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Shein, Temu target Gen Z shoppers with budget-friendly deals

Chinese e-commerce sites Shein and Temu are gaining popularity this holiday season by offering Gen Z shoppers steep apparel and household goods discounts. Their ultra-low pricing targets more budget-conscious consumers than Amazon (AMZN) and Walmart (WMT).

Reuters Reporter Arriana McLymore says Shein and Temu's heavy TikTok marketing spotlights affordability for younger demographics lacking the spending power of older generations. The sites cater to deal-seeking shoppers through a constant inflow of extremely cheap products.

Shein's recent Forever 21 partnership aims to expand reach, but McLymore notes major challengers like Amazon built global domination over the years. While surging in popularity for price-sensitive spenders, she believes Chinese fast-fashion players "still have a long way to go" in matching such scale. However, she notes their discount formula and Gen Z-Millennial focus will keep propelling rapid growth.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

RACHELLE AKUFFO: Now, as the consumer gets more cautious, could Amazon and Walmart be losing share to these low-cost Chinese retailers? Let's bring in Reuters reporter Ariana Macklemore for more on this. So Ariana, break this down for us. Give us some context here. How are they doing market share-wise, these Chinese e-tailers and retailers versus the Amazons and the Walmart's.

ARRIANA MCLYMORE: Absolutely. So when you have Shein and Temu, they're really great for stocking stuffers. Think makeup, think toys and smaller electronics, things that are under $20. But for Amazon and Walmart shoppers, they're looking for TVs, they're looking for iPhones, they're looking for tablets. So when it comes to competition between the two, those consumers are looking for totally different things.

And at the end of the week, we have Black Friday, so there's a lot more time between getting your presents and getting them under the tree. Now, for those last minute shoppers, you're going to see those shoppers go to Amazon because they're banking on that one-day and two-day shipping, even though Shein and Temu shoppers may be looking for those lower prices. So it's really all about a give and take.

RACHELLE AKUFFO: It's true because especially when you think about holiday shopping, that timing very important, especially if you left something till the last minute. Now, we were showing some TikTok clips there. Talk about the marketing around the holidays when it comes to how successful Shein and Temu have been.

ARRIANA MCLYMORE: So Shein and Temu, they know their consumer, they know it's teenagers, they know it's gen Z. So you'll see a lot of their marketing on TikTok. You'll see a lot of their marketing on social media. Shein has also made a push for marketing in Times Square. They did a pop up earlier in November. And Shein is known for doing pop ups across the country. So marketing is a big play.

When it comes to Walmart and Amazon, you'll see a lot of Walmart marketing on TV, on your streaming channels. Amazon has been huge on marketing within its app and on its streaming platform. So again, each platform knows who their audience is. And when it comes to Temu and Shein, they know that younger consumers just don't have as much money as you know, maybe their parents. So that's where they're meeting their customers.

RACHELLE AKUFFO: And I'm certainly getting lots of links from my daughter about things that she wants from Shein and Temu and other things. And I'm just like, yeah, we'll see. Slow your roll a little. But I want to talk about something that we've seen, which is Shein's-- now we're seeing Shein in Forever 21 stores. Talk about the strategy there and how that really helps Forever 21 as they perhaps try and capitalize on some of the momentum from Shein as well.

ARRIANA MCLYMORE: So I think that is a really interesting play, right? Like we haven't heard anything from Forever 21 for years. It was huge when I was in college, huge when I was in high school. But after that, you didn't really hear anything about it. So now that they have this partnership with Shein and they're getting more eyes on the platform in the stores, they're really hoping to get a boost from this partnership.

Now, it remains to be seen on whether this is going to work or not, right? You also see Shein acquiring Missguided, which was also very popular in 2013, 2014. And so you see Shein taking all of this market share from these other fast fashion companies. And it's going to be really interesting to see if Gen Z kind of pivots to the Forever 21 or the Missguideds.

I think that Shein is going to have a long way to go if it wants to beat the likes of Amazon. For example, Shein, between January and September was able to rake in $24 billion. Now, for Amazon, their online revenue sales were $53 billion. So like I said, Shein has a long way to go if it wants to beat the likes of Amazon.