How Shein and Temu Snuck Up On Amazon — With Louise Matsakis

Louise Matsakis is a technology reporter and writes You May Also Like on Beehiiv. Matsakis joins Big Technology Podcast to discuss her recent story for Big Technology about how Shein and Temu snuck up on Amazon and what these two Chinese ecommerce companies have done to carve out a growing slice of the online retail market. In this story, we talk about demographics, marketing, tariff loopholes, and more. Stay tuned for the second half where we discuss the state of the TikTok ban and how China is competing with U. S. Tech. Read the full story: How Shein and Temu Snuck Up on Amazon --- Enjoying Big Technology Podcast? Please rate us five stars ⭐⭐⭐⭐⭐ in your podcast app of choice. For weekly updates on the show, sign up for the pod newsletter on LinkedIn: https://www.linkedin.com/newsletters/6901970121829801984/ Want a discount for Big Technology on Substack? Here’s 40% off for the first year: https://tinyurl.com/bigtechnology Questions? Feedback? Write to: [email protected] Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Alex Kantrowitz?

  Let's talk about how Amazon is facing what may be its most serious challenge yet as Chinese retailers Shein and Timu make inroads in the United States and elsewhere. All that and more coming up right after this. This episode is brought to you by Genesis. What does it actually take to put a Gentic AI to work across an entire enterprise? I recently spoke with Genesis Chairman and CEO Tony Bates about why orchestration is emerging as a competitive advantage in customer experience and what companies need to get right in the AI era. Then I sat down with Adam Mitchell, Head of Enterprise Business Solutions at Voya Financial, to go inside a large-scale agentic CX transformation, including the business decisions, trade-offs, and lessons along the way.

• 0:44Alex Kantrowitz?

  You can watch both conversations now on my YouTube channel today. It's never been more challenging to get frontier compute. How do you know where to look, who to trust, or how much to pay? Akash is an open cloud that provides easy access, flexibility, and peace of mind. That's how companies like Razer were able to cut their inference cost by 15 times. Visit akash.network/alex for a free consultation. That's akash.network/alex for a free consultation.

• 1:15Alex Kantrowitz?

  Welcome to Big Technology Podcast, a show for cool-headed, nuanced conversation of the tech world and beyond today. We're diving deep into Shein and Temu with the author of a great story, live on bigtechnology.com right now. Louise Matsakis is here in the house. She's a friend of the show and the author of You May Also Like, which you can find at youmayalsolike.beehive.com. Louise, welcome to the show.

• 1:38Speaker 01

  Thanks for having me, Alex.

• 1:39Alex Kantrowitz?

  Great to have you here. Great to be doing this in person, which is cool and a new capability that we have here at Big Technology HQ. So you just wrote this great story for us on Shein and Temu. And these are obviously two retailers that people are starting to hear about. Their name recognition is getting much more out there with big Super Bowl ads and lots of marketing on Facebook and Twitter. Also, people are just buying this stuff. Like, it's not uncommon now to be like, speaking with someone and be like, "Oh, where did you get that?" And it's from Shein. Can we talk a little bit at the start about how big these companies are and whether they're actually posing a real challenge to Amazon?

• 2:17Speaker 01

  Yeah, so let's start with Temu or Temu. It's funny, actually.

• 2:21Alex Kantrowitz?

  What's the right pronunciation?

• 2:22Speaker 01

  So there actually is no right pronunciation. So I think a couple of times their PR people have corrected people and said, oh, it's Temu. And then the other day I was listening to another podcast. It was Planet Money, NPR's economics podcast, and they did an episode about Temu. And they asked, and Temu's response was, it's however you feel like you want to pronounce it.

• 2:42Alex Kantrowitz?

  That is like some of the weirdest branding I think I've ever heard.

• 2:45Speaker 01

  Yeah, their PR strategy is a little bit questionable. But so I like to say Temu. I think that's fine. But so Temu is the sister app of Pinduoduo, which is now the most valuable e-commerce company in China. Has about, you know, 750 million plus users. So they're a much larger sort of like parent company. And Temu itself has hundreds of millions of users around the world already. They are operating in around like 60, 65 countries. And in the US, they have, you know, it sort of fluctuates, but I would say around 40 million monthly active users right now. And then there's Shein, which specializes more in women's fashion, although they've branched out into a lot of other categories as well.

• 3:29Speaker 01

  Pet supplies, makeup, small electronics, home goods. So they have about 20 to 30 million monthly active users in the US on any given month. And they're in over 100 countries around the world.

• 3:43Alex Kantrowitz?

  And it's interesting, like, they did kind of come out of nowhere. And then all of a sudden to be running like, what, six Super Bowl commercials? Like, you're like, oh, these things are, you know, people were like, I can't believe Temu or Temu actually has the money to run these commercials. But they had actually built big businesses. And one of the reasons they've been able to do it is because they've gone to, I would say, an underappreciated demographic, right, to start to grow within the United States. So talk about that a little bit.

• 4:07Speaker 01

  So it's interesting. When I first pitched, Shein was, you know, earlier than Temu, because Temu didn't launch until the end of 2022. And I remember pitching Shein and said, hey, I want to run a feature about this big, you know, Chinese online e-commerce company. And I had editors push back and say, oh, that's not a tech story. Like, I don't get it. Who cares what like, you know, 13-year-olds are buying $700 leggings. Like, why does that matter? You know, like, I don't really see the use case. And I thought that was so interesting because there had been all of these other sort of direct-to-consumer startups that had the same sort of e-commerce model, and they had gone after upper-middle-class Urbanites, right? There were so many of these, you know, I'm thinking of like the

• 4:52Speaker 01

  Soylent of the like, all the luggage startups. There was all these different types of clothing, you know, the Allbirds, right? There were all these consumer startups that sort of the archetype they were going after was men and women who were making, you know, I would say over like $8,000 a year, right? In sort of like New York, San Francisco. And in a lot of ways, Shein and Temu went after the opposite of that demographic. So a lot of times, I'll talk to someone in New York City or in Los Angeles where I live, and they'll say, oh, you know, my aunt in Texas loves Temu, or my nephew who lives in Wisconsin is obsessed with Temu. My granddaughter who lives, you know, in Iowa is really into Shein. And that is no mistake. They specifically went after

• 5:37Speaker 01

  sort of lower income demographics outside of major cities. And they often overwhelmingly, both sites are dominated by female consumers. So I think that in Silicon Valley, a lot of the sort of men who were the perfect target customer for the Allbirds or the Soylent just sort of missed the rise of these companies. Because, you know, while they had these enormous advertising budgets, they were not advertising towards those people. Because those people are already so well catered to, right? That's a really crowded market. And it was already dominated by Amazon, right? Like, all those people already have a Prime membership.

• 6:16Alex Kantrowitz?

  Yep. And so some of the demographics you have in the story, the average American Shein shopper is female, in her early 30s, earns roughly $65,000 a year. Temu's fastest growing demographic, this kind of surprised me, ages between the ages of 55 and 64, eating young people to make fun of their older relatives for becoming Temu victims. And then also, Temu's customers are also women, and more than half of them make less than $50,000 annually. Let me ask you this, there is a sort of agreed upon feature or bug within these platforms that a lot of this stuff is, it's low quality, it breaks, you kind of take like a 50/50 chance at like whether this is going to work or not.

• 7:00Alex Kantrowitz?

  Do you think that our society has pushed people toward these sort of low-quality sites that have these goods that are not from the US? Because they get paid so little and they sort of almost have no choice but to do that? And then doesn't that sort of help, like, put us in this like, almost death spiral? Where like, we pay people less, they buy low-quality goods, eventually they buy those low-quality goods from outside the United States, the economy gets worse, and so on and so on?

• 7:31Speaker 01

  Yeah, I think there's a lot to unpack there. So I think to play sort of the devil's advocate here, I do think that the other big sort of category of retail that Shein and Temu are competing with is dollar stores. Right? And in a lot of markets where people are shopping at, they're not shopping on Amazon, they're shopping at sort of the Dollar General or the Walmart. And I would say generally, the Shein and Temu, the quality is actually better than a lot of those retail experiences. Because in a lot of cases, Shein and Temu are working directly with the suppliers. So while the price might be similar to a Dollar General, there's not a middleman in the middle who's even reducing the quality further, right?

• 8:12Speaker 01

  And Temu in particular has a reputation for being incredibly aggressive in terms of quality. They will cut off their suppliers if there's a quality issue or if the return rate is too high. That's not to say these are the most luxurious handmade, luxurious, you know, handmade artisan goods by any means. But I do think for this demographic potentially, I would rather shop on Temu if I were, you know, in a rural part of the United States than having to drive the five miles or whatever to the Dollar General. That, I think, the quality is generally going to be worse and there's going to be far less selection, right? So I think that that's sort of the devil's advocate argument.

• 8:53Speaker 01

  But on the other hand, I do think that this is sort of like the hyper-rise of this incredible level of consumerism. And I think that there is sort of an inherent darkness and trepidation that a lot of people have. And I think that, you know, as a China reporter, what I've sort of seen is that get Tripped up and mixed into sort of like Sinophobia, right? And sort of this like, oh, because it's made in China, it's inherently bad. And so I think I'll feel better if I shop at this other site where like, everything is also made in China, but it has a nice American name that I know how to pronounce. And they don't remind me that it's made in China and the news doesn't remind me of that. And if I call customer service, they tell me that the executives are in America.

• 9:36Speaker 01

  Right? And so I think what I worry about is sort of like, do those companies get off the hook for also selling stuff that's like really bad? But because they're not Chinese and because they're not maybe using sort of this low end marketing, they get off the hook for sort of this exact same practices, right?

• 9:54Alex Kantrowitz?

  Absolutely. I mean, isn't that a case with Amazon? Like they're selling a lot of the same goods from the same manufacturers. We're going to get into the human rights stuff, but they have the same human rights problems.

• 10:02Speaker 01

  Totally. I think, I think it's really true that Amazon sort of originally pioneered a lot of what Temu and Shein are doing in that like, these are both marketplaces, right? Where they're working with thousands of different suppliers. And that's why they're able to have so much selection. That's why the selection changes so often. And that's what Amazon did, right? And a lot of Chinese manufacturing towns and Chinese suppliers learned how to cater to the US market because of Amazon, right? So like, we are all now used to going on Amazon and seeing these like, you know, you could buy a cup or something that would be a sort of weird string of letters. And it was some like Chinese company, right? And they sort of took off the veneer of like, maybe

• 10:46Speaker 01

  a few years before that, you would go to Target and it would have some cute name, right? Because there was a middleman, there was a US middleman that was sort of hiding the reality of this stuff being made overseas. And now sort of that veneer is gone. It's easier to sort of see into like, oh, like this is all coming from China and there's so much of it and it's under all these weird brand names. And, you know, how do I, how am I supposed to feel about that as a consumer?

• 11:09Alex Kantrowitz?

  Yeah, well, we should talk about the human rights thing because it is an issue, right? Like these, there are noted, noted human rights violations that these companies have been involved with. And it's almost like, I think about, okay, so like on one hand, maybe we shouldn't single them out for human rights violation. Like there may be no worse than some of the suppliers on Amazon. On the other hand, like, why is it so freaking hard for us to have a supply chain? That like, doesn't rely on slavery. It's crazy.

• 11:33Speaker 01

  Yeah, I think that one of the sort of like, Fundamental reasons that I get up in the morning and that I want to do this reporting is because I believe that consumers and societies deserve to know more about where the things they buy come from. And I think it is ludicrous that we live in a world where it is now functionally impossible to understand where something you bought actually came from and how it arrived at your doorstep and who was potentially exploited in that supply chain. And I think it's unhealthy for society to have that abstraction and to have no connection to sort of like where things come from. I think that fundamentally as humans, we like, you know, want to know that we can produce

• 12:16Speaker 01

  things with our hands and like, where does this stuff come from and who makes it? And I think that that's something that we're losing right now and that allows sort of these companies to, yeah, you know, exploit people to, I think, engage in sort of practices that are really questionable. I don't know if you want to get into the specifics of what the accusations have been.

• 12:35Alex Kantrowitz?

  Yeah, go for it.

• 12:35Speaker 01

  In this case, so I think, just to give people, I think there's sort of like this vague aura of badness.

• 12:41Alex Kantrowitz?

  That's exactly the right way to describe it.

• 12:44Speaker 01

  Yeah, and I think it's worth just sort of like being very specific. So in the western region of China, there is an area called Xinjiang where an ethnic minority called the Uighurs have been persecuted for a long time. And around, you know, one to two millions of, one to two million of them have been put into camps. And as part of sort of that, that religious and ethnic crackdown, there have been accusations of forced labor. And so in particular, one of the concerns is about cotton. So the majority of cotton in China is grown in Xinjiang, and the concern is that Uighurs are being forced to pick this cotton and to process it and to make clothes there. So the United States government outlawed basically anything, in particular cotton,

• 13:29Speaker 01

  being imported to the US that has ties to Xinjiang. So the concern is that Temu and Xi'an have continued to use cotton from this part of China despite those accusations. So I think it's just, you know, important for people to know precisely what the accusation is. You know, I think sometimes people say, oh, everything on Xi'an is made with child labor, and that's not necessarily true, right? Like, I think it's important to just be specific about what we're talking about.

• 13:57Alex Kantrowitz?

  Yeah, and whatever the case, I mean, clearly, like, the American consumer is not too worried because this stuff is pouring in through the mail. And you and your article cite this, I think it was a TikTok of a US mail carrier. He goes, every day it's Temu, Temu, Temu, I'm Temu-tired.

• 14:14Speaker 01

  Yeah, I think they have this tendency to put everything into one package and then kind of like wrap it in a bunch of duct tape. So it's like these amorphous big packages that the poor mail carriers have to have to deal with.

• 14:27Alex Kantrowitz?

  So this stuff is pouring in through the postal service.

• 14:30Speaker 01

  Yeah, exactly. And a lot of it is coming in in sort of these small packages, and they're going directly to consumers' doorsteps, which is a problem in terms of being able to catch whether something was made before slavery, because we used to have a system where, you know, a big shipping container would come in and we'd be able to say, like, okay, all of these T-shirts we can see on the manifest came from Xinjiang. So, you know, we're going to block this import and we're able to sort of enforce our laws. But when instead of that big shipping container, you have 2,000 tiny little packages that are going all over the US, it's a lot harder to sort of do any supply chain policing.

• 15:10Speaker 01

  So that's another sort of like added, you know, complication to the Xi'an and Temu story is that a lot of this stuff is coming directly from China to individual people's houses or whatever. And so that makes it a lot harder for the US government to know what is coming, is it safe? And should we be concerned?

• 15:32Alex Kantrowitz?

  Right. And interestingly, they're not sending us these, they're not sending people these packages individually because they want to like try to get around human rights. They're trying to get around it because they have a loophole that allows them to send anything, I think, under $600.

• 15:46Speaker 01

  $800.

• 15:47Alex Kantrowitz?

  $800 without paying the tariff. So talk about that, this de minimis loophole.

• 15:52Speaker 01

  Yeah, so the de minimis threshold, which sounds like this sort of obscure thing. If you've ever left the US, you've probably benefited from this. And it allows you to come back into the United States and bring $800 worth of goods and not pay tariffs on it. It's also what allows eBay to thrive. It's also what allows Amazon to thrive. You know, I like to buy vintage stuff from Japan on eBay and I'm allowed to import it to the US, you know, no problem. And it ships via DHL and I don't have to pay any tariffs on it. So this is a huge benefit to consumers. But what Shein and Temu realize is that they could also use it to avoid the normal tariffs that their competitors have to pay in order to sell, you know, the same type of clothing in stores.

• 16:34Speaker 01

  So they have to pay retail tariffs because they're sending those shipping containers to go to a Target store or to go to a Forever 21. And so it could be like, you know, a 30% tariff that they're able to dodge by just sending that stuff directly. And I don't know who in the world is spending more than $800 on Temu or Shein. And it's only the individual one, right? So let's say you did pay, you know, place some gigantic order, you could just split it up into two parts and you would still be able to avoid having to pay tariffs.

• 17:02Alex Kantrowitz?

  So they're always effectively going to be cheaper than like going to a brick and mortar store.

• 17:07Speaker 01

  Exactly.

• 17:07Alex Kantrowitz?

  That's selling Chinese made goods and saying, can I just buy this?

• 17:10Speaker 01

  Exactly. So sometimes people wonder like, oh, you know, why is that skirt that's the same quality, you know, $40 in a local boutique, but it's only, you know, $15 on Shein? And that's part of the reason is that they're able to sort of dodge those tariffs.

• 17:25Alex Kantrowitz?

  Yep. Louise Matsakis is here. She's a friend of the show and the author of You May Also Like. It's at youmayalsolike.be.com. She also has a story up on bigtechnology.com. Just went up this past week, how Shein and Tmoo snuck up on Amazon. It's free and available to everybody to read, so I definitely hope you go check it out. On the other side of this break, we're going to talk a little bit about what these companies do to get access to the American consumer. Because they don't have storefronts, they need to go through some other means to find their way to us. And that, of course, is social media advertising. So we're going to talk about how important they are to Facebook's business, a little bit more in their supply chain, and maybe we can talk a little bit about whether they're going to get banned and whether TikTok is actually going to

• 18:09Alex Kantrowitz?

  get banned on the other side of this break. Back right after this. This episode is brought to you by App Point. Everyone's racing to roll out AI right now. Co-pilots, chatbots, agents doing real work. But here's the part nobody loves talking about. All that AI runs on your data, and most teams have no single way to see it, secure it, and prove it's under control. That's exactly what App Point does. For 25 years, they've been the trusted layer beneath the world's most demanding data, now extended across your entire AI estate. Your data, your cloud, and the agents acting on your behalf. It's how more than 28,000 organizations deploy AI with confidence, so innovation

• 18:51Alex Kantrowitz?

  scales without scaling risk. App Point, the unifying trust layer for AI. Head to apppoint.com to see how enterprises deploy AI with confidence. Learn more at avpt.co/bigtechnologypodcast. That's avpt.co/bigtechnologypodcast. Violent threats against executives are growing at an alarming rate. When a company experiences backlash, executives are the first people blamed. When their address and other personal details are sitting online, this backlash can lead right to their front door. The team at Ironwell knows this better than anyone. They've protected some of the most targeted executives and individuals on the planet for almost two decades. As

• 19:33Alex Kantrowitz?

  a white glove enterprise security service, they protect your people with continuous personal data removal, proactive prevention tools, and human-led emergency support. So when someone goes looking for your executives, Ironwell ensures they hit a dead end. So here's what to do. Go to ironwall.com/bigtechnology, fill in the quick form and request your free risk assessment. Their team will show you just how exposed your executives are and how to lock it down before a threat reaches their front door. That's ironwall.com/bigtechnology. Learn how to stop online threats before they become real world attacks. The link's in the show notes. And we're back here on Big Technology Podcast with Louise Metzakis. You can find her newsletter

• 20:17Alex Kantrowitz?

  at youmayalike.beehive.com. Also, her story how Shein and Temu, or Temu if that's what you prefer, snuck up on Amazon is live on bigtechnology.com. These companies have also, so they don't have storefronts, right? So, okay, we know that they are able to sell items cheaper than your typical retail store with a storefront, cheaper than maybe even the dollar store. But they have to find a way, like they have to set up a digital storefront that has to have traffic. And the way to get that traffic is Facebook ads. So how important are they to the Facebook ecosystem? And how have they been able to make this work in their system? And by the way, as we talk through this, it's just amazing because you think it's like this kind of silly casino-like retail experience, but actually, every little

• 21:02Alex Kantrowitz?

  intricate piece of their business model is very well thought out and positioned in a way to take advantage of the American system.

• 21:09Speaker 01

  Totally. So, a few things. So, one I will say is that Shein does have some retail stores, but they're usually temporary pop-ups. But it's fascinating because I remember they had one in Texas and there were lines down the block. And they sort of revitalized this mall temporarily because all of a sudden, like, the mall was flooded.

• 21:29Alex Kantrowitz?

  Really?

• 21:30Speaker 01

  Yeah, with girls who were there to go to the Shein store. So, I will say that they have tried sort of like experimenting with retail. But generally, yes, they're a digital-only experience. And I think the meta point is really important because I think one thing I hear often, you know, reporting in China is, oh, you know, the American tech companies have no presence in China, right? And while that's true, they don't have a consumer presence. They do often have ads business, right? So there are a lot of Chinese companies that are advertising to American consumers or to, you know, consumers in other parts of the world. And right now, two of the biggest ones are Shein and Timo. So they're spending, you know, collectively billions of dollars annually.

• 22:11Alex Kantrowitz?

  Yeah, from your story, we have Timo spent $2 billion on Instagram and Facebook advertisements last year. That's a lot of money.

• 22:18Speaker 01

  It is an enormous amount of money and it has resulted in Meta's China business growing much faster than its US ads business. So I think, you know, just to take a step back, one way to sort of think about Shein and Temu and the difference between them and Amazon sort of conceptually is that they are thinking about shopping, online shopping, as a form of entertainment. And so they are, you know, using these spinning wheels where you can earn a discount. There are these games, they're incentivizing you to leave reviews. They will give you points that you can use towards purchases if you log into the Shein app every day.

• 23:00Speaker 01

  And that is such a different type of, you know, approach and philosophy than Amazon, which has been, I think, their archetype of their ideal customer is sort of this, you know, stressed out, high-earning person in a big city who they just want that buy now button. Why don't you put the toilet paper on auto, you know, replenish or whatever? Remember when they had those, I was thinking the other day about the dash button? Yeah, really, don't even log on to our app. Just click the bounty paper towel button, right? Like, that was a huge, I think, part of the ethos for Amazon was how can we get this to be as convenient as possible? Whereas Shein and Timo are saying, hey, get on our app, download our app, we'll reward you for that.

• 23:44Speaker 01

  We want you to come and stay a while, right? I think that's why you're seeing sort of this older demographic spending a lot of time on Timo because they're like, hey, this is fun. I'm having a nice time. I'm seeing things I didn't expect. And there's a lot more sort of like surprise and delight. You know, pick a free gift of like, You know, from the selection of like, you know, quirky little things that you didn't know you wanted. And so that is a big sort of, you know, fundamental part of the philosophy is a ton of advertising. We're going to get you on there. We're going to hook you, but then we're going to keep you there. In the same way that TikTok is going to keep you there or Instagram is going to keep you there. And it's sort of like this slot machine function of, well, when you refresh it, you never know what you're going to see.

• 24:27Speaker 01

  Whereas I think with Amazon, it's like, no, we want you to, every time you can ensure your Dawn dish soap comes every six weeks.

• 24:36Alex Kantrowitz?

  Right.

• 24:36Speaker 01

  That's totally different. Um, and just in terms of the approach.

• 24:41Alex Kantrowitz?

  Yeah. And you mentioned in the story that there's a photo of this guy with all the things that he's bought from Temu, I think. And it's kind of hilarious.

• 24:49Speaker 01

  Yeah. So I, you know, it's important, I think with Timo to look back to what was Pingguo Dua, the parent company. What was their approach in China? And they did the exact same thing. They went after people in, in China, there's this tier system of cities. So, you know, first tier is sort of like, you know, the Beijing, the Shanghais. And so they went after people in like third, fourth tier cities in these, you know, county level towns who had time on their hands. And I think it was in 2018, the New York Times took this amazing photo and it's of a guy who was like, I think in his 40s. And he's surrounded by all this stuff that he impulse bought on Pingguo Dua. And it's like a electric pink car for his daughter. I think there's like a dart game. There's an inflatable raft.

• 25:34Speaker 01

  It's like all this stuff he didn't really need, but he was like, oh, this is such a good deal. This is so delightful. This will sort of make me happy. This is entertaining. Whereas I think, you know, of course there is sort of that impulse component on Amazon, but I think a lot of what you would see is like, oh yeah, I got like storage containers for, to organize my kitchen, right? Or I got like planters, you know, for, for the plants that I got, or like, it's much more sort of like this productivity, efficiency ethos. Whereas I think with these sites, it's much more about like, Can we get you something funny or that will delight you? Or that you can plan a birthday party? Or you can decorate for Christmas? That is much more how they're thinking about the holes that they want to fill in terms of consumer behavior.

• 26:18Alex Kantrowitz?

  Right, and going back to the social media ads. I mean, if this stuff disappeared, how big of a hit would it be to like a Facebook's business?

• 26:25Speaker 01

  I think it would be big, right? I think that for Facebook, and it's also, it's not just Facebook, it's also YouTube. It's also, we should know, we talked earlier about, I think Timo had six separate Super Bowl ads. It's also traditional advertising TV channels that would be hit. I think that no matter what, though, this is going to slow down over time. You know, I've heard people sort of make the mistake where they're like, oh, well, it's all just advertising fluff, right? And once the advertising goes away, you know, Timo will go away. But I think this is exactly what they did in China. And it's a very deliberate strategy where they are flooding the market with advertisements. But they're watching closely to ensure that these people are repeat buyers.

• 27:07Speaker 01

  I don't think that Temu is like Wish, which is another platform that was like this, that sort of had this huge rise based on all these Facebook ads. And then they sort of fell off, right? I don't think you're going to see the same pattern. They're very carefully sort of watching, like, we're making this huge investment. We're going to give all these free gifts. We're going to have all these Facebook ads. But that's a very deliberate strategy that over time, the advertising will cool, the average price of the product will go up slightly. But by then, hopefully, we have sort of gotten a big enough user base that's already converted and already in love with us and has canceled their Prime membership or whatever. And so we have a sustainable business.

• 27:45Alex Kantrowitz?

  Yeah, and it sounds a lot like TikTok's strategy. And before we talk about TikTok, I just want to note that Louise's story was at the top of Techmeme over the weekend and Road Techmeme the whole weekend, which was great. Our first contributor to make it there, so we appreciate that. And folks at home, if you don't know what Techmeme is, it's my go-to site for finding out what's happening in the tech world. As it's happening, and I think you'll find great value from it, too, if you go and check it out. So that's techmeme.com. They are an awesome partner that we have a cross promotion running with. Big technology podcast. I think this episode is going to be on their homepage. And I'm grateful for it. They're a great site. So it was very cool to see your story up there.

• 28:25Speaker 01

  I've been a reader for a long time.

• 28:27Alex Kantrowitz?

  Definitely. Okay, so let's talk about TikTok. I mean, this this strategy that you're you talk about, go big on ads, like, and then and then hopefully you have a sustainable business that you don't need the advertising. So Propel sounds exactly like TikTok. I mean, TikTok basically built its business on the back of running Facebook ads and sending users to its app. So talk a little bit about the overlap here. Is this just like a strategy that apps in China have employed to enter the United States? Is there some like taking notes from one to the other, or is it just a coincidence?

• 28:56Speaker 01

  I don't think it's a coincidence. I think the big thing, I think one way to think about it, you might think is, okay, Shein, Timo and TikTok are all Chinese companies. So that's why we would look at them all together, right? But I think the actual more important similarity is that TikTok has enormous e-commerce business in China. And they are now also rivaling Alibaba the same way that Pinduoduo is. So that's why I would put them in that category. And it's important to look at their e-commerce strategy as well. You know, there's TikTok Shop right now. And so I think that, yes, it is a strategy, to answer your question directly, to place all of these, you know, ads on other platforms and then sort of see if you can get a sustainable business out of doing that.

• 29:42Speaker 01

  But it's also that all three of these companies are really, you know, focused on e-commerce. And while we think of TikTok as just a video app primarily, they're also competing with with Shein and Timo in the exact same way. And so I think that's another reason that sort of considering TikTok as part of the mix is really important.

• 29:59Alex Kantrowitz?

  How big is TikTok's retail business?

• 30:01Speaker 01

  So in the US, it's not that big. I think that they're, I haven't looked at the, there's daily sales recently, but they're doing like, you know, in the tens of millions of dollars of daily sales. But they're really big in other parts of the world as well, the same way that Shein and Timo are. You know, so TikTok's, the TikTok Shop. It's doing really well in Southeast Asia. It's doing fairly well in other corners of the world. And already it is the cash cow for ByteDance in China.

• 30:28Alex Kantrowitz?

  Yeah.

• 30:29Speaker 01

  So I think that.

• 30:29Alex Kantrowitz?

  Wow.

• 30:30Speaker 01

  Yeah, so I think people miss that. And I think it's important to sort of like, you know, look at that as part of the mix. And also they're selling a lot of sort of these household goods. These sort of like, you know, smaller ticket item priced.

• 30:44Speaker 01

  These smaller ticket item priced products that are also made in China, right? So I think that's another avenue. And I think, again, they also have this ethos of shopping being entertainment. Right versus shopping being something you just try and get done as quickly as possible and move on with your day. Right, it's this idea of like engaging with these businesses. You know, having a laugh before you click order. Right, or you know, having a little bit of fun, spending time looking at these products over and over again before you actually buy. I think all three of those companies really are going in on that idea as being their thesis. And so far it's bearing out.

• 31:19Alex Kantrowitz?

  So do you think US regulators, the US Congress is going to look at these two sites, Shein and Temu, and say, wait a second, like the same concerns we might have had about TikTok? We might have about these two, whether it's a challenge to American competitiveness or maybe data, I don't know, influencing culture? And is there a chance that we're going to see a same progression go on with Shein and Temu?

• 31:43Speaker 01

  I think so. So you're already sort of seeing some hesitancy on Capitol Hill. There was a big astroturf campaign against Shein in Washington DC where I can't remember exactly what their ridiculous tagline was, but I think it was like Shein is the needle and TikTok is the drug. And it was like trying to connect the two to being some sort of nefarious influence. We don't know because it was a dark money campaign. And you're already seeing, you know, Shein originally wanted to IPO in New York. And you're already seeing the Security and State Commission sort of slow roll their application, not engage with them, and they're starting to look at IPOing in London maybe instead.

• 32:25Speaker 01

  So you're already sort of seeing rumblings of, you know, displeasure and sort of like, you know, hesitation about these companies in Washington. And I think that there's no reason that that wouldn't continue to escalate. The question is. Are we going to just keep playing whack-a-mole with these Chinese apps? Right? Like, I don't know if that's a good strategy. And I think that there's maybe some hesitation among certain lawmakers about whether that's really a good path to go now necessarily. But you're definitely starting to see the rumblings of them being the next TikTok.

• 32:55Alex Kantrowitz?

  OK, but I have one more question about TikTok and then we're going to go back to these two. Is TikTok actually going to get banned? I mean, I know they passed the ban and apparently the clock is ticking. There's like 10 months. Do you think we're going to get to a point where they're actually going to sell or get banned? Or is this going to end up in lawsuits and just delay it indefinitely?

• 33:13Speaker 01

  I think it's going to be delayed indefinitely because of the lawsuits. But I have concerns, I guess, about whether or not the Supreme Court would strike down such a lawsuit on First Amendment grounds. I think that they might have some sort of convoluted First Amendment argument that would allow the ban to actually take place. But even if it did, I'm still unsure about the actual mechanics of like, will the app just keep working if you've already downloaded it? Will we see sort of like the surreal moment where Americans are downloading VPNs to use apps that have been banned the same way that people in China do that? Right? So I don't foresee a world where we can't actually access TikTok.

• 33:55Speaker 01

  But I am sort of pessimistic about whether the lawsuits will result in a, you know, clear win for TikTok in the sense of like, you know, the highest court in the land saying, you know, this is unconstitutional and the law that Biden signed banning the app being struck down just very clearly. I think it will get messy, I guess is what I'm saying.

• 34:16Alex Kantrowitz?

  It is amazing, you know, it wouldn't be a huge deal if Reels or YouTube Shorts were on the level. But it is amazing how much better TikTok remains above Reels and YouTube Shorts. Do you have any thoughts on why that is?

• 34:28Speaker 01

  You know, so I actually do. So last night I deleted TikTok from my phone and I very specifically said, I'm going to really give Reels a shot. So I set a timer for 90 minutes and I said, I'm going to spend 90 minutes scrolling through Reels and just see like, what is the deal? I think a fundamental issue is that you have this group of creators who knows how to make static content, because that's what they did on Instagram. And they don't actually know how to make good videos. And so a lot of the time it's like, Kind of a really short video that like should just be a photo with some like background music put on, but you don't actually need the audio. Does that make sense? It's kind of like a meme with music playing in the background.

• 35:11Alex Kantrowitz?

  But it's the it's different creators effectively. So you think that TikTok native creators are doing a better job.

• 35:16Speaker 01

  I I

• 35:16Alex Kantrowitz?

  But there's so much reach available on Instagram if you do well.

• 35:20Speaker 01

  I I I think it's still really hard to just join Instagram and to go viral in the way that you can on TikTok. Because there isn't that same for you page capability where people are starting just at this algorithm. They're starting at like looking at their friends' stories, right? And then maybe they wander over to reels. Um, I I I think that fundamentally you have creators who don't understand the video format. And you have a platform that is not built to support those videos creators, those video creators first and foremost.

• 35:50Alex Kantrowitz?

  Instagram has kind of been a weird place right now. It has the static images. It has like a Twitter, like a worse iteration of Twitter and threads. And it has this like, I don't know, TikTok knockoff that's not very good.

• 36:02Speaker 01

  You're seeing the same thing that happened with Facebook where the app is getting bloated in all these sort of like strange ways. And people just still want to see their friends and family.

• 36:09Alex Kantrowitz?

  Yeah.

• 36:10Speaker 01

  Fundamentally.

• 36:11Alex Kantrowitz?

  So let's just wrap up this conversation about Shein and team. Amazon, how are they going to respond?

• 36:17Speaker 01

  So they're already responding. So what you're seeing Amazon do is that they have lowered the fees, the the amount that they charge sellers for specifically clothing items, like very affordable clothing items. So they've reduced the amount of fees, I think, so that these items can be listed for prices that are closer to what Shein charges. And so I think you're going to see a continuation of that where you're going to see Amazon roll out with policies that are better for sellers. So maybe reducing more fees, you know, improving customer service for sellers. Because for a long time, Amazons have had the advantage. But I think you're going to see some of these sellers in China say like, oh, well. I'm just gonna go work with Shein and Temu. They're banging on my door, right? I'm a top Amazon seller, and so I'm gonna go take their incentives to go over to that platform,

• 37:02Speaker 01

  and I'm gonna spend less time on your platform. So I think that that's one thing that you're gonna see them do. And I think also they're gonna maybe shift less of their focus. I think that they realize that they've saturated the US e-commerce market. And so, you know, it's still a huge business for them, and I don't think it's gonna go anywhere. But I think you're gonna see them invest more in AI, invest more in AWS, invest more in these newer areas. And I think you're especially gonna see them invest more in AWS in these emerging markets. Because it's like, hey, if everyone's shopping on Shein and Temu, we're at least gonna make sure that the rest of the internet infrastructure in these countries is on AWS.

• 37:37Alex Kantrowitz?

  Yeah, they'll find a way to make their dollar no matter what.

• 37:39Speaker 01

  Oh, for sure, for sure.

• 37:41Alex Kantrowitz?

  So just stepping back here, it's interesting how in a moment where the US and China's relations are about as bad as they've been in recent memory, that China has effectively introduced a answer for two of our biggest tech giants. We have Meta still effectively on its heels against TikTok, right? They changed it on Facebook anymore. They changed the name. They're all about the metaverse. Now they're all about AI. We don't hear very much about how they're trailing in like the main thing they do, which is social media. Or I don't even know if you would call TikTok a social media company, but like, it's essentially in the same vein of like, you're gonna like user-generated content and algorithmic recommendations, which is what basically the business now.

• 38:24Alex Kantrowitz?

  So China's attacked Facebook there, and now it's coming for Amazon with these two companies. Is that a coincidence that it's been able to make such inroads with these companies at this moment? Or is there some, some plan going on there, or some intentionality, intentionality there?

• 38:41Speaker 01

  I think what the missing piece of that story is, is that For the last decade, the narrative of Chinese tech has been the enormous rise of the Alibaba, of the ByteDance, of, you know, they went from, you know, being fairly modest tech companies to they took over the whole country, right? But these companies have now saturated the domestic market. You know, there are very few rural pockets of China now where people don't have smartphones and they're not already on TikTok, they're not already familiar with Alibaba, right? They're not, they're already not using Pinduoduo. So in order to continue growing, they have to move out. So I think while relations between the US and China have, you know, they're probably

• 39:24Speaker 01

  the worst they've been in my lifetime, these companies have no choice but to figure out an international strategy and to move outward. And I think that the government has been very encouraging of that. So it's like, if we want to keep growing, we're just going to have to weather the politics. And if it doesn't go that well in the US, okay, well, we're going to get everywhere else in the world.

• 39:45Alex Kantrowitz?

  Yeah.

• 39:45Speaker 01

  I think people forget that it's a really big world and that, of course, everyone wants the US market, it's still the most valuable. You can maybe learn a lot of lessons there that you can apply to Mexico, that you can apply to Brazil, that you can apply to Thailand or Vietnam or these emerging markets where I think they have a lot more in common with the Chinese domestic market in a lot of ways. And so the Shein, the Temu, the TikToks of the world are better poised to do well there. Whereas I think, you know, Facebook's done really well, but Amazon hasn't done that well, right? Like, you know, I think there's a case to be made that these people coming online and who are, you know, getting a disposable income for the first time, they're probably more likely to shop on Shein and to use TikTok than they are to be a loyal Instagram user or buy stuff from Amazon, if Amazon even operates in their country.

• 40:30Alex Kantrowitz?

  Yeah, and as we're talking, I'm like, it's not just like social media and e-commerce, it's electric cars that China is really pushing hard into, and phones with the Huawei Mate.

• 40:41Speaker 01

  Yeah.

• 40:42Alex Kantrowitz?

  Huawei Mate 60, which is apparently finally reaching parity with like an Android phone and is selling like crazy in China. Do you want to talk a little bit about those two initiatives before we head out?

• 40:52Speaker 01

  Yeah, I think the electric cars thing is another, is going to be another one of these examples where in a few years, you're going to go abroad and you're going to see Chinese electric cars everywhere, affordable, high-quality electric cars. I got the chance to ride in some of them in Shanghai recently and I can attest that they are just as good, if not better, than Tesla's. Whereas here, you know, we're seeing a protectionist policy where it's going to be, you know, functionally impossible to buy a lot of these cars in the US if they're going to be imported at all. And so I think that's going to be really strange. But I do think there's a slightly different story with the phones in that the Huawei, the new Huawei phone is selling pretty well in China. But I have seen this trend again and again where

• 41:33Speaker 01

  the richer country gets, the more iPhones they buy. And that is true even in places like South Korea, the home of Samsung. Samsung's losing its home market because people in South Korea don't want Samsung's, they want iPhones.

• 41:47Alex Kantrowitz?

  That's crazy.

• 41:48Speaker 01

  And you're seeing that in India, you're seeing that in Latin America. I think, for whatever reason, Apple still has a chokehold on sort of the premier phone market. And no matter how good the Androids are, the second people can afford an iPhone, they get one.

• 42:02Alex Kantrowitz?

  That's interesting because, I mean, Apple is like, the revenue is declining in China, precipitously.

• 42:08Speaker 01

  But it's getting better in these other places.

• 42:10Alex Kantrowitz?

  Yeah.

• 42:10Speaker 01

  I think even if you do go to China and they are losing out there, but I think that on the global scale, they just continue to do better in these other places. So I do worry about their business in China because of Huawei. But I think in the end, you're not going to see a world, even where people are driving a BYD or a Chinese electric vehicle, they still want an iPhone.

• 42:31Alex Kantrowitz?

  Okay, take us five years out. So let's go to 2029. Are Shein and Temu, have they cut dramatically into Amazon's market share in the United States? And are they banned? Or on their way to being banned?

• 42:43Speaker 01

  I would say they're on their way to being banned.

• 42:46Alex Kantrowitz?

  Really?

• 42:46Speaker 01

  And that they've become synonymous with sort of like, you know, questionable ethical practices. I'm not sure they're going to be able to sort of turn around the PR story, but they're not banned yet. And I do think that they've cut into a fair amount of Amazon's retail business. And I think that they have become a serious threat. To sort of the more traditional dollar store, Targets of the world. I think we will see a world where you go into Target and it looks a little bit more like going on Shein or Timo.

• 43:16Alex Kantrowitz?

  That's crazy. You're going to be spinning a wheel and deciding what slippers you're going to get.

• 43:20Speaker 01

  Maybe not quite, but there's going to be more.

• 43:21Alex Kantrowitz?

  I'm ready for that. I'm ready for it.

• 43:23Speaker 01

  You ready to walk into a Target and spin a wheel for a discount?

• 43:25Alex Kantrowitz?

  Spin for a discount. I would do it. I'd be back more often.

• 43:28Speaker 01

  Same. Same.

• 43:30Alex Kantrowitz?

  All right. The story is how Shein and Temu snuck up on Amazon. It's free to read on bigtechnology.com. Louise, thanks so much for coming down today. It's great to speak with you and thank you again for writing this terrific story for us.

• 43:40Speaker 01

  Thanks for having me, Alex. It's always great to talk to you.

• 43:42Alex Kantrowitz?

  Likewise. All right, everybody. Thank you so much for listening. We'll be back on Friday breaking down the week's news with Brian McCullough of the Tech Meme Ride Home Podcast. So that should be fun and we'll see you next time on Big Technology Podcast.

• 43:54Speaker 02

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