business news in context, analysis with attitude

Two similar stories this morning highlight how iconic American retailing names are facing differing challenges emanating from China:

•  The Wall Street Journal reports on Amazon trying to figure out how to respond to Chinese e-commerce platforms that specialize in heavily discounted items.

"While Amazon has for years contended with challenges from rivals such as Walmart and Target, Temu and Shein, both of which have Chinese roots, are tapping into demand for low-price items that aren’t delivered quickly," the Journal writes.  "Amazon hasn’t taken steps to match the prices of items on Temu, people familiar with the matter said, a rare strategy for a company that typically scours the internet with a variety of price-matching tools to ensure its site has some of the lowest prices online.

"Inside the tech giant, executives have been weighing how to respond to the two competitors, the people said. Executives have seen there is a market for bargain items that take longer to arrive and have tried to figure out if they should make such offerings on their own site more discoverable and available."

According to the story, "Inflation-wary American customers have increasingly been willing to try out Temu and Shein. Since launching its U.S. services in September 2022, monthly unique visits from U.S. customers on Temu’s website and app, a measure for how often shoppers are visiting the service, grew by more than 10 times to about 70.5 million by March, according to estimates from analytics firm Comscore.

"Since August 2021, Shein’s U.S. monthly unique visitors nearly doubled to roughly 41 million in March. 

"Amazon’s monthly unique visitors decreased to about 211 million in March from about 217.5 million in September 2022, Comscore estimated. Data firms Similarweb and Sensor Tower measured similar web and app traffic trends during recent months to Temu, Shein and Amazon."

The Journal notes that "Shein recently opened a marketplace for U.S. customers, creating a channel for independent merchants to sell products through its site. Thousands of Amazon sellers have joined the new platform, including dozens that are based in the U.S., according to research firm Marketplace Pulse."

•  The Wall Street Journal also has a story about how Starbucks, which continues to dominate the global coffee culture and has placed an enormous premium on growing sales in China - a place where coffee has not been as popular as in other global markets - is facing considerable competitive pressure there.

An excerpt:

"Three-time Chief Executive Howard Schultz, who resigned last week from Starbucks’ board, placed great importance on China, heavily courting President Xi Jinping. Tellingly, his replacement will be former Alibaba executive Wei Zhang. Schultz’s ambition to grow Starbucks’ store count from today’s 37,000 to 45,000 in 2025 and 55,000 by 2030 hinges on one day making China the chain’s top market. It has about 6,500 there today and pledged last year that it will open one every nine hours on average over the next three years.

"Some local competitors are putting even those ambitions to shame. Luckin Coffee, China’s one-time answer to Starbucks, was brought to its knees financially after it admitted fabricating sales. It has had a dramatic recovery under new management. Three years ago it was neck-and-neck with Starbucks in terms of store count and heading lower. Now it has nearly 11,000.

"Even more impressive, though perhaps deserving an asterisk, is Cotti Coffee, a China-based chain started just a year ago by Luckin’s founders. It now claims more than 5,000 stores, which would make it the fifth-largest coffee brand globally. Between them Luckin and Cotti have opened a coffee shop every hour on average in the past year."

And, "Plenty of other foreign chains are piling in … Peet’s only entered China in 2018 and expects to open its 200th store there this year. And Tim Hortons’ U.S.-listed, China-dedicated entity, Tims China, is becoming a force too. It had 700 stores in June with plans to expand to 1,000 this year and 2,740 by 2026."

The bottom line:  "Chinese people still only consume about 12 cups of coffee a year on average, compared with 380 in the U.S. But they won’t all be drinking Starbucks."