Amid Temu’s aggressive expansion in the affluent US market, Amazon concluded its 8th annual Prime Day shopping festival, on 11/12 July.
Consumers in the United States spent US$12.7 billion during the 2 day shopping festival, or about a 6% increase year on year.
More interestingly, according to Amazon, 375 million items were sold this year, as compared to about 300 million last year – a 25% increase year on year.
Which means, although consumer insights firm Numerator estimated an increase in average order size, the average value of the items sold this year was lower compared to last year.
Multiple cross border sellers/brand owners told us they were surprised by the Prime Day results, with some saying that they are selling 4x-5x of the normal volume with a smaller proportion of advertising investment.
“We are pleasantly surprised,” one seller told a friend of ours, adding that the sales for the whole first half year of 2023 had been lukewarm, leading him to not have any expectations for the Prime Day.
Numerator estimated that the three top selling (in terms of volume) items were Temptations Cat Treats, Fire TV Sticks and Liquid I.V. Packets – whilst in 2022 the top three were all electronics & appliances.
This is probably an indication of the household spending shifts under the current economic environment, after stubborn inflation and multiple interest hikes.
It is the same macroeconomics that gave Temu the window of opportunity to enter the US (and other developed) markets.
While Temu’s volume is still modest compared to Amazon’s behemoth US$600b annual GMV, the growth trajectory can be menacing, especially coupled with price advantages. Therefore you hear Amazon kicking Temu out of its price comparison checks, we will probably hear more disputes about Temu’s practices as the perceived competition intensifies.
Will Temu be able to challenge Amazon? That was the concluding question we asked in our Who is Temu report published earlier this year.
Like all insurgents or revolutionaries, Temu’s short objective should not be challenging the lords (i.e. Amazon), but establishing a base or bridgehead. That will be defensible, while opening up future possibilities.
During the Prime Day promotions, Temu launched a 90% off campaign, which is more of a hitchhike of the shopping bonanza trend, rather than an assault on Amazon.