Finding new revenue streams outside China became urgent for major Chinese online retailers as Covid control measures and a turbulent domestic regulatory environment hurt economic growth and consumer confidence in the country.
Shein, which started as a small cross-border wedding dress supplier, turned into a unicorn worth $100 billion by April 2022, demonstrating a successful path for other shopping platforms trying to sell outside of China.
Chinese overseas-focused online shopping apps were a bright spot in a year otherwise characterized by high inflation and weak demand in the world’s major economies.
Fast fashion giant Shein maintained strong growth despite sustainability, imitation, and labor rights controversies, while the more established Alibaba saw its turnover decline in Europe despite narrowed losses in Southeast Asia. Pinduoduo-backed Temu, seemingly out of nowhere in September, shot to the top of the US app downloading chart by the end of 2022. ByteDance-owned TikTok tried to navigate the same successful path as its sister app Douyin in e-commerce, but with less impressive results in the UK.
Here’s what you need to know about the overseas adventures of Shein, Temu, TikTok Shop, and Alibaba in 2022.
Shein was the most popular fast-fashion brand worldwide in 2022, according to research conducted by price comparison site money.co.uk, which shows that Shein experienced tremendous global growth over the year. The company reportedly surpassed its full-year 2021 sales of $15.7 billion just midway through 2022 and was expected to have made sales of $24 billion by the end of the year.
In April, Shein received a $100 billion valuation from General Atlantic, Tiger Global Management, and Sequoia Capital China, but as one person who declined to invest in Shein at a roughly 30% discount told Financial Times, the firm may well have been overvalued.
The company’s continued problems over environmental and sustainability issues overshadowed its initial preparations for a possible IPO in the US as soon as 2024, as investors increasingly bet on companies that are more responsible in those areas. Shein became increasingly vocal in its commitment to environmental, social, and governance efforts, planning to eliminate a quarter of emissions by 2030 and pledging $15 million to improve factory standards.
Every day, Shein posts thousands of new items for sale and relies on third-party suppliers in China for its low clothing prices. However, the company has faced controversies over appropriating designs from independent and emerging fashion designers. Shein or its Hong Kong-based parent company Zoetop Business Co., have been named in at least 50 federal lawsuits in the past three years, according to a June report by the Wall Street Journal.
In other moves, Shein opened pop-up stores in multiple major cities worldwide in 2022. Local media reported seeing long queues, Shein fans chasing particular items, and limited shopping time due to limited stock. But Shein said it “remains digital-first,” a Shein spokesperson told TechNode.
The buzz around Shein shows no signs of abating in 2023, and the company seems to be expanding its business model, reportedly exploring a marketplace platform that would enable other merchants to sell directly to customers, in a move to compete more directly with e-commerce giants like Amazon and Alibaba-owned AliExpress.
Less than four months after its launch, Temu, the cross-border e-commerce platform owned by Pinduoduo, has already shown strong appeal with its big discounts and generous coupons, and for most of the past two months, it has been the most downloaded app in the US.
Temu’s sales growth rate cannot be underestimated. In October, its average daily sales generated more than $1.5 million, reportedly slightly below internal expectations. Temu reached a peak weekly GMV of over $40 million around Black Friday, with sales topping $10 million in the first week of November, according to data provider Sandalwood.
Temu came to the US with super-low prices when the country’s consumers were facing high inflation. Temu’s China-focused sister app, Pinduoduo, has long relied on low prices to quickly capture market share from established retailers like Alibaba and JD. The platform didn’t respond to TechNode’s question on whether its ultra-low prices were sustainable. While gaining fast popularity, Temu is also facing customer complaints about long delivery times, incorrect orders, and “unresponsive” customer services, according to a report by the Time magazine.
Pinduoduo debuted its 10 billion subsidy campaign – in which the company subsidizes high-volume items down to a competitive price compared to other platforms – during 2019’s June 18 online shopping festival, China’s second-largest annual e-commerce event. The initiative became Pinduoduo’s signature and a regular program after it proved to drive user growth.
This significant subsidy is recorded as “sales and marketing expenses” in its financial reports and has remained above RMB 10 billion per quarter since 2021, reaching RMB 14.05 billion, or 40% of total revenue, in the third quarter of 2022.
The marketing-for-growth strategy has resulted in continued user growth for Pinduoduo, with the company achieving an annual profit for the first time in 2021, six years after its founding.
In 2022, TikTok expanded its e-commerce business in Southeast Asia, initially finding success in the region, but facing setbacks in Europe.
According to a report by Chinese online media outlet LatePost, TikTok made more than $1 billion in total sales in the first half of 2022 — equivalent to more than half of the RMB 12 billion GMV goal the company set for its e-commerce business this year.
The sales growth achieved by TikTok was mainly driven by its Southeast Asian markets, especially Indonesia — the largest e-commerce market and economy in the region. TikTok Shop already had tens of thousands of sellers in the country, most of whom were micro, small, and medium-sized enterprises, by November 2022, said Desey Muharlina Bungsu, fashion and category lead of TikTok Shop Indonesia, at a TikTok Shop event in November.
The reception in the UK, its first market in the West, was quite the opposite. Different work cultures, as well as market conditions, exacerbated TikTok Shop’s woes. The Financial Times said TikTok Shop had “struggled to gain traction” in the country, reporting that influencers had dropped out of the scheme.
TikTok’s e-commerce business hit $200 million in monthly GMV in the Indonesian market, while only $24 million in the UK, LatePost reported.
Consumers were more receptive to live commerce in Southeast Asia, which helped TikTok find success in the region, with a survey conducted by market research firm Ipsos revealing that 71% of Indonesian consumers had accessed live commerce events, and 56% had made purchases during such events.
However, Shopee and Alibaba-owned Lazada still dominate most e-commerce markets across Southeast Asia. In Malaysia, Shopee holds 71% of the region’s overall e-commerce web traffic, followed by Lazada at 18% and PGMall at 9%, tech news site Tech Wire Asia said.
TikTok Shop made a quiet test debut in the US in November 2022. The short video platform’s ambitions to push e-commerce business in the US market appeared cautious and low-profile, with no officially confirmed full rollout, and only brands or merchants with an invitation code can sign up.
Meanwhile, it remains to be seen how well American consumers embrace the new shopping feature that enables merchants, brands, and influencers to showcase and sell products directly via in-feed videos.
The Chinese e-commerce giant’s overall performance in international commerce retail in 2022 was muted, with revenues in the first three quarters essentially flat compared to the same period a year earlier, up just 1.6% to RMB 31.15 billion.
According to details revealed in the company’s earnings report for the first three quarters of 2022, Trendy, Alibaba’s shopping platform in Turkey, recorded the most significant growth among all other international retail units, maintaining a growth rate of more than 40% in each of the three quarters. A precise order volume was not disclosed.
In the quarter ending September 2022, Southeast Asia-focused Lazada’s order growth posted its first year-over-year decline in orders in two years, which Alibaba said was largely affected by a lifting of Covid-19 restrictions that lured consumers back to offline channels. The platform saw exponential growth in the January to March period in 2021 as the initial Covid wave forced many people to shop online. Despite a slowdown in growth, Lazada managed to narrow the loss per order by 25% compared to last year.
Alibaba-owned AliExpress recently gained notable success in South Korea, with the app ranked first in terms of downloads in the shopping section in the country’s app store, according to Chinese media outlet The Economic Observer, citing mobile data analytics provider App Annie.
A person in charge of the platform’s Korean market told the media that AliExpress currently has nearly 3 million monthly active users, which covers around 10% of the country’s e-commerce users.
But the tech giant said it faces challenges in Europe amid supply chain and logistics issues resulting from the ongoing Russia-Ukraine conflict. Moreover, the EU’s removal of tax exemptions for cross-border packages under 22 euros also hurt AliExpress’s orders.
Although the Chinese e-commerce giant has been in Europe for more than a decade, AliExpress has captured only a small market share in the region, with 4% in Western Europe at 4% (compared to Amazon’s 20%) while holding 5% in Eastern Europe in 2021, according to Reuters.