Clash of the Titans: The Battle for Marketplace Supremacy

Temu's Tumult, Amazon's Counteroffensive, and Walmart's Rise to Dominance

Oct 29, 2024

Temu

In August, PDD Holdings, the parent company of Temu and Pinduoduo, which is newly headquartered in Ireland (but also has presences in Boston and Shanghai) saw its stock price plummet 33% on the Nasdaq after a disappointing Q2 earnings report - revenue growth was 86% to $13.36 billion; the analyst consensus estimate was $14.02 billion.

Gone was ~$50B in market value in a single day.

Temu had been paying for customers and a revenue miss finally caught up with them.

In 2023, Temu spent $2B on Meta ads (equating to losses of $600M or $40/order). There were 250 million Temu app downloads in 2023.

The stock has since rebounded, although headwinds are strong. Congress is investigating their labor practices. And the Biden-Harris administration is making moves to close the de minimis loophole.*

From an environmental standpoint, Greenpeace is pushing Temu for more transparency (The Retail Dispatch will cover this in a future issue).

Source: Greenpeace

*A shipment is eligible for the de minimis exemption if the aggregate fair retail value of the articles imported is $800 or less. De minimis shipments enter the United States with less information than other imports and are not subject to duties and taxes.

Temu (and Shein) are likely responsible for more than 30% of all U.S.-bound daily volume that falls under the de minimis provision.

To stay in front of the proposed legislative changes, Temu is setting up U.S. warehouses. The company started onboarding sellers with inventory in local warehouses in March 2024. There are currently no U.S. sellers; instead, it is Chinese sellers with inventory in the U.S.

Amazon is launching a counterattack on Temu

Reuters (citing a The Information report) reported that Amazon plans to “launch a section on its site featuring cheap items that ship directly to overseas consumers from warehouses in Guangdong, China.” The new marketplace, Amazon's most aggressive response to the growth of bargain sites like Temu and Shein, will offer unbranded fashion, home goods and daily necessities.”

These plans coincide with a slowdown in sales, which saw just a 5% rise in the second quarter, down from 7% in the previous quarter.

According to Reuters, the company’s price limits to merchants include $8 for jewelry, $13 for guitars and $20 for sofas - yes, that’s a $20 cost for a sofa!

This is a change in strategy, as historically Amazon has not set strict limits for sellers.

Items will ship directly from China and the products will be delivered to customers in about 10 days.

Amazon is actively recruiting additional Chinese sellers. This year, they opened offices in Zhengzhou and Wuhan to support the new strategy.

The counteroffensive includes actions related to Amazon marketplace fees. Amazon has lowered fees from 17% to 5% for items under $15 and 17% to 10% for items between $15 and $20 – a direct shot at Temu’s supplier terms advantage.

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Walmart

Walmart CEO Doug McMillon said marketplace sales grew 32% year over year in its recent quarter (August 2024, Q2 FY2025).

Walmart's marketplace has consistently demonstrated impressive metrics, achieving sales growth of 30%+ in each of the past four quarters.

The disciplined execution has paid off, helping Walmart surpass a significant milestone: exceeding $100 billion in online sales revenue last year.

The number of sellers listing items on Walmart.com grew 20% last fiscal year, the retailer said at its recent Let’s Grow Marketplace Seller event that took place in San Francisco in late August.

Source: Walmart

With over 410 million unique monthly visits to walmart.com, the Walmart marketplace ranks second only to Amazon in terms of online presence. Moreover, the platform has surpassed 150,000 sellers, a milestone achieved earlier this year.

The marketplace is a key contributor to Walmart's online success, allowing the retailer to tap into a diverse customer base. The vast array of products available on the platform span the entire spectrum, from affordable to high-end items. There is something for everyone.

Walmart invests significant time and effort in catering to its marketplace clients. For instance, suppliers are treated to elaborate events with merchants and Walmart makes it clear they want to earn the business of new suppliers. As an example, Walmart offers shipping at competitive rates that are, on average, 15% lower than those of its competitors.

In a future newsletter, we will cover TikTok Shop, as well as go deeper on the Temu environmental - and related - impacts.

Until next time, happy retailing!

*For those in the retail and tech spaces, here are ways I can help:

1. I have been published in the Harvard Business Review on the topic of C-Level engagement. If you need help fine-tuning client material, such as proposals and campaigns, for maximal impact, to appeal to a C-level audience, I can be reached at tdecicco@konposit.com.