Temu and Shein

Low-cost stores from China are becoming a problem for Amazon

The Asian portals are putting pressure on the established players - even top dog Amazon, which is adapting its strategy.

(Bild: AP)

Online retail in Germany is unable to build on its boom times with double-digit growth rates during the pandemic. After a weak year in 2022, things didn't get much better in 2023. According to forecasts, this year will not bring the hoped-for upturn either.

Experts from the Cologne-based retail research institute EHI expect a nominal increase of 1 percent for the largest 1000 online stores. Adjusted for prices, retailers must expect a minus. An end to the crisis is not in sight.

"Online retail is suffering from the fact that consumers' money is flowing elsewhere, for example into travel and concerts," says EHI e-commerce expert Lars Hofacker. "Many retailers have grown out of high demand in the past and are currently under great pressure due to increased costs." This does not mean that things are going badly for all stores. Asian online platforms have recently been among the winners.

The fashion retailer Shein, which was founded in China, increased its turnover in Germany by 30 percent last year and ranks 18th in the list of top-selling online stores. Asians are also at the forefront of marketplaces - websites where consumers can buy items from more than one company. AliExpress took fourth place. Temu, which has only been active in Germany since April 2023, narrowly missed out on a place in the top 10.

Temu and Shein are growing rapidly
Temu and Shein in particular are on a steep rise. According to the industry association BEVH, the two providers now account for five percent of orders in German online retail. They have more than doubled their market share within a year. Temu was already in fourth place behind Amazon, eBay and Otto in terms of orders in the second quarter.

The Asian portals are putting pressure on the established players. Can they break the dominance of market leader Amazon? "Temu and Shein are forcing Amazon in Germany to adapt its strategies for the first time in almost ten years," says e-commerce expert Alexander Graf. Amazon has shaped the market so far, but has hardly had any answers to Temu and Shein's radical business model. This will have an impact on sales in the medium term.

Temu and Shein offer many items at low prices. Due to the strong price focus of customers, they have recently benefited from the poor consumer sentiment in the country. According to the German Retail Association (HDE), Temu and Shein together send around 400,000 parcels to Germany every day. Shein disputes this figure.

Shein and Temu have been polarizing ever since they entered the retail stage. They are snatching sales away from established players such as Otto. According to an estimate by the German Textile, Footwear and Leather Goods Retail Association (BTE), Germans will buy around one billion fashion items and shoes from Asian suppliers in 2023. Shein and Temu are not only competing with Amazon & Co for buyers. They have also recently opened their online marketplaces to German retailers.

Industry representatives are not happy with the new competition. "The market is often flooded with questionable or inferior goods, some of which are not even allowed to be sold in the EU," says BTE Managing Director Axel Augustin. Shein and Temu reject the accusations. Augustin and others are calling for more regulation by the EU and fairer competitive conditions.

Europe strives for more control
The German government, together with other EU member states, wants to push for greater control of providers. Penalties should be consistently imposed if online retailers do not adhere to the applicable rules and, for example, do nothing when products on their sites are classified as unsafe.

There are also concerns among customers. Portals such as Shein and Temu are too unsafe for a good 60 percent of consumers, according to a survey by the Cologne-based retail research institute IFH. Reservations are particularly high among high earners, men and people over 50. Many fear that the items they order are of inferior quality.

Werner Reinartz, Professor of Marketing at the University of Cologne, sees this uncertainty as an opportunity. Other retailers could differentiate themselves from platforms such as Temu and Shein through trust.

Industry studies can at least give online retailers some encouragement. It is not only consumer uncertainty and the focus on prices and offers that are declining slightly. In almost all areas, purchases are increasingly shifting from bricks-and-mortar stores to the internet.

The BEVH association has recently seen slightly positive signals. Between April and June, consumers treated themselves to more again. The first market growth in online retail in two years was recorded. However, there is still no sign of optimism, they say.

The boom during the pandemic has become a psychological burden for e-commerce. The industry is now being judged on this. The Managing Director of HDE, Stefan Genth, is therefore appealing for leniency. "The coronavirus years with the closure of brick-and-mortar stores have given the industry a huge boost in sales. It is therefore quite normal that further development cannot continue at the same pace."