How Shein and Temu, which are spending billions on digital ads and offering steep discounts or free products, have become big threats to Amazon in the US
In the fall of 2020, Amazon looked unstoppable. The pandemic lockdowns had supercharged its e-commerce business … X: @joshuaogundu , @kantrowitz , @lmatsakis , and @kantrowitz X: Josh / @joshuaogundu : Who said paid ads don't work? I've seen domestic companies and Chinese companies leverage them pretty effectively Alex Kantrowitz / @kantrowitz : New: @lmatsakis writes the definitive story on how Shein and Temu snuck up on Amazon and now pose the biggest threat to its empire in recent memory. https://www.bigtechnology.com/ ... via @BigTechnology Louise Matsakis / @lmatsakis : If you want to know more about how Shein and Temu really operate, I wrote about their strategies and tactics for @BigTechnology this week: https://www.bigtechnology.com/ ... Alex Kantrowitz / @kantrowitz : New: @lmatsakis writes the definitive story on how Shein and Temu snuck up on Amazon and now pose the biggest threat to its empire in recent memory. https://www.bigtechnology.com/ ... via @BigTechnology
Context & Ripple Effects
Amazon’s retail teams had already shifted attention toward Temu and Shein after the pair displaced Walmart and Target in internal competitive discussions. The change in Amazon’s internal focus indicates that the challenge had moved beyond a niche apparel rivalry.
The companies’ growth playbook combines paid acquisition with aggressive consumer incentives: earlier coverage documented their large-scale U.S. digital-ad spending. Their ad-spending push gives this competition a distribution dimension as well as a pricing one.
First-order effects
- Amazon faces more immediate pressure to defend shopper attention and promotional appeal in U.S. retail as Temu and Shein use discounts, free products, and paid ads to acquire customers.
- Temu and Shein can translate advertising spend into faster brand awareness and transaction volume, while absorbing acquisition costs in pursuit of share.
Second-order effects
- Amazon’s retail organization is likely to place greater emphasis on promotions and other responses aimed at retaining price-sensitive shoppers; reporting had already tied the rivals’ rise to Amazon’s exploration of new campaigns. Amazon’s consideration of promotional campaigns
- Digital-ad platforms gain two unusually aggressive retail buyers, while merchants and marketplaces competing for the same value-oriented consumers face a higher cost of visibility.
Third-order effects
- If this model remains sustainable, U.S. e-commerce competition may be defined less by marketplace scale alone and more by the ability to combine low-priced supply, subsidized acquisition, and rapid demand generation.
- The result could increase buyer power over sellers and brands: platforms that control consumer discovery and promotions can more strongly shape which products receive demand.
The trend: Cross-border e-commerce challengers are using performance marketing and subsidized pricing to contest incumbent marketplaces’ control of consumer demand.