According to the most recent market share data, Temu, the rapidly expanding Chinese e-commerce site that sells $10 clothes and $4 home furnishings, is effectively challenging Dollar General, the industry leader, and other U.S. dollar retailers.
According to data analytics company Earnest Analytics, Temu held approximately 17% of the market share in the US for cheap stores as of last month. This contrasts with 43% for Dollar General, 28% for Dollar Tree, and 8% for the dollar retailer Five Below.
Temu opened for business in the US in September 2022 and gained popularity fast by leveraging social media influencers to promote its products as superior to those found in regular retailers and at lower prices.
According to Michael Maloof, head of marketing at Earnest Analytics, “Temu poses a greater threat to brick-and-mortar discounters like the dollar stores than other online marketplaces because of its low prices on consumer staples and household goods.”
Temu offers similar holiday décor, storage containers, and toys as dollar stores, in addition to selling clothing such as $12 gowns and $20 sneakers. As it grows abroad, analysts predict that it will bring in more than $16 billion in revenue this year.
Michael Ashley Schulman, chief investment officer of Running Point Capital Advisors, stated that Temu has an advantage over stodgy low-end cheap retail brands in that it possesses freshness and excitement, which is difficult to replicate.
Requests for comments regarding the research were not answered by Temu, Dollar General, Dollar Tree, or Five Below. Due to their comparatively smaller internet presences and diverse customer bases, U.S. dollar stores have previously stated that they do not believe Temu will have an impact on their sales.
Although consumers who purchase necessities like food, drinks, and detergent continue to frequent dollar stores, businesses are facing a shift in consumer demand in addition to operational difficulties.
This year, Dollar General has lowered its yearly profit projection three times as cost-conscious consumers have switched from purchasing more higher-margin consumable items to lower-margin items.
Because dollar stores are slashing prices to get rid of extra inventory and, like many other businesses, are also suffering from retail theft, their margins have also decreased.
Based in Tennessee, Earnest Analytics reports that Dollar General has had the biggest decrease in market share when compared to its competitors. Its market share dropped from over 57% in January to 43% in November. The proportion of Dollar Tree fell from 32% in January to 28% in November, a decrease of almost four percentage points.
According to Peter Earle, an economist at the libertarian, free-market American Institute for Economic Research, Temu is profiting off consumers’ weariness with high pricing and inflation. PDD Group (PDD.O), Temu’s parent business, reported that sales for the quarter ending September 30 increased by 94% over the same period last year to 68.84 billion yuan ($9.62 billion).
Temu works with a network of low-cost clothing, household products, and electronics producers in China. Manufacturers and retailers on Temu use a trade exception that permits shipments under $800 to enter the United States duty-free to provide goods directly to Temu consumers.
“Temu with their ‘shop like a billionaire’ slogan has mastered gamification and rewards to make online shopping fun, easy, and cheaper than the dollar stores,” Schulman of Running Point stated.
