Tech Stocks' Earnings Crying and Laughing with Temu and Shuin

Amazon Competes with Temu and Shein through Delivery and Low-Priced Products
Meta and Google Benefit from Temu and Shein Ads, Raising Wall Street Concerns

As the popularity of Temu and Shein soars, Wall Street is closely monitoring the impact these companies have on the earnings of tech giants like Meta and Amazon, CNBC reported on the 29th (local time).

Temu and Shein have achieved great success in the U.S. market by selling inexpensive Chinese products online. They have emerged as competitors to American e-commerce companies such as Amazon, eBay, and Etsy.

[Image source=Reuters Yonhap News]

The London Stock Exchange Group (LSEG) forecasted that Amazon's Q2 revenue would grow by about 11% to reach $148.6 billion (approximately 206 trillion KRW). Net income is expected to increase by 63% compared to the same period last year. However, CNBC explained that this is a result of cost-cutting measures, including recent layoffs of tens of thousands of employees.

E-commerce is not Amazon's growth engine, but it remains one of the major businesses accounting for most of its revenue. Additionally, third-party seller products make up 60% of the items sold on Amazon.

Amazon is competing with Temu and Shein by emphasizing fast delivery speeds. According to Bank of America (BoA), Temu's delivery time averages 4 to 22 days, while Shein's takes 3 to 14 days. Amazon plans to reduce delivery times from 2 days to less than 1 day. It also plans to create a new section for ultra-low-priced items under $20 targeting Temu and Shein. BoA stated in a report released in May, "Reducing delivery times will be a critical factor in long-term competition." eMarketer projected that Amazon will account for about 40% of U.S. e-commerce sales this year.

CNBC noted that the U.S. and the European Union (EU) are considering imposing tariffs on goods purchased from Chinese online low-cost product platforms, which could hinder the growth of Temu and Shein.

Google and Meta are representative companies benefiting from the growth of Temu and Shein. Temu became Meta's largest advertiser last year, spending $2 billion (approximately 2.77 trillion KRW) on ads. It was also one of Google's top five advertisers last year. Shein is heavily advertising on Google and Facebook to expand its business ahead of its initial public offering (IPO). Shein reportedly placed about 80,000 ads on Google last year.

However, if Temu and Shein halt their aggressive advertising strategies, Meta and Google's advertising revenues will inevitably face shocks. Temu believes that the increase in new subscribers has reached its limit and has shifted its strategy from expanding subscribers to retaining existing ones. According to Barclays data from May, Temu's new subscriber count peaked in Q3 last year and has been declining since.

CNBC stated, "Meta has concerns because there are signs that Temu will reduce its advertising spending." CNBC also predicted that the Temu and Shein effect might be a short-term phenomenon. In 2010, Wish gained popularity with ultra-low-priced products supplied directly from China and had a corporate valuation of $14 billion (approximately 19.4 trillion KRW) at its IPO in 2020, but after subscriber losses destabilized the business, it was acquired this year for $173 million (approximately 239.7 billion KRW).

This content was produced with the assistance of AI translation services.