Despite Temu's challenge, Amazon maintains a strong lead in attracting teenage shoppers
- Amazon's popularity among teens has increased from 52% to 57% to the current 59%, as per Piper Sandler's Taking Stock With Teens survey.
- Temu, a subsidiary of PDD Holdings, made its first appearance in the survey, but only 1% of teens voted Temu as their favorite retailer, indicating Amazon's continued dominance.
- Amazon has faced challenges from Temu and Shein, Chinese retail/marketplace platforms, which are rapidly growing in the U.S. and have made significant efforts to attract young customers.
- Temu, in particular, has achieved over 100 million downloads in a year since its launch.
- Amazon's resistance to price-matching with Temu differs from its usual strategy and indicates the competition's impact.
- Amazon's stock has experienced a 10% decline from its 52-week high despite a 55% increase over the year.
In the fiercely competitive world of online shopping, Amazon continues to lead the pack, especially when it comes to winning the hearts and wallets of Generation Z shoppers. Recent surveys conducted by Piper Sandler reveal that Amazon remains the favorite shopping website for 59% of American teenagers. This score represents an increase from 57% in the spring and 52% in the previous fall.
While Amazon still holds a commanding position, it's essential to note that new players, including Temu and Shein, have started to make their presence felt in the market. These companies offer low-cost apparel primarily sourced from China and have rapidly gained traction among younger consumers.
Amazon vs. Temu and Shein
The recent discussions among investors have raised concerns about Amazon's dominance in the face of the growing popularity of Temu and Shein. According to Mark Mahaney, an analyst at Evercore ISI, the sharp rise of these Chinese retail and marketplace platforms is viewed as a potential risk to Amazon. Temu and Shein have gained prominence in the shopping app category, amassing more than 100 million downloads, with Temu showing exceptional growth since its launch a year ago.
Interestingly, Amazon has chosen a different approach when dealing with this competition. Unlike its traditional strategy of utilizing price-matching tools to ensure it offers the lowest prices, Amazon has been resistant to matching the prices of items from Temu.
Early Days for Temu Competition
Piper Sandler analyst Thomas Champion suggests that it's still early days for the adoption of Temu. While Temu and Shein are growing, it might take time for them to genuinely challenge Amazon's dominance.
Challenger on the Horizon: TikTok
Adding another twist to the competition is TikTok, which recently launched its live shopping feature for U.S. users. TikTok's ambition is to challenge Amazon and grow its global e-commerce business to $20 billion in sales.
Piper Sandler's surveys also revealed that TikTok is making waves among American teenagers, with 38% naming it as their favorite social media app, putting it ahead of Snapchat and Meta's Instagram.
Teens Spending Less and the Inflation Challenge
One notable trend observed is that self-reported annual spending by teenagers has fallen by 1%, compared to the previous year. This decline in spending could be attributed to broader economic concerns, including inflation, which might be affecting consumers' purchasing power.
Despite these challenges, Amazon is banking on strong sales to close out the year. The company recently announced plans to hire 250,000 full-time, part-time, and seasonal employees in the U.S. to support the holiday season. This move was well-received by analysts, who interpreted it as a bullish signal.
Amazon has also shown resilience in its second-quarter earnings, surpassing analyst expectations with a 4.2% year-over-year increase in online store sales, bouncing back from consecutive quarters with e-commerce sales declines.
Additionally, Amazon is reportedly exploring new strategies to boost e-commerce sales, such as testing a "Buy Again" feed on its app's homepage, aiming to encourage repeat purchases.
While Amazon's stock has seen a 55% increase this year, it has faced some challenges, including a 10% drop from its 52-week high in mid-September.
Amazon's dominance among Gen Z shoppers remains strong, despite the emergence of new competitors like Temu and Shein. However, these challengers, along with TikTok's entry into e-commerce, indicate a shifting landscape that Amazon must navigate carefully to maintain its position at the top of the online retail world.