Four Chinese Cross-Border E-Commerce 'Dragons' Challenge Amazon (AI Translation)

【周刊提前读】跨境电商四小龙挑战亚马逊 未来高增长拼什么？

In 2023, four major Chinese e-commerce players—Pinduoduo's Temu, SHEIN, AliExpress, and TikTok Shop—have made significant waves in the global market. These companies, often referred to as the "Four Little Dragons," have been driving China's e-commerce export growth and reshaping global e-commerce landscapes [para. 1][para. 3][para. 4].

Temu and SHEIN were the top two shopping apps globally in terms of downloads for 2023, according to data.ai, while AliExpress ranked third and fourth in various metrics. TikTok, with over 1 billion monthly active users, was the most downloaded social app worldwide during the same period [para. 2][para. 3].

China's total exports in 2023 amounted to 23.77 trillion yuan, a slight year-on-year increase of 0.6%. However, cross-border e-commerce exports surged by 19.6% to 1.83 trillion yuan, highlighting the growing impact of e-commerce on China's trade [para. 3]. HSBC estimates that the combined Gross Merchandise Volume (GMV) of these four companies exceeded one-third of China's total cross-border e-commerce GMV of $350 billion in 2023 [para. 5].

These companies have driven the growth of new business models in foreign trade, promoted by government policies such as the "Opinions on Promoting Stable Scale and Optimized Structure in Foreign Trade" [para. 7]. The emergence of these platforms has shifted many Chinese businesses from traditional trade platforms like Amazon to these new players. Data from SimilarWeb showed that while Amazon had 428 million unique monthly global visitors in the first quarter of 2024, Temu and AliExpress had 185 million and 164 million, respectively [para. 8].

Competition in the U.S. market remains fierce, with companies like Temu and SHEIN offering low-cost alternatives to traditional e-commerce giants [para. 10]. These platforms, through models like Temu’s full-service model, have significantly altered international logistics, primarily using small-package air freight. As of early 2024, new expedited shipping routes via sea were being explored to manage rising volumes [para. 14].

Compliance and regulation have become critical battlegrounds. According to a March 2024 HSBC report, the four companies are increasingly focusing on compliance to deal with regulatory challenges in markets like the U.S. and the European Union [para. 28]. For example, President Biden signed a bill banning TikTok, which could impact its e-commerce operations if not resolved through divestiture or legal challenges [para. 31]. Similarly, SHEIN, Temu, and AliExpress face ongoing scrutiny regarding their use of tariff-exempt shipments under U.S. de minimis laws [para. 34][para. 36].

In terms of strategy, these companies focus on localization and brand-building to mitigate risk and compliance issues. SHEIN, for instance, capitalizes on the Chinese supply chain's flexibility to offer competitive prices and rapid product updates [para. 39]. Other companies, like TikTok and AliExpress, leverage their vast user bases while adapting their operational models to suit local markets [para. 38][para. 42].

Despite the competition, Amazon remains a dominant force with its extensive market share and unparalleled logistics capabilities. While Temu and SHEIN are making inroads with cost-effective offerings, Amazon’s mid-to-high-end positioning largely shields it from direct competition with these new entrants [para. 44][para. 46].

The expansion strategy of these "Four Little Dragons" entails diversifying product offerings and adjusting business models to align with local regulatory environments. For instance, platforms now offer semi-managed models where merchants manage warehousing and logistics, catering to larger items not suited for small-package air freight [para. 58][para. 60].

Addressing overseas policy risks will be crucial for sustained growth. The Restrict Act in the U.S., increased scrutiny under de minimis rules, and geopolitical tensions pose significant challenges. Chinese companies are taking steps to ensure greater compliance and mitigate these risks [para. 29][para. 66].

In summary, the "Four Little Dragons" are rapidly expanding their global footprint through innovative business models and strategic localization, though they face significant regulatory and competitive challenges. Their success will depend on navigating these complexities while leveraging their competitive advantages in supply chain management and low-cost offerings.