Temu, Shein, AliExpress: Chinese Retailers in Germany

Chinese Marketplaces in Germany: Key Insights

• Global Expansion: With the Chinese eCommerce market slowing considerably, the big Chinese retailers are seeking international expansion for future growth. This also drives the aggressive European strategy of marketplaces such as Temu, AliExpress and TikTok Shop.

• Low Prices and Social Commerce: Pinduoduo and Douyin managed to increase their market share on the back of ultra-cheap and social features. These trends are now poised to enter European markets with the expansion of Chinese marketplaces.

• Limited Market Position in Germany: Chinese growth in Germany has so far been muted compared to markets such as Spain, France or Italy. Reasons for that are the dominance of established local competitors, higher consumer spending, and less reliance on discounts.

• Potential Threat to German Retailers: The rapid growth and financial resources of Chinese players could pose a long-term challenge to local retailers. This could threaten the market position of established platforms if they do not adapt to the changing landscape.

Chinese platforms are the talk of the town within the European eCommerce community. Temu was both the most successful and most controversial new marketplace in Europe, jumping to more than US$13 billion in GMV almost from the get-go amid a huge marketing push and even bigger criticism. Shein is the spectre of almost every fashion retailer, while TikTok Shop has started to make aggressive ways even before its launch in continental Europe.

It almost seems as if Chinese eCommerce companies have suddenly discovered that other markets might also be lucrative and worth expanding into. And the reasoning behind this expansion is simple: the Chinese eCommerce market has reached its peak. In 2023, eCommerce revenues in China grew by just 3.5%. This is lower than almost all other countries in the Top 10 largest eCommerce markets.

To counter slowing demand in the home market, the giants of Chinese eCommerce have started to explore international expansion as an avenue for future growth. And they are not shy to use their massive fortunes to enter established and presumably lucrative markets. But what does this mean for German retailers? In preparation for the Marketplace Convention 2024, we analyze the rise of Chinese marketplaces in Germany. And it turns out that the biggest threat for German stores and marketplaces might not be what is currently on everyone’s mind.

Chinese Big 4: Between Cheap Prices and Social Commerce

The crucial thing for understanding developments in the Chinese eCommerce market and their impact in Europe is that Chinese retailers are subject to the same pressures as the retailers in Germany, France or the United States. Almost all of the Chinese giants of eCommerce are publicly listed companies that need to meet expectations of revenue growth and profitability.

They need to satisfy the price-conscious consumers as well as public authorities. And their sales are subject to macroeconomic pressures such as demand fluctuations or high unemployment rates.

As all of these aspects continuously shape the business of Chinese eCommerce companies, it is important not to see the Chinese market as an unchanging monolith. Instead, the Chinese companies expanding into Europe have experienced significant shifts in their market position and are not the same players as they were a decade ago.

The Chinese eCommerce market is dominated by four massive eCommerce companies – Alibaba, PDD, JD.com and ByteDance – all of which generate more than US$350 billion in annual eCommerce activity. These four companies alone generate more than 80% of the biggest eCommerce market in the world, making it one of the most concentrated eCommerce markets. Alibaba is by far the biggest player, generating US$978 billion in Chinese eCommerce activity revenue across its two marketplaces Taobao and Tmall. In Europe, it first appeared on the landscape by having the then largest initial public offering (IPO) showcasing the massive amounts of money in Chinese eCommerce.

But Alibaba is no longer in the dominating position it was a few years ago. Back in 2019, Taobao and Tmall made up almost 70% of GMV generated by the Big 4. Together with JD.com (around 20% in 2019), Alibaba’s platforms controlled a market it had itself shaped as the pioneer of Chinese eCommerce. Since then, both players have lost significant market share to the two developments that are now also entering European eCommerce markets: cheap prices and social commerce.

Alibaba’s competitor Pinduoduo has become the largest single marketplace in China through incredibly low prices at a time when Alibaba switched its strategy towards more affluent customers. A direct-to-consumer approach and platform-induced pressures on prices have powered years of high growth as the platform now captures almost a quarter of GMV among the Big 4.

TikTok’s sister app Douyin has experienced an even more meteoric rise. It’s parent company Bytedance started to intensify its social commerce efforts around 2019 combining the strong engagement numbers of short-video formats with the audience draw of successful influencers. Following this formula, Douyin has grown to US$388 billion in GMV and is expected to become the second largest eCommerce platform in China by 2024.

Those two newcomers have caused the traditional retailers Alibaba and JD.com to lose their once dominant position. Our forecasts show that their platforms will make up only slightly more than 50% of the GMV generated by the Big 4 in 2024. All three marketplaces have experienced declining sales in 2023 while Pinduoduo and Douyin are still growing by double digits. To combat this decline, all Chinese retailers are jumping on the social commerce trend. Even non-eCommerce players such as Tencent are investing heavily into their digital retail business. And the distinctly lower prices of Pinduoduo have already started a race to the bottom capturing even established retailers such as Alibaba.

The Chinese eCommerce market is generally a few years ahead of Western markets. One can therefore expect that some of these developments will reach eCommerce markets in Europe. In fact, the international ventures of Chinese retailers might already be a glimpse into a future shaped by these new trends. But how are the individual companies expanding outside of China and what are the implications for local retailers?

How does Shein fit into the picture?

Fast fashion retailer Shein and its parent company Roadget Business Pte Ltd. are also to be considered when analysing the growing importance of Asian retailers for European eCommerce markets. But Shein is in a slightly different position compared to the likes of Alibaba and Co.

Back in 2021, the company moved its headquarters to Singapore to distance itself from regulatory structures in China amid growing concerns among Western audiences. This is particularly important as more than 99% of Shein’s customers sit outside of China. It is therefore entirely dependent on its international business and does not have a lucrative home market to fall back on.

But Shein’s supply chain and the source of its products put them firmly into the camp of Chinese influences. Almost all of the fashion sold is manufactured by Chinese suppliers and shipped directly from China which allows the company to severely undercut its Western competitors in the fast fashion business. Shein also does not operate a marketplace for third-party vendors but instead sells only its own products to consumers.

For this analysis, we will therefore include the first-party net sales of Shein in the overall Gross Merchandise Value (GMV) of Chinese retailers whenever needed.

Colossal Business in China Funds Global Expansion

Out of these four players, only JD.com does not have a significant international presence. All of the other companies operate one or more marketplaces or online stores (in the case of Shein) outside of China.

And their increasingly global business is clearly driven by significant past successes. Since 2019, only Alibaba has shown somewhat ordinary growth rates, mostly due to the fact that it was already the largest eCommerce company in the world.

PDD Holdings and Shein managed to grow their eCommerce activity revenue by 300% and 1,200% respectively, showcasing the strong demand for ultra-low prices across market.

eCommerce activity for ByteDance jumped by more than 6,000% as social commerce has turned into an integral pillar of Chinese eCommerce. ByteDance is now the fifth-largest eCommerce company by activity revenue with plans to expand their social commerce business to the global stage. As a result, all of these companies are expanding into other markets from a position of strength.

Alibaba’s Earnings Powered by Growth in International Business

While frequently lumped together, all of these companies follow different marketplace strategies on the global stage. PDD Holdings and ByteDance are single-platform retailers, only operating the discount marketplace Temu and the social commerce platform TikTok Shop respectively.

Alibaba augments its international marketplace AliExpress with other regional platforms such as Miravia (Spain), Trendyol (Turkey) or Lazada (Southeast Asia). As a pure first-party player, Shein operates different regional domains for its online stores.  

Out of the three Chinese retailers with a third-party focus, Alibaba has the highest share of international business. The company generates 11.7% of its eCommerce activity revenue in non-Chinese markets with 3.3% coming from Europe and North America.

Alibaba International has recently become the most important motor of growth for the parent company. With growth rates of more than 40%, the division was responsible for almost all of Alibaba’s overall growth offsetting the slowing Chinese retail market.

International shares for ByteDance and PDD Holdings are considerably lower showcasing the future potential for both companies in global markets. ByteDance generates just 0.7% of its eCommerce activity in Western markets as TikTok Shop and social commerce has not yet reached the level of popularity it has in Southeast Asia.

In contrast, almost 1.7% of PDD Holdings’ eCommerce activity is coming from Europe and North America showing the impact of Temu in these regions. As a special case, Shein’s non-China share sits above 99% with more than 90% out of Western markets.

Chinese Retailers Generate 7% of European Business in Germany

Business by Chinese retailers in Europe has shown strong growth in recent years. GMV of marketplaces operated by Chinese companies in the region is forecast to reach US$46.3 billion in 2024. This is up from just US$10.2 billion in GMV back in 2019, mostly driven by the expansion of AliExpress and Trendyol as well as the launch of Temu. But which role does Germany play for these marketplaces?

The biggest European market for Chinese retailers is Turkey with 21% of European GMV in 2023. This comes as no surprise as Alibaba operates a separate marketplace in the country. Trendyol is by far the biggest marketplace in the country generating almost 40% of all eCommerce activity. France and Spain are responsible for 15% and 14% of the volume in Europe respectively.

In France, AliExpress and Temu are among the 15 largest marketplaces, while a number of big French marketplaces (Cdiscount, Auchan, La Redoute) are showing declining revenues over the last year.

Alibaba also operates a regional Spanish skew called Miravia, which has jumped to more than US$1 billion in GMV just a year after its launch. The strong presence in both markets is mostly due to higher price sensitivity by eCommerce consumers. Average Order Value (AOV) in both countries is significantly lower than the average spending in other European markets such as Germany.

In comparison, Germany makes up just 7% of all European business by Chinese companies. This is despite Germany’s status as the second-biggest eCommerce market in Europe. And while marketplaces such as AliExpress and Temu have experienced success in the German market, their strategy has been more focused on other markets with more existing potential for low-price platforms.

Due to its market size, Germany has a stronger group of established native companies such as Otto, Zalando or Ceconomy that make it difficult to break into the market. Even Shein with its store-only strategy for fast fashion is only the eighteenth-largest online store in Germany.

Chinese Retailers Showing Strong Growth in Germany

But while the pickup of Chinese platforms in Germany has not been as resounding as in other markets, these outlets have still experienced rapid growth in recent years. The four platforms with a relevant presence in Germany are AliExpress and Trendyol (both by Alibaba), Temu (PDD Holdings) and Shein (Roadget Business).

All of these retailers have shown at least double-digit growth over the last year. Temu is the obvious standout performance in a group of successful players. After its launch in 2022, the ultra-cheap marketplace has quickly grown to almost US$750 million in just one year, which makes it the 13th-largest marketplace in Germany.

 And while the combination of low prices and relatively quick deliveries has found an audience, this new player has also made major splashes outside the realm of sales. The amount of cargo shipped by Temu and Shein has led to increased freight costs and both American and European authorities have called for lawmakers to close the loopholes exploited by Temu.

Growth for the other retailers has been considerably slower due to being more established players already. AliExpress has grown its German business by 54% crossing the US$1 billion in 2023. This makes it just the seventh-largest marketplace in Germany, a far cry from their position in other European markets such as France, Spain or the Netherlands.

According to a survey, 11% of Germans have bought something on the platform in 2023. While not negligible, almost 40% of consumers in Spain have used the platform in recent months. Lack of marketing and localization efforts compared to other European markets as well as longer shipping times also play a role in a market that is not as price sensitive as some of its neighbours.

Net sales of Shein in Germany have grown by 40% in 2023 reaching US$617 million. That is a high level of success but still below Shein’s performance in the rest of the world. Shein is the biggest fashion store outside of China and is generally generating double the number of sales of its competitors in other European markets.

In Germany, there are eight stores generating more money than Shein through fashion, five of which are stores from Germany primarily focused on Fashion such as aboutyou.de, bonprix.de and hm.com. This established group of casual fashion retailers does not exist in the other European markets and makes it harder to break into the German fashion market.

The weaker performance of Chinese platforms in Germany can also be explained by consumer benchmarks. Not only is the average order of German consumers more expensive than in France, Italy or Spain, but discounts also play a bigger role in these markets.

Discount rates in Germany (i.e., the average percentage by which product prices are reduced in the country) are lower than in all of the other markets showing the diminished role that reduced prices play in the German eCommerce market. But despite the lower impact of Chinese platforms in German eCommerce, is there justified reason for concern?

The Threat of Chinese Potential

As of today, the talk surrounding the likes of Temu and Shein is larger than their actual impact on eCommerce revenue in Germany. In 2023, Chinese platforms generated US$2.9 billion in eCommerce activity revenue. This is just 2.6% of all revenues in the German eCommerce market.

There are seven companies that individually make more money than all Chinese retailers combined. Amazon alone generates almost 20 times the eCommerce activity of these Chinese platforms. So, it seems that the threat of Chinese eCommerce is mostly a future one contrasting the potential of Chinese retailers with the moody outlook of German eCommerce companies.

Excluding Temu’s launch year, Chinese platforms in Germany show a healthy double-digit growth rate over the last years. That is a level of growth that German retailers can only dream about. The average German marketplace grew by just 5.6% in 2023. Net sales of the biggest German online stores were even declining by 1.2% on average.

In contrast, Chinese retailers in the German market have managed to more than triple their eCommerce activity revenue compared to 2019 and are expected to double it again over the next two years. German marketplaces are forecast to lie just 74% above their 2019 numbers by 2025, which is in turn more than 25 percentage points below the revenues in 2021.

Even the big international players (i.e., Amazon, eBay, Vinted) do not perform significantly better. And due to their massive home market, Chinese companies have deep enough pockets to bankroll more years of aggressive growth.

Chinese Companies in Germany: New Growth or Cannibalization?

The question is whether Chinese retailers have found a way to grow where most other German retailers could not or if German stores and marketplaces are getting cannibalized by this new competition. Determining this counterfactual is tricky business, but most signs point towards the latter. Our analysis shows that eCommerce companies in Europe are on average growing slower than their Asian competitors despite all other factors being equal.

Growth of the average European retailer is about 6% lower, even compared to other retailers with comparable characteristics and significant business in Europe. As our analysis also includes the years in which German retailers outperformed its Chinese competitors (2019-2021), it can be assumed that this is a structural weakness of German eCommerce companies.

There is also no direct relationship between market growth and the presence of Chinese retailers in European countries. The Chinese retailer share of the overall eCommerce market in slow-growth countries such as Germany, the United Kingdom or France is much lower than in growing markets like Spain, Italy or Turkey.

As a reference, Chinese platforms make up just 2.6% of all activity in a German eCommerce market that is growing by just 4.4%. In contrast, those platforms account for more than 14% of the Spanish eCommerce market which is growing by more than 11%.

But the more saturated markets also showed the same revenue jumps as the other group between 2022 and 2023, the year that Chinese platforms started to take off. It seems that the expansion of Chinese outlets has not created any additional uplift outside general market trends.

This is a clear indication that Chinese retailers are in fact taking their growth from incumbent competitors. It seems that cheaper prices have not led consumers to spend more but switch from existing platforms to the cheaper alternative. And while this development is not yet as advanced in Germany, other European market could present a cautionary tale for the German eCommerce market.

Chinese Marketplaces in Germany: Closing Thoughts

The rise of Chinese eCommerce giants in Europe marks a significant shift in the online retail landscape. Platforms like Temu, Shein, and AliExpress have quickly gained traction across various European markets, utilizing ultra-low prices and innovative strategies such as social commerce to capture consumer attention.

Their rapid expansion is a response to the saturation of the Chinese market, where growth has slowed significantly, prompting these companies to seek new opportunities abroad. However, in Germany, the impact of these platforms has been less pronounced compared to other European markets, due in part to the presence of established local competitors, consumer preferences for quality over price, and a less discount-driven shopping culture.

Despite their relatively modest footprint in Germany, the threat posed by Chinese eCommerce platforms should not be underestimated. These companies have demonstrated an ability to rapidly scale and disrupt markets where they were initially underrepresented, as seen in countries like Spain and Italy.

Their aggressive growth strategies, backed by deep financial resources and a willingness to operate at lower margins, could erode the market share of German retailers if left unchecked. The double-digit growth rates of Chinese platforms contrast with the more stagnant performance of many German and European retailers, highlighting a need for local companies to innovate and adapt to this new wave of competition.

For the German eCommerce market, this means that while the immediate impact may seem contained, the future could bring more intense competition. German retailers must not only focus on their core strengths but also explore new strategies to compete against these international players.

The experience of other European markets serves as a cautionary tale, suggesting that without proactive measures, even the most established retailers could find themselves losing ground in an increasingly globalized and price-sensitive market.

Sources: ECDB, Statista