Dream Agility Blog

The Temu Threat to UK Retail

Navigating the New Retail Landscape: Responding to Eastern Market Disruptors.

The UK retail landscape is facing unprecedented challenges from Eastern market disruptors. Shein decimated the fast fashion industry from it’s 2020 high. Boohoo’s share price has dropped 90% from its lockdown high and half year losses are massively up from last year. Boohoo blames Shein for its demise, but with Shein’s own challenges in 2023, largely due to the emergence of Temu, UK retail leaders must strategize effectively to maintain market relevance.

Understanding Temu’s impact
It’s a marketplace like Amazon, with a category range as large, if not larger, than Amazon. Connecting Chinese Manufacturers directly with western customers, at Pound Land prices.

Temu’s offer:
• A £50 credit to start shopping with them.
• A 10 day delivery window and penalties for the manufacturer if they didn’t hit it.
• A 90 day return window.
• Credits for writing reviews.
• A price adjustment on purchases if the price drops after you’ve bought it.

Temu is all about customer acquisition, at any price, for the best priced products in the market. There’s only one thing worse than being undercut, that’s being massively undercut by an organisation with very deep advertising pockets.

The Google Factor
Search reps say that’s all they’re hearing at the moment “What is Google going to do about Temu?”. Nothing, is the short answer. They’re one of Googles biggest customers, and as Google has just announced growth which was less than anticipated, they won’t be curbing Temu’s activity any time soon.

Temu’s US Market Penetration.
Temu has bitten off 60% of Shein’s US market share, and has grown a massive user base in record time.

Temu’s Challenge to Retail: The Temu model poses a significant challenge to UK online retailers. While it has yet to achieve the same market penetration in the UK as in the US, its impact is undeniable. UK retail leaders must adopt proactive strategies to defend their market share and revenue streams.

Strategic Responses for UK Retailers:

  1. Optimizing Search Strategy: Utilize search marketing more effectively, especially in product categories where there’s an overlap with Temu. Temu is only on Google PMax and shopping results, understand and exploit the nuances of Temu’s advertising strategy to gain a competitive edge.
  2. Budget Reallocation: Shift budgets from lower return on ad spend (ROAS) SKUs to higher ROAS SKUs. This will improve conversion rates and visibility in Google’s product offerings.
  3. Market Analysis and Response: Continuously monitor market trends and Temu’s growth trajectory. UK retailers must not underestimate the potential impact of Temu and should prepare their defence’s accordingly.
  4. Supplier Exclusivity: Ensure your contracts cover suppliers not selling your products direct to consumers via third parties like Temu.

Conclusion: The retail landscape is evolving rapidly, with Eastern market disruptors like Temu reshaping consumer expectations and pricing structures. UK retail leaders must adapt their strategies, focusing on digital marketing efficiencies and consumer insights to maintain competitiveness in this challenging environment. 

How can Dream Agility Help?  

We’re uniquely positioned with our proprietary platform to be able to deliver on all of the above Strategic responses. We’ve developed this approach watching the breakneck Temu entrance to the US market with our US clients. Please contact us if you’d like some help assessing the Temu threat to your business or for advice on delivering a strategy.