Every few years you hear about a new app or website that's going to disrupt retail and challenge Amazon.
There was a time when Ebay, with its auction model, was considered disruptive, but that site proved more a novelty than a true contender.
Then there have been super discounters including Wish and Alibaba’s AliExpress. But the disconnect between what the items look like in those apps and what actually gets delivered has limited their success in the U.S.
Other plays like Jet.com managed to use hype to push Walmart into spending $3.3 billion for the site, which was never a major player and was quickly closed by the retail giant.
Still, the purchase of Jet.com, and the acquisition of its chief executive, Marc Lore, gave Walmart WMT the leader it needed to push the retail giant into truly taking on Amazon.
Related: Walmart is about to completely change how you shop (for the better)
Lore used his considerable sway to persuade Walmart CEO Doug McMillon to invest the billions it needed to catch up its infrastructure.
That choice was not universally agreed upon among Walmart executives, most of whom had a pure brick-and-mortar background. But if it hadn't happened, Amazon would be in a singular place in the e-commerce world.
Now, a new player, perhaps even a contender for the throne, has emerged. And it's taking business not so much from Amazon and Walmart — at least not yet — but from Dollar General, Dollar Tree, Five Below and Ollie's Bargain Outlet OLLI.
Image source: Getty Images
A new Chinese-owned app takes on Amazon and Walmart
Temu, which is owned by a Chinese retailer, has quickly become one of the most downloaded apps in the U.S. The site, which uses the tagline "shop like a billionaire," sells at below-dollar-store prices, with some items literally costing less than a quarter.
That could make it a rival for Amazon and Walmart, but it has already become a player in the lower-end dollar store/big discount space. Temu’s slice in the discount market soared from 0% to 14% within the year ended in September, according to extensive research from Earnest Analytics, RetailDive reported.
So far, however, Temu's growth seems to be making the discount category bigger.
Dollar General, which is not a dollar store, reported a dip (off 0.1%) in same-store sales for its second quarter. Dollar Tree, which also owns Family Dollar, saw a 6.9% same-store-sales increase, while Ollie's same-store sales jumped 7.9% and Five Below's climbed 2.7%.
The big boys aren't being hurt by Temu's growth just yet, either. Amazon's net sales jumped 13% in its third quarter while Walmart's U.S. comparable sales jumped 6.4% and its net sales increased 5.7% in its second quarter.
Is Temu a contender or a pretender?
Temu has some features that Amazon and Walmart don't offer, which makes the experience more social. People can, for example, join with their friends to buy an item, which brings down the price per unit of the item, a volume discount. The app also gamifies shopping, offering rewards and gifts to people who complete certain tasks.
"The popularity of Temu is undeniable, and so is its impact on the super low end of the market," the retail expert and author Mark Ryski commented on RetailDive. "But while offering a 'sugar high' of super cheap, often lower quality goods will always be attractive to some consumers, it’s not for everyone,"
Gary Sankary, a 50-year retail veteran, does not believe the app will be a long-term competitor.
"Their business model isn’t sustainable. Amazon and the dollar stores all have different delivery modes that will take Temu years to come close to being able to match," he wrote.
Temu also faces another problem, the retail influencer Georganne Bender pointed out.
"For all the talk about sustainability, fast fashion, tracking apps, and the like from consumers, where is the outrage over Temu and its cheap goods and cheap labor? I don’t think it will make dollar stores obsolete in the long run," she wrote.
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