According to analysts, discount e-commerce is expected to rule the world during the crucial forthcoming Christmas shopping season in the West and Singles’ Day in China.

Platforms in China, the largest e-commerce market in the world, have recently spoken of a “value-for-money battle” fueled by financial uncertainty and a slower-than-anticipated retail rebound after the easing of COVID-19 limits in late 2017.

Consumers are enslaved by rapidly expanding platforms like PDD Holdings’ Temu and Bytedance’s TikTok Shop throughout a large portion of the rest of the world, from Southeast Asia to North America and Europe, which ship affordable goods from China at a time when cost of living is a major concern for many.

China has historically been a significant exporter of a wide range of consumer goods, but its most recent export trend—its e-commerce marketplace dynamics—to the rest of the world has upended the online retail industry.

The final quarter of the year, which encompassed the crucial holiday season and China’s biggest shopping festival, appears to be shaped by low-cost platforms in China as well as foreign corporations shipping from the country.

“These marketplace dynamics that first emerged from China, or were invented in China, are now dominating the Western world,” said Sharon Gai, the former head of global key accounts at Alibaba and author of “E-commerce Reimagined.”

“(Other online retailers) are seeing this insurgence of these cheap Chinese goods that are flooding in from the likes of Temu and Shein and their boats have been rocked,” she said. “They don’t know if they can compete.”

But the trend towards low-cost platforms is not occurring in a vacuum; it is being supported in part by macroeconomic challenges that different markets are facing, such as China’s economic slowdown and inflation that is putting pressure on consumer spending.

Fast-rising discount rivals like Pinduoduo and Douyin in China and Temu and Shein, which have expanded their services to markets in Latin America, some Asian markets, and countries from Canada to Australia, are investing billions of dollars in subsidies and discounts to gain market share among customers who prefer to buy $10 dresses and $5 headphones over more expensive items.

During its “Prime Big Deal Days” on Oct. 10-11, Amazon plans to increase discounts.

“From an e-commerce standpoint, you definitely notice the massive amounts of discounting that are currently occurring, even on Amazon,” Humphrey Ho, U.S. managing partner at digital advertising agency Hylink Digital, said.

With the entry of TikTok Shop, which in the United States will likewise focus on Chinese-made goods, as Shein and PDD Holdings’ Temu have done with success, the fight for the bottom of many marketplaces is only likely to get more aggressive.

During the American Christmas season, TikTok Shop is already preparing retailers to give significant discounts and promotions. To cover the costs of those discounts and to entice additional sellers to bring their goods to TikTok Shop and away from Amazon, the business is waiving merchant fees.

Indonesia is considering outright banning e-commerce on social media to safeguard offline retailers in response to worries that TikTok Shop will swamp the market with inexpensive goods.

A void at the low-cost end of e-commerce that has been there for a while is being filled by the growth of cheap online players’ market share globally; in the past, many of the world’s prominent platform firms were concentrated on selling higher margin items to generate profitability.

“There was a clear vacuum for the discount retailer online experience … There is still so much more room still to grow in the discount arena,” said tech analyst Rui Ma, who specializes in U.S. and Chinese companies.

Executives all around the world are now concentrating on price pressures as low cost online merchants grab more and more market share. Trudy Dai, CEO of Taobao and Tmall Group, stated during a conference call with analysts last month that the “value-for-money battle will continue and will be an area of major investment” in response to the Chinese e-commerce giant Alibaba’s most recent quarterly profits report.

Although industry giants JD.com and Alibaba grew more quickly than anticipated in their most recent quarters, PDD Holdings outpaced them with a 66% year-over-year revenue increase as its international shopping site, Temu, and discount e-commerce platform Pinduoduo continued to experience strong growth overseas.

Although current structural and macro conditions have facilitated this race to the bottom, a change in broader trends may also result in a change in focus for both e-commerce platforms and customers.

“Inside China the platforms are just addressing a consumer confidence moment. In the West, the inflation driven consumer wants something cheaper because they’re going through a moment of financial insecurity,” Ho said.

“If the consumer is having a good economic time, they will always seek to upgrade. That might affect and dampen these (discount-focused) platforms’ growth, if you start seeing the economy come back up.”

(Adapted from ThePrint.in)

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