad Spaces:

• • • These eCommerce giants often secure premium advertising spaces, such as banner ads on high-traffic websites and top search results. This limits the visibility of smaller businesses' ads, forcing them to spend more to achieve similar visibility and reach.

2. Saturation of Social Media Feeds

Dominant Social Media Presence:

• • • Temu and Shein invest heavily in social media marketing, including paid ads, influencer partnerships, and user-generated content campaigns. Their constant presence saturates social media feeds, making it harder for smaller brands to get noticed without significant investment.

Influencer Partnerships:

• • • These companies frequently collaborate with influencers to promote their products, often securing top-tier influencers who can reach large audiences. This makes it challenging for SMEs to compete for influencer partnerships or forces them to engage with less influential personalities, which may not yield the same impact.

3. The impact on Customer Acquisition Strategies

Increased Customer Acquisition Cost (CAC):

• • • The competition for ad space and social media visibility directly increases the customer acquisition cost for other players. SMEs may need to spend more on ads to maintain their visibility, making their marketing campaigns less cost-effective.

Shift in Marketing Tactics:

• • • To counter the high CAC, SMEs might need to shift their marketing tactics. This can include focusing on organic growth strategies like content marketing, SEO, and community engagement, which can be more cost-effective but typically require more time to yield results.

7 Strategies to Compete with Temu and Shein

1. Enhance Website Conversion Rates

• • User Experience (UX) and Design: Ensure your website is user-friendly, mobile-optimized, and visually appealing. A seamless navigation experience can significantly improve conversion rates.
  • Personalization: Leverage your shop's data to personalize the shopping experience. Automatically recommend products based on browsing history, and use personalized email marketing to re-engage visitors.
  • Trust Signals: Display customer reviews, ratings, and trust badges prominently to build credibility and encourage purchases.
  • Simplified Checkout Process: Reduce the number of steps in the checkout process and offer multiple payment options to minimize cart abandonment.
  • A/B Testing: Continuously test different website elements such as headlines, images, and call-to-action buttons to see what works best in driving conversions.

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2. Implement Customer Retention and Loyalty Programs

• • Loyalty Programs: Implement loyalty programs that reward repeat customers with discounts, exclusive offers, or points that can be redeemed for future purchases. This helps increase customer lifetime value (CLV).
  • Personalized Offers: Use customer data to send personalized offers and recommendations. Tailored communications can significantly boost customer retention rates.

3. Optimize Ad Spend and Targeting

• • Efficient Ad Spend: Use precise targeting options available on advertising platforms to ensure your ads reach the most relevant audiences. Focus on high-intent users to maximize return on ad spend (ROAS).
  • Retargeting Campaigns: Implement retargeting campaigns to bring back visitors who have shown interest but didn’t convert. These campaigns can help lower your overall CAC by converting warm leads.
    
    
    

4. Leverage Content Marketing and SEO

• • Content Marketing: Create high-quality, engaging content that provides value to your target audience. This can include blog posts, how-to guides, and video tutorials that attract organic traffic and build brand authority.
  • Search Engine Optimization (SEO): Optimize your website and content for search engines to improve visibility and attract organic traffic. Focus on long-tail keywords and local SEO strategies to capture specific audience segments.
    
    
    

5. Utilize Social Media and Influencer Marketing

• • Engage on Social Media: Build a strong presence on social media platforms where your target audience is active. Use these channels for direct engagement, promotions, and customer support.
  • Influencer Partnerships: Collaborate with micro-influencers who have a loyal and engaged following. They can offer more targeted reach and higher engagement rates compared to top-tier influencers used by Temu and Shein.
  • User-Generated Content: Encourage customers to share their experiences on social media. Feature user-generated content on your website and social channels to build community and trust.

6. Form Strategic Partnerships and Collaborations

• • Local Collaborations: Partner with local artisans, businesses, and influencers to create exclusive product lines or special promotions. This can enhance your local market presence and attract new customers.
  • Cross-Promotions: Engage in cross-promotions with complementary brands to expand your reach and attract new customer segments.

7. Differentiate Through Niche Markets and Unique Value Propositions

• • Niche Targeting: Focus on specific, underserved market segments where Temu and Shein have less presence. Highlight local products, handmade items, or specialty goods.
  • Unique Value Propositions: Emphasize unique selling points such as sustainability, ethical sourcing, local craftsmanship, or superior quality. Consumers are increasingly conscious about these aspects and may prefer brands that align with their values.

Conclusion

The dominance of Temu and Shein in the eCommerce market presents substantial challenges, but SMEs can still find ways to thrive by adopting these strategies.
Focus on differentiation improve your website's conversion rates, and optimize your customer acquisition tactics to compete effectively. By leveraging niche markets, enhancing user experience, and building strong customer relationships, you can create a sustainable competitive edge and decrease your customer acquisition costs.

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Sources: Modern Retail, Alliance for American Manufacturing, Modern Retail