We all know that deep discounting does no good for the markets as it is a fact that these e-commerce players are just doing it to attract new customers to their platform and it becomes a race between who is able to spend the most per customer which is also known as customer acquisition cost. Now, we have a new report that tells you about the concerns of deep discounting by the major e-commerce players that puts pressure on the newcomers.
The trend towards low-cost platforms isn’t happening in a vacuum however, but is bolstered in part by macroeconomic challenges facing different markets – including belt-tightening amid economic uncertainty in China and inflation in the United States and European markets putting pressure on consumer spending. Fast-rising discount competitors, such as Pinduoduo and Douyin in China and Temu and Shein, which have rolled out their services to countries from Canada to Australia, as well as across Latin America and some Asian markets, are themselves pouring billions of dollars into subsidies and discounts to grow market share among consumers who are happier to snap up $10 dresses and $5 headphones than higher-priced items.
The author of E-commerce Reimagined says “These marketplace dynamics that first emerged from China, or were invented in China, are now dominating the Western world,” and adds that “(Other online retailers) are seeing this insurgence of these cheap Chinese goods that are flooding in from the likes of Temu and Shein and their boats have been rocked. They don’t know if they can compete.”
Amazon is set to ramp up discounts during its Oct. 10-11 “Prime Big Deal Days.” which will be its version of the early Black Friday sale this year and one that they hope will get them a lot of sales and traction ahead of the big holiday season and this is done to make people spend more despite the weak economic conditions all over. The report also says, “The battle for the bottom in many markets is only likely to get more aggressive with the entrance of TikTok Shop, which in the United States will also focus on Chinese-made goods, as Shein and PDD Holdings’ Temu have done with success”.