Earlier this year, Udayan Bose, CEO of NetElixir, mentioned that Temu’s explosive growth has placed significant pressure on margins, especially for middle-market retailers, who represent roughly 35-40% of the fashion apparel segment. In just over a year, Temu has secured 1% of the overall retail market, intensifying competition across various industries, including home goods, fashion, and footwear.
Now, Temu is squaring off against SHEIN in a legal battle that highlights the stark differences in their business models. According to Bose, this clash is not just about market share; it’s about fundamentally different approaches to competition in e-commerce. While SHEIN has built its success on innovation, identifying new product opportunities and bringing them to market quickly, Temu has taken a more direct route—offering a low-cost leadership model. This strategy of undercutting SHEIN by copying its offerings for less has been a key driver of Temu’s rapid growth.
Innovation vs Cost Leadership
SHEIN’s commitment to innovation is more than just rhetoric. Bose himself has called Shein an ‘innovation factory’. The company has invested heavily in its Center of Innovation for Garment Manufacturing, dedicated to reducing waste, enhancing efficiency, and developing new technologies for its suppliers. SHEIN is also deeply involved in training its supply chain workers, ensuring they are equipped with the latest knowledge in enterprise management, organizational structure, and quality assurance.
Temu, on the other hand, has built its success on offering products some of which seem to be clearly inspired by Shein but at lower prices. This approach has enabled Temu to rapidly gain market share, leading to their legal battle with SHEIN. According to Bose, this confrontation was bound to happen given the differing strategies of the two companies, each vying for dominance in the e-commerce space. You can see the difference in this 2×2 Grid from Porter below.
Why This Matters
The legal battle between SHEIN and Temu is not just about market share; it’s about the future of e-commerce competition. For retailers, especially those in the middle market already feeling the pressure from shrinking margins, this lawsuit serves as a crucial indicator of where the industry is headed. The choices retailers make in response—whether to focus on innovation like SHEIN or emulate Temu’s low-cost approach—will likely determine their ability to survive and thrive in the increasingly competitive market.
What’s Next? Stay Tuned
As this legal showdown unfolds, its implications for the e-commerce industry are still unclear. NetElixir will continue to monitor the situation closely, providing insights into how these developments will shape the future of retail. Stay tuned as the story evolves and the impact on the market becomes clearer.
