Temu’s Vietnam pivot could trigger direct showdown with Shopee

Cross-border shopping platform Temu is feeling the heat in Vietnam.

Regulatory hurdles, backlash from local sellers, and higher taxes are all bogging down the Chinese ecommerce firm. It may also need to pivot from its direct-from-China model for its supply chain.

One of its options is to adopt the marketplace model that it is rolling out in its largest market, the US, which could put the company squarely against Southeast Asia’s leading ecommerce player, Shopee.

Image credit: Timmy Loen

The Vietnamese government suspended Temu’s operations in the country over registration issues a mere month after its debut in October. This comes as the country aims to step up scrutiny of the local operators of foreign ecommerce platforms.

Even so, the pressure is coming from both Vietnamese businesses as well as the authorities, who are concerned about the potential sale of counterfeit items in the country, the third-largest ecommerce market in Southeast Asia.

The heightened regulatory oversight has also hit Shein, a Chinese ecommerce platform for fast fashion, which also temporarily halted the Vietnamese edition of its website earlier this month.

The government is considering removing tax exemptions for low-value imported goods that are bought mainly through online platforms as well.

No to a fully cross-border model

“For Temu to operate effectively and long-term in this market, it probably can’t do everything cross-border,” says Jianggan Li, chief executive at Singapore-based research firm Momentum Works.

He suggests that the Chinese firm may need to operate as a local marketplace, at least in the medium term, just like it does for its other major markets such as the US, Europe, Japan, and Korea.

This would entail onboarding merchants registered in Vietnam to sell their goods on its platform, complementing its existing pool of approximately 300,000 sellers. Most of these merchants are based in China, according to estimates by ecommerce intelligence firm Marketplace Pulse.

The model could put Temu in a tighter race with Shopee, which held a commanding 61% market share in Vietnam last year.

According to the website analytics tool Similarweb, Temu’s website received about 5 million visits from Vietnam in the past two months, representing 0.37% of its total traffic. This was slightly lower than its performance in Thailand and the Philippines, which recorded over 5.6 million and 6.7 million visits, respectively, in the same period.

Warehouses in China

M&A play

Direct competition with Shopee