Low-cost online platforms like Temu and Shein have gained significant market share by combining rock-bottom pricing with expansive product catalogs. Recent strategic moves by Amazon and Walmart highlight the escalating battle to counter these emerging competitors.
Amazon and Walmart have lost ground in specific categories—particularly fashion and non-essential goods—where Shein and Temu dominate. Shein’s trendy, low-cost apparel and Temu’s expansive product catalog have redefined consumer expectations for affordability.
Temu, backed by Chinese conglomerate PDD Holdings, has become the second-most-visited online shopping platform globally after Amazon. Temu’s low pricing is made possible through its direct-from-manufacturer model, which eliminates intermediaries. However, its long shipping times remain a barrier for some U.S. consumers.
Shein, meanwhile, has evolved into a fashion juggernaut, reporting sales of $23 billion in 2022. The company has invested in U.S.-based distribution centers to shorten delivery times, a strategic move that brings its model closer to those of Amazon and Walmart.
The rise of Temu and Shein parallels the earlier expansion of dollar stores like Dollar General and Dollar Tree. These brick-and-mortar chains thrived by catering to price-sensitive consumers, challenging Walmart’s dominance in budget retail.
Dollar stores grew by prioritizing small-format stores, localized assortments, and ultra-low pricing. While Walmart adapted by emphasizing "Everyday Low Prices," Amazon largely overlooked the brick-and-mortar dollar store boom. In contrast, Temu and Shein have borrowed key elements of the dollar store model—affordable products and large assortments—but scaled them digitally for a global audience.
Amazon, in response, recently unveiled "Amazon Haul", a dedicated shopping section featuring products priced under $20, with many items available for less than $10. This initiative targets price-sensitive consumers drawn to the affordability of competitors like Temu and Shein. Unlike Amazon’s traditional quick delivery promises, Amazon Haul embraces slower shipping times of 1-2 weeks to replicate the cost efficiency of its low-cost rivals.
The move is part of Amazon’s broader push to retain value-conscious shoppers. By emphasizing affordability, Amazon seeks to prevent further erosion of market share in categories like apparel, home goods, and small electronics—segments where Temu and Shein have excelled.
In parallel, Amazon has expanded its grocery offerings with "Amazon Saver," a brand offering over 3,000 discounted grocery items priced under $5. Available exclusively to Prime members through Amazon Fresh, this initiative underscores Amazon’s commitment to delivering value in a sector critical to long-term consumer loyalty.
Walmart’s online marketplace continues to grow, incorporating third-party sellers to bolster product variety. This strategy enables Walmart to counter Amazon's vast marketplace ecosystem while appealing to cost-conscious consumers who value a wider range of low-priced options. Walmart’s marketplace sales growth reflects its success in providing consumers with affordable alternatives to Shein and Temu.
Walmart’s investment in omnichannel retail—combining online, in-store, and curbside pickup—further differentiates it from purely online rivals. Recent upgrades to Walmart’s app and website have streamlined navigation and checkout, improving the overall shopping experience. Walmart’s ability to leverage its vast physical store network, coupled with growing online sales, has solidified its position in the market.
Walmart continues to dominate the U.S. grocery market, with projections indicating a 26.9% share of online grocery sales by the end of 2024, outpacing Amazon’s 18.5%. Grocery is a critical battleground as consumers increasingly seek affordable essentials. Walmart’s vast footprint, combined with competitive pricing strategies, makes it a formidable player in this category.
Walmart’s dominance in groceries has insulated it from broader disruptions, providing a steady revenue stream. For Amazon, its focus on expanding Amazon Fresh and Whole Foods is an acknowledgment of the importance of grocery to retaining consumer loyalty.
Both Temu and Shein face increasing scrutiny from U.S. regulators over import practices and sustainability concerns. Recent discussions about tightening de minimis rules—which exempt low-cost imports from duties—could disrupt their cost advantages in international markets.
The rapid rise of Temu and Shein represents a seismic shift in the retail landscape, forcing incumbents like Amazon and Walmart to adapt aggressively. Both retailers are leveraging their unique strengths—Amazon with logistics and tech-driven innovation, Walmart with its omnichannel and grocery dominance—to counter these new challengers.
