Produced by Radar Finance and EconomicsLi Yihui edDeep sea
The two most ferocious players who go to sea, Temu and Shein, have a lawsuit battle again.
On December 14, it was reported that Chinese cross-border e-commerce platform Temu sued fast fashion rival Shein in the United States, saying that its anti-competitive behavior against Temu was "intensifying".
Temu and Shein are inseparable in the U.S. market, from the mall to the court, and have previously sued each other, but have since withdrawn the lawsuit.
The war was renewed, and people close to Temu said, "Their (shein's) behavior is too exaggerated; We have no choice but to sue them. According to the lawsuit, SHEIN filed tens of thousands of copyright takedown notices against Temu, forced fashion ** merchants to sign exclusive agreements, and threatened and even detained Temu merchants.
Shein said that Temu has not only been plagiarizing its own brand products on a large scale and continuing to engage in unfair competition, but also "reversing black and white, and shouting to catch thieves".
Both sides insist on their own opinions, and who is right can only be left to the court to judge. Behind the fierce competition, these two Chinese e-commerce companies have achieved good results in the US market, but they are highly dependent on local Chinese manufacturers, so the first merchants have become the key to the competition between the two.
As the two emerging giants in the field of cross-border e-commerce, temu and shein are facing different situations at present. Among them, Temu helped the parent company surpass Alibaba in market capitalization, and Shein fell by more than $30 billion in valuation after Temu entered the U.S. market.
Not long ago, SHEIN just submitted an IPO application to the U.S. regulator. During this critical period, Temu initiated a lawsuit, which may have an impact on SHEIN's listing.
Restart the legal battle
The two giants who went overseas have fought all the way from business wars to legal wars.
According to market news, on December 14, Temu, a cross-border e-commerce platform under Pinduoduo, officially filed another lawsuit with the court of the District of Columbia, accusing the fast fashion platform SHEIN of anti-competitive behavior against the platform.
It is reported that Whaleco, a Boston-based company that operates under the name Temu, disclosed some details of its escalating competition with SHEIN in a 100-page lawsuit filed with the court.
SHEIN is accused of forcing thousands of ** merchants to sign copyright takedown contracts; Through the "** party style" exclusive transaction agreement, prevent and intimidate ** merchants from contacting TEMU. For example, a ** merchant was called to SHEIN's office in Guangzhou, detained and intimidated for several hours, forcibly confiscated his electronic devices, and forced to provide business information such as account passwords and transaction records related to Temu.
The indictment alleges that SHEIN abused intellectual property law by making false statements to copyright registries and initiating tens of thousands of false and malicious complaints in the United States that were not supported by real copyrights. The number of complaints about SHEIN alone is 17 times.
In addition, SHEIN is accused of poaching Temu's key marketing and advertising personnel who had access to TEMU's confidential information and know-how and copied it at SHEIN. Temu asked the court to "stop SHEIN's deceptive abuse and anti-competitive conduct against the U.S. legal system." ”
A representative of Temu said the latest lawsuit was due to SHEIN's escalating anti-competitive practices. "Their actions are so exaggerated that we have no choice but to sue them. ”
Shein also responded that Temu has not only been plagiarizing SHEIN's own brand products on a large scale and continuing to engage in unfair competition, but also reversing black and white, shouting to catch thieves, and attempting to retaliate and smear with malicious lawsuits.
Previously, the two companies had sued each other, but the lawsuit was later withdrawn. Backtracking found that in December 2022, SHEIN claimed that Temu deliberately impersonated and imitated the company's brand account and induced Internet celebrities to belittle SHEIN products.
Since March this year, SHEIN has filed lawsuits against TEMU in courts in the United States, the United Kingdom and other places, accusing TEMU of misappropriating SHEIN**'s goods ** and causing unfair competition, and demanding that it pay high compensation.
Subsequently, Temu launched a counterclaim. On July 14 this year, Temu filed a new lawsuit in federal court in Boston, accusing fast fashion competitor Shein of violating U.S. antitrust laws by "abusing market dominance to force clothing manufacturers to sign exclusive agreements with them, lock the ** chain, and prevent them from cooperating with Temu".
However, the parties withdrew their lawsuits against each other in October this year. RoadGet Business, which owns the SHEIN trademark and is actually responsible for its operations, withdrew its lawsuit against PDD Holdings, the parent company of Temu; At the same time, Temu has also voluntarily withdrawn its legal action against SHEIN.
Analysts pointed out that there was a legal reconciliation before, but the struggle between the two sides is not over. This time, Temu sued Shein again, marking a further escalation of the legal battle between the two e-commerce companies.
Behind it is the competition of ** businessmen
In the eyes of many people, the competition between TEMU and SHEIN is inevitable, and the best business is the key point of contention between the two sides.
In terms of business model, temu is a fully managed model, the supplier only needs to provide the goods to the platform, and the follow-up platform will help the merchant complete the follow-up links such as marketing operations, logistics and warehousing, and after-sales service. At the same time, pricing power, stocking and product quality are also determined by the platform.
However, under this model, merchants are also facing the reality of being depressed while enjoying the platform traffic and rapidly increasing the volume.
It is reported that the pricing on temu is lower than that of the same model on Pinduoduo and 1688; At the same time, the introduction of a bidding mechanism to encourage merchants to compete with each other, so that the product ** is getting lower and lower.
Under this model, it is also difficult for some sellers who purchase from 1688 and sell on temu to make a difference; And those who have production factories can make money on the temu platform. Therefore, Temu attaches great importance to this kind of small and medium-sized enterprises that respond quickly and can provide the ultimate cost performance.
In contrast, SHEIN has cooperated with a large number of Chinese garment factories through the "small order quick return" model and flexible ** chain construction to help them achieve production speed and cost compression, and also realized the rapid expansion of SHEIN in overseas markets with low product prices and fast fashion attributes.
In addition, SHEIN is mainly its own brand, and on the premise of real-time analysis and tracking of fashion trends, it starts with very small orders for all SKUs, and then uses actual market demand to sell and control production quantities.
While there are differences in the models, both are upgraded versions of the ultra-fast fashion model, characterized by more SKUs, more frequent launches, lower, sales, and direct-to-consumer.
In the ultra-fast fashion model, ultra-fast fashion manufacturer resources are very important, they create big new products and styles, they have to act as designers themselves, create their own style, be proficient in e-commerce, and have to do it all with a small profit.
What the platform does is to bind more first-class merchants, and even adopt methods such as "exclusive distribution".
In the July indictment, Temu said that as of May, "SHEIN had required all approximately 8,338 manufacturers on or sold on the SHEIN platform to sign exclusive distribution agreements, which prevented these manufacturers from offering products on the Temu platform or to sellers on the Temu platform."
Temu said that the more than 8,000 manufacturers that supply SHEIN account for 70%-80% of the total number of ultra-fast fashion merchants with the capacity.
Temu claims that SHEIN has adopted at least four tactics to curb competition, including imposing fines on ** merchants who cooperate with Temu and forcing ** merchants to sign "loyalty agreements".
However, in this legal battle, TEMU is not sure of winning. Chen Xinlei, a professor of marketing at Cheung Kong Graduate School of Business, and other scholars believe that if the design of products, the analysis of consumer preferences brought about by the massive data accumulated in the market, and the platform's product recommendations and traffic pushes belong to the platform's own property, then in order to encourage the supply of services and solve the free-rider problem, certain channel control measures taken by the platform may be regarded as justifiable.
Intellectual property lawyer You Yunting also analyzed that if Temu's case against SHEIN in the United States is heard in a Chinese court, it will be difficult for Pinduoduo Temu to win the case. High market share and market dominance are two different things, the competition in the clothing e-commerce market has always been very fierce, even if a company has a first-mover advantage, it is difficult to last, even if the relevant market in this case is set as the ultra-fast fashion market with a 75% market share, the court will not easily determine that SHEIN has market dominance. If there is no dominance, the AML will not apply to the abuse.
Each has its own challenges
SHEIN and TEMU, which started in China, have both chosen the United States as their main position and are fighting here.
According to public information, the predecessor of SHEIN was Nanjing Dianwei Information Technology, which was founded in 2008, and operated cross-border wedding dress e-commerce in the early days; After 2012, it transformed into cross-border**, officially changed its name to SHEIN in 2015 and entered the US market two years later.
In China, SHEIN is unusually low-key and mysterious, and its founder Xu Yangtian rarely accepts ** interviews, but it does not prevent it from becoming an emerging giant in the cross-border e-commerce industry.
In April 2022, SHEIN conducted Series F financing, with a valuation of $100 billion. In terms of performance, SHEIN's revenue in 2022 will be $22.7 billion, and its net profit will be $700 million.
However, a year later, in its latest funding round in May this year, Shein raised new capital at a valuation of $66 billion.
Just a few weeks ago, it was reported that SHEIN had secretly applied for an IPO with a target valuation of $80 billion - $90 billion. Both figures are below the company's $100 billion valuation in 2022.
In the eyes of the outside world, the shrinking valuation of SHEIN is not unrelated to the competitive pressure given by Temu. Founded by Pinduoduo in July 2022, Temu was released two months later, topping the Apple App Store in the US and soon becoming the number one free app on Google Play.
The sharp increase in volume has also brought about a simultaneous increase in transaction volume and achieved a reversal of SHEIN. According to Bloomberg Second Measure, Temu's sales in the U.S. surpassed fast fashion-focused Shein for the first time in May this year, exceeding by about 20%. The data shows that since May, Temu's lead has expanded every month, and sales in the United States in September have more than doubled that of SHEIN.
Some analysts believe that Temu's extreme cost performance and full range of categories have brought them an advantage. Euromonitor International's Fatima Linares said the wide range of products was "arguably the most important factor in pushing Temu ahead of SHEIN".
In addition, what Temu uses to break the barrier of SHEIN's low price is lower**. It is reported that Temu has put on the shelves a lot of the same Shein products after landing in the U.S. market, and it is lower, and some items are even as low as 30%.
At present, Temu is seen as the second growth curve of Pinduoduo, which has previously said that it does not focus on Temu's separate financial metrics at this stage.
But temu also faces some challenges, with aggressive pricing strategies eating into its profits. Research institute Sanford CBernstein estimates that Temu could see 36 percent this year, despite global sales of $13 billion this year$500 million in operating losses, which is double its January** loss.
This also means that even if Temu is "not driven by financial metrics", as it expands rapidly, Pinduoduo will have to consider burning more money.
For SHEIN, while bearing the pressure of listing, it also has to "fight hand-to-hand" with Temu. Considering that behind the opponent is Pinduoduo, which can be called the "king of volumes", Shein has met a strong opponent this time.