Superbalist’s big Shein and Temu headache in South Africa

Shein and Temu are showing exceptional growth in South Africa due to their aggressive marketing strategies and low prices.

Local competitors, like Superbalist, struggle to keep pace because of higher prices and significantly lower marketing spend.

It is valuable to see what happened in the United States to illustrate the challenge facing Shein and Temu’s competitors in South Africa.

Temu is owned and operated by PDD Holdings, which also owns Pinduoduo, a common online commerce platform in China.

PDD Holdings has a market cap of $151 billion (R2.9 trillion), illustrating the formidable competitor local eCommerce players face.

The Temu platform first went live in the United States in September 2022. It pumped billions into marketing to build brand awareness and gain market share.

In 2023, Temu was the top advertiser by revenue on Meta Platforms, which own Facebook and Instagram.

Temu, through PDD Holdings, spent nearly $2 billion on advertisements with Meta last year. It was also one of Google’s top five advertisers.

It did not stop there. The company spent large amounts to display prominently on digital publishers to build its brand.

Temu even spent tens of millions on advertising during the Super Bowl to become a household name in the United States.

The Chinese giant spent so aggressively on online marketing that it pushed up digital advertising prices for everyone.

PDD Holdings does not provide separate financials for Temu. However, it reported a profit of $2.1 billion in Q3 2023 while spending $3 billion in sales and marketing during the period.

Goldman Sachs recently estimated that in 2023, Temu’s marketing spending contributed to an average loss of $7 an order.

This shows how aggressively Chinese retailers like Temu spend on marketing to gain market share in a new country they enter.

Now, let’s look at South Africa. It is nearly impossible to read a news article online or open Facebook without seeing a Temu ad.

Temu is pumping millions into marketing to grow its brand and eCommerce market share in South Africa.

Its marketing is far more aggressive than any South African online retailer – and it is working.

Similarweb’s latest rankings show that Temu’s mobile app is the most popular app in South Africa. It is more downloaded than WhatsApp, Facebook, and TikTok.

So, while local eCommerce players benefit from being in South Africa with direct relationships with media companies, their marketing budgets are too small to compete.

In South Africa, marketing budgets seldom reach double-digit figures when measured against revenue.

This means that Temu and Shein, which are spending big money on marketing in South Africa, will outgrow their local competitors.

It is, therefore, no surprise that Takealot is looking to sell Superbalist because of concerns about increased competition from Chinese apparel shops Shein and Temu.

Google Trends comparison

The effect of Temu and Shein’s aggressive market is clearly seen in a Google Trends comparison with Superbalist.

Google Trends provides access to a largely unfiltered sample of actual search requests made to Google. This data can be requested for a specific country.

It provides a window into what people are searching for and the trend of whether a company’s search activity is increasing or decreasing.

The latest data shows that Shein and Temu have a much higher search traffic than Superbalist, despite the Superbalist’s early mover advantage.


Top JSE indices