Taking matters into their own hands, Chinese entrepreneurs are tapping
overseas markets more than they ever did in the past. They are keen to draw in new consumers, especially the resilient Americans who shop like billionaires. They are also running away from a crowded home base, where a race-to-the bottom mentality still dominates.
These modern seafarers are being rewarded with resounding success. Shein, the online fast fashion platform whose supply chain is largely rooted in the southern Guangdong province, has filed to go public in the US in what could be one of the world’s biggest IPOs. Backed by the likes of UAE’s sovereign wealth fund Mubadala, it was valued at around $66 billion in May.
Here is another disruptor in cross-border e-commerce: Since its debut in September 2022, Temu, the overseas arm of PDD Holdings Inc., has accrued around 120 million monthly active users, with 43 percent from the US. Temu is reportedly on track to sell $14 billion in gross merchandise value this year and is targeting $30 billion for 2024.
Consumer brands are making inroads too. Guangzhou-based Miniso Group Holding, a 10-year-old lifestyle retailer that sells cheap but trendy household goods, already has over 2,000 shops abroad. In May, it opened a flagship store in New York’s Times Square. With overseas markets contributing to about one-third of its total revenue, Miniso just had its best quarter and its stock is up 132 percent year-to-date.
Even better days are ahead. As Americans continue to shoulder the cost-of-living squeeze, they might just embrace “consumption downgrade,” a popular trend among China’s “lie-flat” youth who happily trade away premium products for value-oriented ones to conserve cash.
Already, during this Black Friday sales season, we have seen a glimpse of that sentiment shift. US consumers have gotten more meticulous, putting in time and effort to compare prices online and shopping strategically, according to Adobe Analytics.
China Inc. thinks they can tap into that mood change. They have gained a lot of experience from marketing the value-for-money concept at home. As of 2022, over 95 percent of products sold by Miniso, from cosmetics to home décor heavily influenced by Japanese design, were priced under $7. Meanwhile, a best-selling item at Temu is a $13 portable car vacuum. What’s there not to like, if you are practically minded?
Over time, Chinese entrepreneurs have also learned how difficult it is to do business in China. Every few years or so, disruptors pop out to confront natural monopolies, and Alibaba Group Holding Ltd. knows the pain better than anyone. It was first challenged by newcomer PDD, founded in 2015, and then by social media app Douyin, TikTok’s sister company in the mainland and also owned by ByteDance Ltd., the world’s most valuable unicorn.
Or consider the battle over robot vacuums, a niche product that became popular during the pandemic. Top seller Ecovacs Robotics Co has been losing customers to unicorn startup Dreame Technology, whose Suzhou headquarters are only 10 minutes’ drive from Ecovacs’ head office. While this changing balance of power has prompted Ecovacs’ CEO to openly criticize his rival at a product launch, Beijing Roborock Technology Co, another major manufacturer, is speeding up its exodus from China. This Black Friday, Roborock was slashing prices and getting good reviews. Most of its sales are generated overseas, and investors are starting to like the stock while continuing to punish Ecovacs.
Granted, Chinese companies are doing a lot to have a seat at the American Thanksgiving table. Temu, for instance, is offering a $100 coupon and “blowout” sales this Black Friday season. If the subsidy continues, the app won’t be able to break even for years.
But here is the thing: Businesses such as Temu may well be prepared to pay the price. All they see is a $1 trillion e-commerce market and a US society that is fed up with inflation and the elevated cost of living. They also know how difficult entrepreneurship is in China, where one can never sit back, relax and collect dividends from past hard work. Whether the politicians like it or not, the Chinese are coming to America. And the Americans can finally get some reprieve and value for their money.
Shuli Ren is a Bloomberg Opinion columnist. Views do not represent the stand of this publication.
Credit: Bloomberg
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