Temu decline in South Africa

Chinese online store Temu has seen a rapid decline in user traffic and search popularity in South Africa over the past few months, data from Similarweb and Google Trends shows.

Makro e-commerce senior product manager Bryton Stevens recently posted Similarweb statistics on his LinkedIn page, in which he compared Temu’s traffic to Shein, another major Chinese e-commerce player that has seen its business boom in South Africa.

Similarweb uses four data sources to estimate user traffic and page visits — direct measurement, a contributory network, partnerships, and public data extraction.

In general, the accuracy of its analysis is regarded to be better for larger websites or services, which should include Temu.

Steven said it was “interesting to see how Shein had a relatively stable flow of traffic while Temu’s traffic had an aggressive entrance but was now decreasing quite quickly on a month-on-month basis.

Temu’s waning popularity is also reflected in Google Trends data for searches in South Africa.

Google Trends showed that searches for “Temu” started becoming more common in South Africa from early January 2024 and peaked in March 2024.

Thereafter, searches receded down to the same level as queries for “Amazon” in the weeks after the launch of its local marketplace in South Africa in May 2024.

Shein’s search popularity in South Africa peaked in November 2023 before it also declined. However, it has been able to maintain higher popularity search popularity than Temu and Amazon.

While Temu has established a foothold in South Africa, it faces tough competition not only from its Chinese counterpart but also from Takealot.

Overall, Takealot has remained the most-searched-for e-commerce player in South Africa over the last year, with Amazon only briefly surpassing the country’s leading online store in the week of its Amazon.co.za launch in early May.

The graphs below show Temu’s decline in online traffic in South Africa and how it compares to Shein, according to data tracked by Similarweb, as well as how Temu’s Google Search popularity compares with Shein, Takealot, and Amazon in South Africa.

Temu vs Shein online traffic — Similarweb statistics

Google Trends Traffic in South Africa — Temu vs Shein vs Takealot vs Amazon

Temu’s massive marketing splurge

Temu’s massive surge in popularity in South Africa and several other countries outside China coincided with a big jump in online marketing spending in 2023 and early 2024.

According to a report by MediaRadar, the retailer increased its advertising budget by 1,000% in 2023, a large portion of which was used for paid social media promotions.

One of Temu’s biggest draws was its use of gamification, which lured in first-time shoppers with a virtual spinning wheel that awarded them significant discounts on their initial purchases.

Goldman Sachs previously estimated that Temu’s significant marketing spending resulted in a loss of $7 per order.

While that amount becomes significant when looking at the volume of orders it receives, it shows how aggressively the Chinese retailer spent to gain a foothold in new markets.

For a long time, it was difficult to use a social media app like Facebook or Instagram without encountering ads for Temu.

However, in the most recent reported quarter of Q2 2024, Temu’s parent company PDD Holdings spent less on marketing than analysts expected.

According to KrAsia, Temu has cut back on ad spending and switched its focus from initial uptake to increasing shopping activity, purchase frequency, and average order values of existing users.

Dolphin Research found that Temu’s marketing expenses increased only slightly quarter-on-quarter.

Reducing its marketing spend was one of the big contributors to Temu delivering strong profits.

However, PDD Holdings would have struggled to deliver its substantial 86% jump in revenue and 156% increase in profit.

That being said, PDD Holdings has warned that the revenue and profit growth is not sustainable.

Its 88% revenue increase in the second quarter of 2024 was already below analysts’ expectations.

Tax headwinds in South Africa

Temu’s growth is also likely to be impacted by external factors outside the company’s direct control.

The retailer has seen increased scrutiny from government and tax authorities worldwide, including in South Africa.

Both Temu and Shein’s businesses are expected to be heavily impacted by adjustments in import taxes.

South African retailers and textile industry representatives have accused Chinese retailers of splitting larger clothing orders into smaller sub-R500 shipments to exploit a 2007 tax loophole.

This allowed them to qualify for a 20% flat duty rate concession on small imported products, which are also exempt from 15% VAT.

From 1 September 2024, all these shipments are subject to VAT.

From 1 November 2024, the South African Revenue Service (SARS) said it would restructure the 20% rate according to the World Customers Organisation framework.

An increase in taxes could discourage online shoppers from using Temu and Shein over local options.

In addition to the tax issues, Shein has launched legal action against Temu in the US. If the court rules in favour of Shein, it could significantly damage Temu’s operating model.