Many customers continue to hold back when shopping – even on the Internet. Shopping portals like Temu and Shein can still significantly increase their sales. This is causing problems for the industry.
Finding and comparing cheaper prices, not having to rely on opening times, having products delivered to your home – buying online has many advantages for consumers. For retailers, these have been the most important ingredients for the growing success of the industry in recent years. In the end it all only worked to a limited extent.
Online retail cannot build on its boom times with double-digit growth rates during the pandemic. After a weak year in 2022 with a large decline in sales, things didn’t get much better in 2023. According to forecasts, this year will not bring the expected upswing either. The experts at the Cologne retail research institute EHI only expect a nominal increase of 1 percent for the largest 1,000 online shops. Adjusted for prices, retailers must expect a loss again. There is no end to the crisis in sight.
“Online trading suffers from the fact that consumers’ money flows elsewhere, for example on trips and concerts,” says EHI e-commerce expert Lars Hofacker. “Many retailers have grown in response to the high demand in the past and are currently very challenged by the increased costs.” That doesn’t mean that things are going badly for all shops. The Asian online platforms were among the recent winners.
The fashion retailer Shein, founded in China, increased its sales in Germany by 30 percent last year and is in 18th place in the ranking of the online shops with the highest sales. This also applies to marketplaces – i.e. websites where consumers can buy things from more than one company – the Asians are at the forefront. AliExpress took fourth place. Temu, which has only been active in Germany since April 2023, narrowly missed making it into the top 10.
“So far Amazon has hardly any answers”
Temu and Shein in particular are making a steep climb. According to the industry association BEVH, the two providers now account for five percent of orders in German online retail. They have more than doubled their market share within a year. Temu was already in fourth place behind Amazon, Ebay and Otto when it came to orders in the second quarter.
The Asian portals are putting pressure on the established companies. Can they break the dominance of market leader Amazon? “Temu and Shein are forcing Amazon in Germany to adjust its strategies for the first time in almost ten years,” says e-commerce expert Alexander Graf. Amazon has shaped the market so far, but there are hardly any answers to Temu and Shein’s radical business model. This will have an impact on sales in the medium term.
Temu and Shein offer many items at reasonable prices. Due to customers’ strong price focus, they have recently benefited from the poor consumer sentiment in the country. According to the German Trade Association (HDE), Temu and Shein together send around 400,000 packages to the Federal Republic every day. Shein denies the number is that high.
Survey: 60 percent are too uncertain about Shein and Temu
Shein and Temu have been polarizing since they entered the trading scene. They steal sales away from established players like Otto. According to an estimate by the Textile Shoes Leather Goods Trade Association (BTE), Germans will buy around one billion fashion items and shoes from Asian suppliers in 2023. Shein and Temu are not just competing with Amazon & Co. for buyers. They recently opened their online marketplaces to German retailers.
Industry representatives do not speak well of the new competition. “Here the market is flooded with often questionable or inferior goods, some of which are not allowed to be sold in the EU,” says BTE managing director Axel Augustin. Shein and Temu deny the allegations. Augustin and others are calling for more regulation from the EU and fairer conditions of competition.
Greater control of providers sought
The federal government, together with other states in the EU, would like to campaign for greater control of providers. Penalties should be consistently imposed if online retailers do not adhere to applicable rules and, for example, do nothing if products on their sites are classified as unsafe.
Customers also have concerns. Portals like Shein and Temu are too unsafe for a good 60 percent of consumers, as a survey by the Cologne retail research institute IFH shows. The reservations are particularly great among higher earners, men and people over 50. Many people fear that the items they order are of inferior quality.
Werner Reinartz, Professor of Marketing at the University of Cologne, sees this uncertainty as an opportunity. Other traders could differentiate and distinguish themselves by trusting platforms like Temu and Shein.
Purchases are increasingly shifting towards the Internet
Industry studies can at least give online retail some encouragement. Not only is consumer uncertainty and the focus on prices and offers declining slightly. In almost all areas, purchases are increasingly moving from brick-and-mortar stores to the Internet.
The BEVH association recently saw slightly positive signals. Between April and June, consumers treated themselves to more. The first market growth in online trading in two years was recorded. But there can be no talk of optimism yet, they say.
The boom during the pandemic has become a psychological burden for e-commerce. The industry is now measured by this. The general manager of the HDE, Stefan Genth, is therefore appealing for leniency. “The Corona years with the closed brick-and-mortar stores gave the industry big jumps in sales. It is completely normal that further development cannot continue at this pace.”
Source: Stern
