Despite the boiling geopolitical rivalry between the USA and China, the latter enterprises and businesses continue to thrive in the American market.
Meta closed 2023 with a bang. With a revenue increase of up to 16% in its Q4 earnings the company boosted its massive performance.
Meta earned $40 billion in its last quarter revenue, of which a majority was credited to a surge in digital advertising spend by different businesses.
The advertising game had faltered earlier due to the pandemic and the changes in Apple iOS policies. The graph had taken a concerning dip.
Fast forward to today, Mark Zuckerberg seems more confident than ever before to venture into this new era with a solid revenue figure.
There was however one issue for Meta, the influx of money by Chinese companies. It was revealed by Suisan Li, the Chief Financial Officer of Meta that Chinese investors now make 10% of total Meta’s advert investors, a percentage share that wasn’t this much before.
It’s not as if it hasn’t been observed before. Many American politicians and congressmen have voted against the widespread Chinese investment being made into American soil and the advent of various Chinese companies.
The prevalence of Chinese companies in the American market was recently felt to a greater extent at the Super Bowl 2024 when a giant Chinese e-commerce company by the name of Temu splurged around $21 million for its advertising on the most watched platform in the USA.
Temu advertising appeared during the game multiple times. It showed the desperation, the willingness, and the money Temu was using to enter the coveted US market.
A Goldman Sach report predicts that Temu is willing to invest $3 billion more into the USA for marketing which is a high increase from its 2023 investment of $1.7 billion.
Another Chinese Fast fashion brand Shien invested more than $100 million in 2023 on TikTok and Meta ads. The company aims to raise funds in the USA, if it succeeds, it will be opened at a massive $60 billion valuation.
Many experts and American entrepreneurs have accused Chinese companies like Temu and Shien of raising the prices of digital advertising. To them, these companies spend money like crazy and are willing to do nearly anything to grab a larger US market share.
TikTok, a social media platform with ties in China is also capitalizing on young Americans with its TikTok shop. A large portion of the US population prefers TikTok to search for items and shop from there.
Should American giants like Amazon, and Walmart be worried?
To an extent, yes. One of the things Shien and Temu are leveraging upon apart from their pattern of exorbitant marketing spend is their dirt-cheap products.
Shien has already become a sensation among the American Gen Z while Temu was the most downloaded application in the USA last year.
While Shien only focuses on Fashion items, Temu offers much more from electronic items to kitchen accessories and whatnot.
These businesses do not rely on middlemen and prefer directly dealing with the manufacturing factories in China. This therefore results in a considerable delay for the product to reach its customers. The items may be cheap, but it can take weeks to arrive. So far this hasn’t stopped Americans from shopping in Temu and Shien.
Despite their high investment, Shien and Temu are estimated to acquire only 1% of the US consumer market. Amazon meanwhile enjoys a 38% share. But this doesn’t stop it from noticing the rapid rise of the former two.
Shien and Temu both are in pursuit of collaboration with many American logistic partners. They have also acquired some warehouses across the country to shorten the delivery time while sticking to offering stiff market competition.
Amazon is Fighting Back
As the Chinese retailer giants are gaining traction in the world’s largest economy, Amazon is revealing its plans in China to capture the market share.
During the China summit by Amazon, the company encouraged Chinese retailers to invest in Amazon’s platform. Amazon as a company does not operate in China but thousands of Chinese retailers look up to Amazon for promoting their products to a global marketplace.
Furthermore, the company unveiled its plan to establish an innovation center in Shenzhen, China’s Silicon Valley.
Back home in the USA, the company has introduced cuts in retailer fees for merchants selling clothing items to rivals Temu and Shien.
Josh Silverman, the CEO of Etsy has criticized this bloodbath for market share and has accused Shien and Temu of using money to manipulate the market and rapidly expand their chunk.
A surprising thing is that this all is happening under the deteriorating shifting relations between China and the US. While both economies are planning to curb trade, establish strict barriers, and stand on opposite edges at the UN tables, their local retail businesses seem to thrive regardless of the ongoing international kerfuffle
If this market pattern continues, Amazon is less likely to be impacted. However, retailers like Etsy and eBay may suffer first. The only way to tackle Chinese retailers is to develop a strategy and implement it with continuous observation.
Even though it can be challenging for American retailers to compete with Chinese less-priced products, by collaborating with advertising platforms like Meta and Google, at least some adjustments can be made to establish a balance in the market.
