The overseas journey of the two Chinese e-commerce “twin stars” is marred by a renewed conflict.
Recently, a new interim restraining order issued by a U.S. court reveals that the cross-border e-commerce platform Temu’s (Te Mu) 50 products, including men’s clothing, casual wear, and sportswear, allegedly infringe upon the fashion e-commerce platform Shein (Xi Yin). The court issued a temporary restraining order (TRO) against 29 stores under Temu, instructing them to cease the alleged infringement of Shein.
This is not the first time Temu has received a “red card” due to infringement issues. Just days before this restraining order, Temu had submitted a lawsuit of over 100 pages to the U.S. court, accusing Shein of engaging in unfair competition and market disruption through illegal means. Shein denies the accusations and accuses Temu of “reversing black and white” and making false accusations.
In essence, the ongoing battle between Temu and Shein, two major Chinese cross-border e-commerce platforms, revolves around a positioning war related to suppliers and intellectual property rights.
In the increasingly fierce competition in the international cross-border e-commerce market, rather than turning against their own, the immediate priority for Temu and Shein, leading the charge in going global, should be to seek a common ground for healthy competition and mutually beneficial cooperation.
I. Ongoing conflicts: Internal strife in international e-commerce
According to industry experts, the recent temporary restraining order is directed at some of Temu’s merchants, imposing restrictions and prohibitions on their sales and fund transfers. It indicates that Temu’s alleged infringement against Shein is ongoing, with the infringing parties expanding to include Temu’s merchants and third-party payment platforms.
As early as August and September of this year, U.S. and UK courts issued emergency temporary restraining orders against Temu for its alleged infringement, compelling Temu to cease further infringement of Shein’s related copyrights.
According to court documents, Temu’s recent months of infringement include extensive copying of clothing designs and layouts protected by Shein’s brand, repeated disregard of infringement notices from Shein, delayed removal of infringing products, or re-listing modified products to maximize illegal sales.
In response, Temu has its own set of arguments. According to Temu, Shein forcibly took over its global intellectual property rights without the knowledge of suppliers, constituting compulsory illegal transfer of intellectual property. At the same time, Temu believes that Shein obtained copyright registration for works lacking intellectual property through false statements, and most of the copyrights are invalid.
In fact, the conflict between Temu and Shein dates back to shortly after Temu’s launch, and this is not the first time the two have been in court. In December 2022, Shein filed a lawsuit against Temu, accusing Temu of making “false and deceptive statements” in collaboration with social media influencers when promoting Shein.
In March of this year, Shein submitted a revised complaint to the U.S. District Court, involving allegations of trademark counterfeiting, trademark dilution, improper source identification and unfair competition, false advertising, business fraud, copyright infringement, business defamation, and unjust enrichment.
Four months later, Temu launched a “counterattack,” filing a lawsuit in the Boston Federal Court, claiming that Shein used its market dominance to force clothing manufacturers into exclusive agreements, preventing them from cooperating with Temu. Temu stated that this led to price increases, reduced consumer choices, and violated U.S. antitrust laws.
On December 14, Temu continued its legal action against Shein, alleging that Shein detained and intimidated suppliers for hours, forcibly confiscated their electronic devices, compelled them to provide business information related to Temu, including account passwords and transaction records, and even threatened to detain Temu merchants.
In response to Temu’s lawsuits, Shein stated that Temu had extensively copied Shein’s own brand products, engaged in unfair competition, and falsely accused Shein. Shein vowed not to compromise on such behavior and would actively defend its legal rights through legal means.
It is worth noting that in October, Temu and Shein submitted a joint statement to the courts in Chicago and Boston, requesting the judges to “impartially” dismiss the two cases filed by each side. However, withdrawing lawsuits does not necessarily mean a resolution, and with Temu restarting its legal action, the flames of the battle between the two will be reignited.
II. Marketing experts, the drunkard’s intentions are not in the wine
Temu entered the overseas e-commerce market in September 2022, positioning itself as a full-category platform and replicating the low-cost marketing tactics based on community fission established by Pinduoduo. According to WIRED analysis, when Temu entered the U.S. market, it averaged a loss of about $30 per order.
“Similar to Pinduoduo” strategy
In just one year, Temu has expanded to over 40 countries and regions, with geometric growth in app awareness and adoption, consistently ranking first in various countries’ app store downloads. There are also reports that Temu’s Gross Merchandise Volume (GMV) for the entire year of 2023 may reach $14 billion, and it has set a target of $30 billion for GMV in the entire year of 2024.
It is noteworthy that Temu has also invested heavily in marketing. According to reports,
Temu’s marketing budget for this year is between $2 billion and $3 billion, and the budget for 2024 is expected to far exceed this year’s. Although specific data has not been confirmed, Temu is currently in contact with the organizers of the U.S. Super Bowl, negotiating a second collaboration.
The author notes that, in the eyes of some foreign media, the fundamental purpose of Temu restarting the lawsuit against Shein is to build momentum for a new round of collaboration with the Super Bowl. A person in the industry claiming to be a “public relations consultant” for Temu, when asked about the motive behind this move, hinted, “They (Temu) have no comment on this strategy, but I think you are right.”
In other words, rather than resorting to legal means and a tit-for-tat approach, Temu’s essential purpose in this move is to generate free traffic by stirring up litigation waves, building a marketing engine to capture more market attention.
III. Overseas siege: Under competition, cooperation is even more crucial
Recently, Apple Inc. released the ranking of app downloads for the U.S. App Store in 2023. Temu’s average daily usage time per user is 18 minutes, surpassing Amazon’s 10 minutes. This rising star in cross-border e-commerce has alerted many international e-commerce competitors to the looming threat.
However, in terms of overall market performance, the impact from Chinese e-commerce platforms is not yet sufficient to shake Amazon’s position as the “leader” in the international market. During the Black Friday and Cyber Monday promotions in the United States, Amazon secured its position at the top with a record-breaking $106.18 billion in sales.
At the same time, Temu, as an emerging platform, is still in the phase of educating user reputation, while Amazon, which has been
cultivating overseas for many years, has already established a mature service system and a comprehensive warehouse and distribution system. A survey by GWS shows that consumer satisfaction with Temu’s delivery is only 30%, far below Amazon’s 52%.
Traffic and conversion rates are also the key to Amazon’s competition. In November of this year, the monthly traffic of Temu, Shein, and AliExpress exceeded 1 billion visits each, but this is only 50% of Amazon’s in the United States. According to Similarweb data, Amazon’s current shopping conversion rate is about 56%, while Temu’s is 4.5%, only a fraction of Amazon’s.
In response to the “price war” initiated by Temu, Amazon recently announced a substantial reduction in commission rates for clothing categories starting from January 15, 2024. For clothing items priced below $15, the sales commission will be reduced from 17% to 5%; for clothing items priced between $15 and $20, the commission will be reduced from 17% to 10%.
According to industry insiders, some new sellers in the clothing category may not need to pay commissions, thanks to the benefits of entry-level packages. Amazon aims to confront Temu, considered a “sales champion category” for clothing, and Shein, focusing on the clothing category, by offering incentives to sellers and improving services.
In April of this year, the U.S.-China Economic and Security Review Commission (USCC) under the U.S. Congress disclosed an analyst report, stating that Chinese cross-border e-commerce platforms represented by Temu and Shein have issues such as data security, procurement irregularities, and exploiting trade loopholes. The report expressed the need for enhanced regulation.
The USCC bluntly stated in the report that the rapid growth of Chinese e-commerce companies like Shein in the United States is actually due to “many controversial practices” and the unique position gained from the U.S. Customs’ $800 minimum tax-free threshold, pointing the finger directly at the entire Chinese cross-border e-commerce industry.
Indeed, the rise of Temu and Shein overseas undoubtedly provides a broader market and improved channels for China’s production, manufacturing, and logistics going global, contributing to the possibilities for the development of the upstream and downstream industries. However, under the influence of multiple factors such as overseas market supervision and industry competition, the expansion path of Temu and Shein will become increasingly challenging.
YipitData’s data shows that the user overlap between Temu and Shein is only 5%, and the overlap in product categories is less than 30%. While Temu aims to create a full-category platform, Shein focuses on the fashion category. At the same time, their operational models have fundamentally different characteristics and do not constitute entirely overlapping competitive relationships.
Facing the enormous cake of the global e-commerce retail market, rather than engaging in exclusive competition, Chinese cross-border e-commerce represented by Temu and Shein should cooperate and march forward together. They should form a united front in going global, seeking a common space for mutual survival and a long-term development path through mutually beneficial cooperation.