Shopping app Temu is taking off in the U.S., a development being monitored by Wall Street analysts that follow Amazon.com. It's too early, though, to gauge how big a threat Temu could be to AMZN stock, as it also faces fresh competition from TikTok's new U.S. e-commerce business.
Temu is a subsidiary of PDD Holdings. Both Temu and video-sharing website TikTok's new e-commerce business source most goods from China.
"Temu has rapidly gained in popularity in the U.S.," Goldman Sachs internet analyst Eric Sheridan said in a recent note to clients.
"In our view, Temu's rise in popularity comes at a time when the U.S. consumer is more susceptible to trade-down behavior (as discretionary budgets are pressured), which incrementally favors the company's low-price positioning," he went on to say.
Temu App Downloads Boom
Sheridan added that higher income households that are members of the Amazon Prime loyalty/rewards program may be less likely to switch to Temu.
"That said, the rise of Temu does put upward pressure on competitive intensity for the sector and we expect that investors will continue to closely monitor the company's evolution in the quarters ahead," Sheridan added.
AMZN stock edged down near 138.35 in afternoon action on the stock market today. PDD stock slumped by 4.4% near 81.
A Baird report on Aug. 2 noted that Temu trailed only Meta Platforms' new Twitter-rival "Threads" in download momentum the previous four weeks.
According to Goldman Sachs, the Temu app has been downloaded 70 million times in the U.S. It also has been downloaded 120 million times worldwide as of June 30.
"Temu's growth strategy is based on price leadership and value for money (similar to PDD's strategy in China with Pinduoduo)," said Sheridan.
TikTok E-Commerce Business Launches In U.S.
Meanwhile, TikTok in August is finally launching an e-commerce business in the U.S.
The social media app has been testing live online shopping in the U.K. and other markets.
TikTok will store and ship items on behalf of manufacturers and merchants in China. Also, it will handle marketing and after-sale services.
Further, Amazon reported second-quarter earnings and revenue that beat forecasts. But its e-commerce and cloud computing businesses face many challenges.
In addition, AMZN stock has shot up 65% thus far in 2023.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
