Week #14: Temu Narrows Losses in Q1, Projected to Achieve Profitability by 2025 | TikTok Delays Expansion Plans to Refocus on U.S. Market
Latest news and analysis on China’s global e-sellers
Here’s our pick for last week’s news:
Shopify Sues Shopline for Copyright Infringement
Alibaba Pumps Another $230M into Lazada
Temu Narrows Losses in Q1, Projected to Achieve Profitability by 2025
Shein, AliExpress, and Temu Reach 10M Active Users Milestone in Mexico
TikTok Shop Thailand Hits $20M in Daily GMV, Surpassing Indonesia for the First Time
Huakai Yibai Completes Acquisition of Tomtop for Close to $100M
Germany Urges for Termination of EU Tax Break Benefiting Shein and Temu
TikTok Delays Expansion Plans to Refocus on U.S. Market
Shopify Sues Shopline for Copyright Infringement
Canadian e-commerce enabler Shopify sued Chinese technology company JOYY's subsidiary Shopline in New York federal court, accusing it of illegally copying Shopify's software to build its own e-commerce platform.
Founded in 2013, Shopline is one of Asia's largest and fastest growing commerce Saas solution providers. In 2022, JOYY, which is headquartered in Singapore and focuses on social-media technology, acquired Shopline in a $183 million USD deal.
"To create Seed, Shopline started by making an unauthorized copy of Dawn, translated that unauthorized copy into a different programming language, and then made largely cosmetic changes to the Dawn code," Shopify alleged in its 17-page complaint, which was filed to the US District Court for the Southern District of New York.
"We've taken aggressive legal action against Shopline to uphold the integrity of Shopify's products," a Shopify spokesperson said in a statement. "We will continue to fiercely defend our intellectual property from bad faith actors."
Alibaba Pumps Another $230M into Lazada
Alibaba Group has poured $230 million USD into its Southeast Asia-focused platform, Lazada, marking the company's first injection into Lazada this year. With this, Alibaba has poured a total of roughly $7.7 billion USD into Lazada since 2016, when it invested $1 billion to take a controlling stake.
The new funding comes as e-commerce players in Southeast Asian turn to lower costs to get ahead of their competition. In August last year, Lazada launched its 'choice' offering, a channel that aimed to "bring the best value products of the world to Southeast Asian consumers", putting it in competition with Temu and Shein in terms of low-cost offerings.
Last year, Alibaba invested over $1.8 billion USD into Lazada. Specifically, the company reportedly pumped $352.9 million USD in April, followed by $845.4 million USD in July, and finally another $634 million USD in December.
Temu Narrows Losses in Q1, Projected to Achieve Profitability by 2025
Temu's parent company, PDD Holdings, released its first-quarter earnings report, showcasing a robust financial performance. The company saw a 131% surge in revenue, reaching $11.99 billion, while net income soared to $3.87 billion from $1.12 billion in the previous year. Esteemed institutions like BOCOM International commended Temu's adept cost management strategies, which have significantly narrowed loss rates and set the stage for anticipated profitability by 2025.
In the first quarter, Temu's Gross Merchandise Volume (GMV) hit $10 billion, with an estimated loss rate of 9%. Projections for the year suggest a substantial increase in annual GMV to over $50 billion, accompanied by a higher profit rate and a reduced loss rate to 8%. Temu aims to achieve profitability in the U.S. market by 2024 and anticipates being profitable across all markets by 2025.
Shein, AliExpress, and Temu Reach 10M Active Users Milestone in Mexico
Competition in Mexico's e-commerce market has intensified with the rise of Chinese platforms Shein, AliExpress, and Temu, which have surpassed local retail giants Liverpool and Walmart in user numbers. In April, mobile app traffic saw a significant surge, with Temu, AliExpress, and Shein recording 15 million, 11.2 million, and 10.1 million active users, respectively, according to data from SimilarWeb.
By contrast, traditional Mexican retailers have lagged behind, with El Puerto de Liverpool drawing only 5.9 million users and the Walmart app attracting a mere 4 million. Despite the impressive growth of these Chinese platforms, Mercado Libre and Amazon continue to dominate the market with 28 million and 24.5 million users in Mexico, respectively.
The Mexican e-commerce sector has experienced consistent double-digit growth for five consecutive years, reaching $39.45 billion in 2023, a 24.6% year-over-year increase. This far outpaces the global growth rate of 10%, positioning Mexico as the fastest-growing e-commerce market in the world, ahead of dynamic markets such as the Philippines, Malaysia, India, Colombia, and Indonesia.
TikTok Shop Thailand Hits $20M in Daily GMV, Surpassing Indonesia for the First Time
Fastmoss's data revealed that TikTok Shop's Thailand site has experienced significant growth, with daily GMV surpassing Indonesia for the first time, reaching $20 million USD. The rise is attributed to the boom in live e-commerce and influencer marketing in Thailand.
As Southeast Asia's second-largest e-commerce market, Thailand plays a crucial role in TikTok Shop's global expansion, with over 200,000 local businesses, mostly SMEs, have joined TikTok Shop. Recent reports indicate that by December 2023, TikTok Shop's GMV in Southeast Asia soared over $13 billion USD, with Indonesia surpassing $4 billion USD and Thailand reaching roughly $3.5 billion USD.
Thailand's vibrant social media scene and well-established live streaming industry provide fertile ground for TikTok Shop's growth, blending social engagement with e-commerce seamlessly. The e-commerce market in Thailand is projected to reach $218 billion by 2025.
Huakai Yibai Completes Acquisition of Tomtop for Close to $100M
Shenzhen-based top seller Huakai Yibai announced its acquisition of Tomtop for $96.66 million USD in cash. Upon completion, this transaction will grant Huakai Yibai full ownership of Tomtop, effectively integrating it as a wholly-owned subsidiary.
In the first quarter of this year, Huakai Yibai's revenue surged by 23.05% to $234.33 million USD, while its net profit rose by 7.67% to $11.32 million USD. Leveraging China's robust supply chain, Tomtop caters to overseas consumers, offering a range of products from 3C electronics to photography and audio equipment through platforms like Amazon and AliExpress.
With this acquisition, Huakai Yibai aims to capitalize on Tomtop's strengths in brand development and operations, focusing on digitalization and supply chain optimization.
Germany Urges for Termination of EU Tax Break Benefiting Shein and Temu
Germany is calling for a reform of the EU's import tariffs, potentially eliminating an exemption for low-cost parcels that has allowed online retailers Shein and Temu to capture market share with their affordable clothing, accessories, and gadgets made in China. Under current EU regulations, packages purchased online from non-EU countries valued under 150 euros ($163 USD) are not subject to customs duties.
Shein and its competitor Temu have refuted claims that their growth is primarily driven by the duty-free policy. "The principal factors behind our swift expansion and market presence are the supply chain efficiencies and operational proficiencies we've cultivated over the years," a Temu spokesperson stated.
The European Parliament provisionally approved the customs reform bill in March; however, the bill will undergo further evaluation following the European elections in early June, when a new parliament will be in place.
TikTok Delays Expansion Plans to Refocus on U.S. Market
Earlier this year, TikTok generated substantial buzz with its announcement to expand into five new countries. However, recent developments indicate that these expansion plans have been postponed due to the untapped potential in the U.S. and concerns over potential sanctions in Europe.
In response to ongoing legal challenges in the U.S., TikTok has taken proactive measures including filing appeals to protect its interests. The legislative buffer period has afforded the company valuable time, allowing its operations in the U.S. to remain relatively stable over the next 2-3 years.
Reports suggest that TikTok will now prioritize launching new sites in Spain and Germany in the first quarter of next year, rather than in the previously planned Q3-Q4 of this year. Throughout this year, TikTok will maintain a concentrated focus on the U.S. market. Other markets, such as Italy, France, and Mexico, are expected to open in Q2 next year, contingent upon the situation in the U.S.