Fashion brands advertising on Facebook, Instagram and Google are swimming in shark-infested waters, and Temu and Shein are the sharks.
The Chinese e-commerce players have been on a huge advertising spree capable of disrupting the marketing of any brands they end up competing against head to head. They can appear out of nowhere, abruptly send costs soaring and disappear just as quickly.
“We are all very aware of their spending power and their ability to change our results in a hurry,” said Vic Drabicky, founder and chief executive of January Digital, a consultancy and marketing agency with customers including Tory Burch, Fenty Beauty and Victoria’s Secret.
Temu’s parent company, PDD, spent almost $2 billion on Meta ads in 2023, sources told the Wall Street Journal, making it Meta’s biggest advertiser by revenue for the year. (Temu disputed the number but didn’t provide a figure of its own.) The company also placed around 1.4 million ads across Google services globally in the past year, the New York Times reported.
Shein is trying to keep up. In the last quarter of 2023, the company’s US ad spending was up 160 percent compared to the prior year, according to data from digital-intelligence firm SensorTower. It ratched up spending a further 80 percent month over month in January of this year.
Most of the time fashion brands won’t see much impact from this flood of advertising. But when it’s targeted at the same shoppers they’re trying to reach, it can make it dramatically more expensive to get the same number of clicks from users — and may come as they’re already fighting to keep their shoppers from decamping to those platforms for similar-looking items at much cheaper prices.
At least two of January Digital’s customers have already run into scenarios where they’ve found themselves head to head with Temu or Shein and felt the consequences.
Drabicky wasn’t authorised to provide the names of the brands. But in the case of one lower-priced footwear brand that had a campaign it was running on Google in Canada, when Shein came into the picture “we saw our costs totally spike for about a month,” he said.
Similarly, an affordable jewellery brand saw its cost per 1,000 impressions, or CPM, surge on Google for about six to eight weeks as it found itself competing with Temu. A quick search of the brand’s name on Temu also found dupes of popular products selling for as little as 17 cents — an assault on multiple fronts.
January Digital was able to identify Shein and Temu as the causes of the disruption because Google offers marketers tools that let them see their competitors. Meta doesn’t have an equivalent feature so it can be harder to isolate the impact they’re having on its channels.
But those brands aren’t the only ones to have noticed the effects. Etsy chief executive Josh Silverman said on a November earnings call, “I think those two players are almost single-handedly having an impact on the cost of advertising, particularly in some paid channels in Google and in Meta.”
There’s nothing illegal, or even necessarily unethical, about buying large amounts of online advertising. In a statement, Temu said it “competes fairly in the free market, just like any other advertiser” and that its budget varies “with the performance of our campaigns, the lessons we learn, and the changes we implement based on those insights.”
The impacts aren’t consistent or evenly distributed, either.
“I would not say we’ve seen any marked increases in CPMs,” said Calla Murphy, senior vice president of digital strategy and integrated marketing at Belardi Wong, a marketing-strategy firm.
Belardi Wong’s fashion clients tend to have an average selling price above $200, meaning they’re likely not going after the same shoppers as Temu and Shein. The targeted advertising provided by Google and Meta lets companies pinpoint which users get their ads based on characteristics like age, gender and location, as well as actions such as the ads a user has clicked and pages they’ve engaged with. (Much of the pinpointing is done by algorithms.) Either way, a premium fashion brand may not be targeting the same users as Temu, so they wouldn’t see any effects from Temu’s aggressive marketing push.
It’s hard to spend billions in advertising just targeting specific niches, however. Part of the approach taken by Shein and Temu appears to entail aiming for wide reach across a number of customer groups, seeing what works and then honing in with focused campaigns, according to Drabicky. Most of the time brands will hardly notice. In fact, data from Measured, a marketing-analytics platform, found that media costs were generally down across Meta’s channels, Google and TikTok in 2023, yielding some improvements in the incremental return on ad spend that brands get.
But that can change as soon as Temu and Shein start targeting the same customers. In the case of the January Digital clients that had their costs spike, both saw the disruption end as quickly as it began. It’s unclear why, but Drabicky guessed either the company’s internal data or the platform’s algorithm found the campaign wasn’t proving effective and adjusted it so that the company was no longer targeting the same shoppers. (Murphy has noticed a similar strategy from Amazon, specifically in the case of one client that sells swimwear.) It’s unpredictable, however.
“Every single one of our account teams is very aware to look for Temu and Shein entering their marketplace,” Drabicky said. “When they do, we very quickly alert our teams, alert our clients and figure out how we want to handle it.”
Sometimes it’s just a matter of waiting it out. But sometimes it can require spending more until the shark swims away.
