Tariffs, Trade and Temu

You might think Donald Trump’s trade war will not have a seismic impact on UK retail. The tit for tat US – Chinese tariff diplomacy is between them and yes we might have our own tariffs but at 10% compared to 125% the US and China are inflicting mortal damage on one another.  In some instances that would be right but trade is truly global and as one door closes another opens, as is the case for big D2C marketplaces such as Temu and Shein.

The graph below, produced by  Ingvaar Kraatz perfectly highlights the knock on effect for EU and UK retail.  Temu has comprehensively pulled out of the US ‘Google Shopping’ market, swinging that investment, in real time, directly into the UK ‘Google Shopping’ market, as the graph shows. I have it on good authority from senior sources at Google that this graph is being replicated across the whole of the EU ‘Big 5’ (UK, France, Germany, Spain, Italy) as the likes of Temu, Shein and others seek to ‘dump’ products and offset lost sales.  The likely next action would come from Amazon and Ebay who will not want to lose hard won share in Europe, with EU and UK based retailers squeezed yet further.

There is a strong argument (and data) to say a competitive landscape is good for consumers and the knock on effect is growth for the whole retail market.  But in the here and now it will likely mean spiralling CPCs and more expensive customer acquisition.

What can retailers do to minimise the risk and maximise the opportunity:

1. Size and spend aren’t everything. Focus on the most profitable lines and be prepared to defend the 20% that make you famous and deliver 80% of the sales.

2. Use technology like Productcaster Comparison Shopping Service and Feed Management to reduce cost and save time.  Temu is currently serving ads on Shopping ‘By Google’ which means they are paying 20% more for the CPCs than those brands serving ‘By Productcaster’. Our feed management solution enables brands to be faster and more accurate with their marketing making the budget go further.

3. Plan for the worst but hope for the best.  A few things could happen but most likely a trade deal that opens the US back up to Temu and Shein. They could easily be back in those markets by summer and they are unlikely to maintain the investment in the EU.

Written by Martin Corcoran

 

Source data: Ingvaar Kraatz