As is well known, Japan’s physical stores have always had a strong influence and have the potential to overturn e-commerce platforms. However, the Japanese, who are not fond of online shopping, have become addicted to Temu.
Temu, a cross-border e-commerce platform under Pinduoduo, announced its entry into the Japanese market, undoubtedly attracting widespread attention and numerous questions from the public.
The Performance of Temu in the Japanese E-commerce Market
Like Pinduoduo in the domestic e-commerce sector, Temu has demonstrated its unique ability to make the impossible possible.
According to the latest data, in January of this year, Temu’s user base exceeded 15 million. Since officially launching its services in July 2023, its user growth in Japan has been robust, with a monthly increase of 2.2 million users.
As of now, Temu’s user base has reached 52% of the average user base of the three leading e-commerce platforms in Japan, including “Amazon Shopping,” “Rakuten Ichiba,” and “Yahoo! Shopping.”
Reasons for the Breakthrough: Pricing and logistics advantages
Japanese people generally do not favour online shopping, but Temu has still demonstrated strong appeal in the Japanese market. Why is that?
One reason is pricing. Since Japan’s economic bubble burst in the 1990s, the country entered a period of consumer downgrade. Due to wage growth not keeping pace with the rising cost of living, many Japanese have tended to reduce their consumption or switch to more budget-friendly brands and products.
As a cross-border e-commerce platform primarily focused on a low-price strategy, Temu has attracted many Japanese consumers with its unique positioning. Data reveals that Temu achieved one million downloads in the Japanese market within just 35 days of its launch, a feat that took 45 days in the U.S., despite Japan’s population being only one-third of the U.S.
Another significant factor is logistics. Japan faces a severely ageing population issue, resulting in higher labour costs in the logistics and delivery industry. To win over Japanese consumers, addressing challenges in logistics and delivery is crucial.
To tackle this market pain point, Temu offers Japanese consumers three services: free shipping for orders, a guarantee of quick resolution of delivery issues, and a free return policy within 90 days. In comparison, significant competitors in the Japanese market, such as Amazon and SHEIN, have set basic shipping fees ranging from 400 to 500 Japanese Yen, increasing the shopping costs for consumers.
Observing app store ratings and feedback, Japanese consumers generally express satisfaction with Temu. Users tend to focus more on Temu’s delivery services than pricing factors.
Temu’s Global Expansion Map: The Asian Market Cannot Be Ignored
In the second month of entering Japan, Temu quickly expanded into the South Korean market and achieved remarkable results.
Data shows that from September 25 to October 9, 2023, Temu topped the charts in South Korea with an astonishing 399,000 downloads. At the same time, the number of registered users witnessed remarkable growth. From 520,000 registered users in August of the previous year, it reached 5.7 million by January of the current year, a growth rate exceeding ten times.
Temu’s Japanese and South Korean expansion strategy has shown initial success. Temu has chosen Asia as its primary market, initially focusing on Japan and South Korea, driven by the immense market potential in these two countries.
In the case of Japan, despite online shopping facing intense competition from physical stores, its e-commerce market is still ranked third globally in terms of sales revenue. According to data, the e-commerce sales revenue in Japan for 2023 is expected to grow by 6.8%, reaching $153.984 billion.
On the South Korean front, due to a highly penetrated e-commerce market with an internet penetration rate exceeding 97%, South Korea has become one of the most developed countries in the global e-commerce market.
Statistics show that in 2023, South Korea’s e-commerce transactions reached 258 trillion Korean won (approximately $228 billion), a year-on-year growth of 15.6%, accounting for 28.9% of the entire retail industry, ranking fourth globally. Among these, the transaction volume of cross-border e-commerce reached 78 trillion Korean won (approximately $69 billion), a year-on-year growth of 25.9%, constituting 30.2% of the total e-commerce transactions.
Considering these market potentials, Temu wisely chose to enter the Japanese and South Korean markets first, with the expectation that after achieving success in these two countries, it can further expand its market share in Asia and other emerging markets, laying a solid foundation for Pinduoduo’s “aggressive” global strategy.
Summary
Whether Temu, TikTok, or SHEIN, they all demonstrate a deep interest in the Asian market. Taking TikTok as an example, the platform’s e-commerce business in Southeast Asia has shown excellent performance. Data indicates that in 2023, TikTok’s GMV in the Southeast Asian region accounted for a staggering 90%, with market shares in countries like Indonesia, Thailand, Vietnam, the Philippines, and Malaysia approximately at 28%, 22%, 17%, 12%, and 11%, respectively. Plenty of development opportunities exist in this fertile ground for these cross-border e-commerce platforms.
The Asian market differs significantly from North America and Europe, possessing more deeply rooted retail traditions. Therefore, for Temu, only by diligently finding its market positioning and capturing the unique needs of Asian users can it confidently navigate the complexities of the global market and become an industry leader.