Chinese e-commerce giants like SHEIN and Temu are ramping up their investment in growth, triggering regulatory inquiries about their operations, complicating the air cargo industry and, if you’re an advertiser or a brand, driving CPA costs up globally in major platforms in what some are calling a “CPA crisis”.
As these brands pour resources into paid advertising, a highly competitive environment emerges. On platforms like Google Ads and Facebook, it becomes more difficult for other players to compete and be profitable. This is particularly impactful during a time of softer spending and declining economic sentiment, where e-commerce brands are relying on sales and promotions to meet their targets.
We may see regulations designed to address the growth of these e-commerce platforms — especially in the current context of a trade war between the US and China — but we cannot know if this will happen, when it might occur or what its scope would be.
So, what can brands and digital advertisers do to reduce their exposure to paid performance advertising in a fairly saturated space?
Invest in your brand
A brand’s first instinct may be to reduce investment in brand building and allocate its entire budget to performance media. The main issue with this approach is that cutting off brand investment has long-term repercussions on brand equity, profitability, consumer trust and employee engagement.
Instead of going head-to-head with retail giants in paid advertising, brands should capitalise on their strengths. Brands will be more successful when they can balance the need for short-term revenue and cash flow with longer-term goals like brand building and awareness.
How? By investing in alternative channels, platforms and creatives.
Invest in alternative channels
The Chinese ecosystem doesn’t rely on SEO and Google as much as the West does, resulting in a profound lack of expertise in organic search.
SHEIN and Temu still rely on paid traffic for most of their acquisition; our analysis shows that only 15% of Temu’s organic search traffic and 9% of SHEIN’s comes from non-branded keywords. This shouldn’t be the case. Their low-price policy, high authority and massive long-tail offering should position both players as potential winners in the SEO space.
Fortunately for other players, their lack of sophistication in technical SEO, category optimisation, content localisation and prioritisation make both sites more likely to lose the non-branded traffic they currently have than become the SEO behemoths they could otherwise be.
This means that smaller brands have an opportunity. While paid advertising struggles with rising costs due to competition, SEO remains cost-effective, giving it the potential to be a much higher return channel.
Also Read: Sushi Sushi Joins Forces with Untangld to Drive Customer-Centric Growth Strategy
Invest in alternative platforms
Meta and Google are SHEIN and Temu’s most used platforms — the rest of the market is less crowded. This opens the door to exploring platforms with lower competition and lower CPAs, such as Bing, DuckDuckGo, Complexity, Reddit, Pinterest and Snapchat.
TikTok still offers some benefits, as video-heavy creatives and influencer engagement are not yet areas where these new challengers shine. This may create opportunities if you play to your strengths and capabilities.
Invest in alternative creatives
Temu and SHEIN rely heavily on programmatically generated designs for their creatives. In 2023, SHEIN used 50,000 unimpressive creatives at the cost of their brand image. Most people perceive SHEIN as a price-oriented brand with cheap products and ads.
In recent years, video ads have become some of the best-performing content types across both organic and paid ads. By creating curated videos focusing on your products, you will differentiate your brand from challengers who cannot do that at the scale they need.
So, to reduce their exposure to paid performance advertising in a cluttered market, brands and digital advertisers must focus on the brand and product story, told through premium, product-centered ads. Double down on those formats (video), platforms (anything but Meta and Facebook) and channels (organic search and social) where investment is less aggressive. In other words: outsmart them!
