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Temu's logo on a smartphone. Picture: FLORENCE LO/REUTERS
Temu's logo on a smartphone. Picture: FLORENCE LO/REUTERS

Just as they were girding their loins for Amazon’s SA launch later in 2024, local retailers have been blindsided by Chinese retail giants Temu and Shein, which are advertising aggressively and flooding the market with highly competitive offerings.

Aside from introducing stiff competition in the online retail sector, these extremely efficient global retailers, which benefit from significant economies of scale, are likely to have a broader economic effect. The authorities will need to consider whether the savings consumers are able to make by buying these goods outweigh the potential job losses that could ensue in an economy that already has one of the highest unemployment rates in the world.

Going big globally

If you saw an ad during a sports break enticing you to “shop like a billionaire”, would you sit up and listen? That is approach taken by Temu during the recent US Super Bowl, where the company featured in six adverts at an estimated cost of more than R400m, and immediately became the number one downloaded free app in the US.

Temu offers similar products to those of other online retailers targeting the US market, yet in some cases is able to do so at less than 50% of their listed prices. This is remarkable given Amazon’s reputation for having some of the most competitive prices available worldwide.

The meteoric rise of discount e-commerce retailers such as Shein and Temu has also created a general feeling of uneasiness among SA retailers, which are already concerned over Amazon’s much-anticipated launch later in 2024.

What is Temu?

Temu is owned by Chinese e-commerce giant Pinduoduo (PDD) — meaning “together, more savings” — which started out selling groceries in China and has since expanded into numerous other categories and gone global. Founded in September 2015 and listed in the US, PDD attained a gross merchandise value (total value of all goods sold on the platform) of $65.7bn within three years of launching.

The company is able to negotiate better prices with suppliers by offering what it calls “group buying”, which means inviting customers to recruit family and friends who all order the same product and receive a bulk discount.

Temu’s marketplace platform launched in the US in 2022 and in key European markets in 2023, where it has already become a household name. Part of the company’s meteoric growth can be attributed to its aggressive marketing spend — it has shelled out about R38bn on Meta (Facebook and Instagram) alone, making it their largest customer for advertisements on these platforms. In the past year alone, Temu has also placed about 1.4-million global ads on Google.

In SA the platform also offers a wide range of products at bargain-basement prices. A soap holder for R13? Check. Polarised sunglasses for R100? Check. Consumers vote with their wallets, and droves of them are already buying from Temu or Shein in SA, welcoming these new e-commerce entrants with open arms.

Effects on SA retail 

Though the low prices and range of goods may be attractive to SA consumers, there are valid concerns about these platforms. Do the savings to consumers outweigh the economic effects of potential job losses? In a country with a 32% unemployment rate, should SA regulators be alarmed or welcome new entrants that increase the sector’s competitiveness? At what cost? Offshore platforms operate under different regulations and guidelines, with no local ownership or BEE requirements, and are quite possibly flouting labour rights.

There have been allegations from regulators and competitors that some overseas retailers might be sidestepping tariffs by exploiting certain loopholes. Yet even if you had to adjust for increased tariffs, the prices offered by these discount e-commerce retailers would probably still be incredibly difficult for domestic retailers to compete with.

Just last week Takealot announced the potential sale of Superbalist, a direct response to the competitive strain forced on local retailers by Temu and Shein. Takealot was once seen as a disrupter in the SA retail landscape, but now the tables have turned.

While competition is generally positive for consumers because it ensures they are paying reasonable prices for products, the full effect of the newcomers needs to be evaluated. Among other things, one should consider the economic climate in our country, as well as the strained wallets of consumers.


To combat high inflation the SA Reserve Bank set out on its interest rate hiking cycle in 2022 with the aim of bringing inflation back to within the target range of 3%-6%. This has meant rate-related payments have gone up significantly for most South Africans, and there has been considerably more pressure on their finances. This inevitably causes consumers to trade down to cheaper alternatives.

Chinese e-commerce products are so affordable due to China’s remarkable efficiency as a manufacturing hub — the country accounts for 28% of global manufacturing output. Another reason for the low prices is how much of the value chain Temu bypasses, as it sources products directly from factories in China and retails them globally.


As an investor, the rational next step is to consider PDD as a possible investment opportunity. The company trades on a forward price-to-earnings (PE) ratio of 13.9 times. While this might not scream “bargain” to some SA value investors, the shares are not particularly expensive if you consider the company’s growth prospects. PDD has been growing revenue at an annual rate of 63% over the past three years and is expected to double again over the next three years.

China’s valuations are touching record lows when compared with  the US market, so it may only be a matter of time before we see a rebound in Chinese share prices. Companies like PDD, Alibaba and are sitting on an average net cash position equal to 41% of their market cap. If they choose to repurchase shares or pay dividends with a portion of this cash investors could realise substantial gains.

As reflected in the S&P 500, the US stock market is trading on a forward PE ratio of about 21 times, compared with China’s 10 times. Investor worries stem from China’s struggling property sector, deflation concerns and irrational regulatory crackdowns by the authorities. At these valuations, the market is more than discounting China-specific risks and implying that Chinese companies are substantially less efficient than US companies, which is clearly not the case. There is ample scope for China to stimulate its economy, which would be further boosted by a pickup in global demand.

As an investor looking to obtain exposure to the e-commerce industry, the JSE offers a limited selection. Naspers is the only option available to South Africans, and most domestic funds are already overweight in the share. Temu and Shein’s expansion in the global retail market highlights the fact that if investors cast their net wider there are excellent diversification opportunities to be found in other geographies.

• Janse van Vuuren is an equity analyst at Flagship Asset Management.

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