Analyzing Temu's Impact on Retailers
Temu’s ascent onto the U.S. ecommerce landscape has been well documented as of late. Buoyed by ultra low prices and intense marketing efforts - PDD owned Temu’s impact on traditional retailers, discount stores, and ecommerce marketplaces is a key narrative for investors.
Our analysis confirms Temu’s focus on low-income households and overlap with other value-focused retailers - however also reveals that impact on overlapping customer spend is nuanced across the different companies in our analysis, namely a possible threat to SHEIN and more benign for Dollar General.
Retailer LTM estimated US sales mix by household income.
Source: US transaction data
Temu's US sales mix skews lower income than most retailers, and is similar to Dollar Tree and Walmart's. Only Dollar General and Family Dollar generate a larger share of panel sales from low income households.
Share of LTM sales from customers with a Temu purchase as of August 2023.
Source: US transaction data
Shein has by far the highest customer overlap with Temu to date, followed by Five Below, Dollar Tree, Burlington, Family Dollar and Dollar General. More interesting however - the data suggests that where a customer shops may be a better predictor of overlap, than income level.
Shein customer from a low income household (<$60k) is more likely to shop on Temu than a high income customer (>$100k) of any other retailer.
A high income Burlington customer is roughly as likely to have shopped at Temu as a low income Amazon customer.
Shein existing customer monthly average spending, before and after trying Temu.
Note: Y-axis shortened for readability, month 1 combined spend is >$70. Analysis includes only shoppers who became Shein customers >6 months before first Temu purchase.
Source: US transaction data
We observed Shein customer spend decline 11% over 4 months after trying Temu - a drastically different trend from the average 13% increase over the 4 months prior to trying Temu. The above and the largest user overlap observed across all retailers suggest Temu may be a sizable headwind to Shein sales.
Dollar General existing customer monthly average spending, before and after trying Temu.
Note: Y-axis shortened for readability, month 1 combined spend is >$80. Analysis includes only shoppers who became Dollar General customers >6 months before first Temu purchase.
Source: US transaction data
Dollar General, on the other hand, saw relatively stable overlapping customer spend, pre and post trying Temu. Despite also having one of the larger user overlaps in our analysis, Temu may not be a direct headwind to Dollar General sales, with any additional spend on Temu drawn from other portions of wallet.
YipitData’s coverage of Temu’s impact on the U.S. retailer landscape showcases our unique ability to provide thematic research across a broader sector. Our ability to track user level spend across multiple retailers and provide insights into demographics allows us to cover the most pressing long-term investment narratives.
