Bargain hunt

Amazon has long set the standard for online shopping with its fast delivery and extensive selection. However, the landscape is now shifting with low-cost platforms such as Temu challenging traditional discount retailers. Social media platforms such as TikTok are also now revolutionising convenience with in-app shopping, seamlessly merging social interaction with commerce.

Is online shopping about to be disrupted?

Temu
Temu offers low-priced homeware, electronics, and novelty items at a fraction of retail and Amazon prices, though delivery takes 9 to 20 days compared to Amazon’s next-day service. Its popularity suggests consumers prioritise price over convenience, similar to Shein.

In October 2023, the average Temu user spent 22 minutes on the app, compared to 9 minutes on Amazon and Shein. Temu's gamified features, like spin-to-win games and flash deals, create a dopamine-driven, addictive shopping experience. These interactive elements enhance the traditional e-commerce model, keeping users engaged longer and encouraging them to explore more deals and products.

Temu's success stems from offering affordable, fashionable products. Prices remain low by limiting initial production and increasing quantities based on performance. This model allows Temu to compete with and disrupt brick-and-mortar discount stores. For instance, from September 2022 to July 2024, Dollar General's share of US discount spending declined from 62% to 51%, Dollar Tree's share fell from 26% to 20%, while Temu’s market share grew from 0% to 17%.

TikTok Shop
Social commerce is growing in popularity, with TikTok users in Southeast Asia, the US, and the UK able to purchase products directly within the app, while creators earn commissions on the sales they promote. Unlike other social platforms, TikTok’s algorithm promotes videos and ads based on user interests, with 55% of users using the app for brand and product discovery. This provides small businesses with a platform to grow, benefiting from lower sales commissions compared to other e-commerce sites.

The low price points of items on TikTok Shop do not convey a sense of "premiumness," making premium brands hesitant to promote their products on the platform as consumers often associate these lower prices with product quality similar to Shein. The price point of TikTok Shop aligns with TikTok users' spending habits: 26% of TikTok Shop customers shop at off-price department stores, and 11% buy fast fashion, compared to 24% and 7% of non-TikTok Shop consumers. The affordable prices, combined with influencer recommendations, make TikTok Shop an effective driver of sales.

TikTok Shop is gradually rebranding to offer higher-end and luxury goods. The hashtag #PreLovedFashion, with over 62k videos, highlights the demand for such products. Recently, TikTok Shop UK launched a preowned luxury category featuring brands like Luxe Collective, Sellier, and Sign of the Times. This move taps into the growing secondhand luxury market, aligning with consumer trends toward sustainability.

Low-cost platforms like Temu and TikTok are disrupting traditional e-commerce models. Temu focuses on affordability over speed, using a gamified shopping experience to keep users engaged, while TikTok combines entertainment and shopping, letting users buy directly in-app. Both platforms appeal to price-sensitive consumers and are reshaping product discovery and purchasing.

Retailers are exploring new, engaging formats to boost product discovery and sales, with platforms like Walmart Realm leading the way. This metaverse-style platform, allows users to browse products in themed spaces created by social media influencers, shifting consumer behaviour from passive browsing to more interactive, experiential shopping. Unlike traditional transactional platforms like Amazon, this approach makes shopping more engaging.

The rise of metaverse-style shopping, alongside TikTok Shop and Temu, marks a shift toward more interactive retail experiences. These models focus on engagement over convenience and could challenge traditional e-commerce. Online discount platforms compete with physical discount stores by offering both engaging shopping and doorstep delivery, attracting consumers who prioritise savings over speed.

Hui Wen Lim