In the world of e-commerce, sustaining growth can be a challenging endeavor. This was evident in the recent acquisition of Wish, an online dollar store, by Singapore’s Qoo10. Wish, which was once valued at $14 billion, was acquired for a mere $173 million in cash, highlighting the struggles faced by discount retailers in the e-commerce space.
Founded in 2010 and based in San Francisco, Wish gained recognition for its ultracheap goods primarily sourced from Chinese manufacturers. Co-founder Peter Szulczewski took a gamble, believing that consumers would accept longer delivery times in exchange for rock-bottom prices. Wish’s marketing strategy, which heavily relied on Facebook and Instagram, resembles the recent advertising blitz by Temu, another discount retailer.
However, Wish found itself hemorrhaging money, leading to the ousting of Szulczewski as CEO. In November last year, the company announced that it was exploring strategic alternatives. This, coupled with its declining fortunes, led to its acquisition by Qoo10.
Competition from Chinese Discount Retailers
Qoo10 now inherits the battle against competition from Temu and Shein, both of which originated in China and have strong ties to the Chinese market. Additionally, TikTok, owned by China’s ByteDance, has also ventured into the e-commerce space with its online marketplace. These companies have demonstrated a willingness to invest heavily in attracting shoppers, often offering free shipping and large discounts, resulting in losses on the sales of cheap products.
While this aggressive ad spend has benefited platforms like Facebook’s Meta, it has negatively impacted other retailers. Etsy, a purveyor of handmade goods, acknowledged that Temu and Shein have eroded some of its market share. The Super Bowl spectacle further highlighted Temu’s marketing efforts, with the company running ads promoting giveaways worth $15 million.
Temu’s deep pockets can be attributed to its parent company, PDD Holdings. Launching in late 2022, Temu quickly gained traction and is estimated to have spent between $600 million and $1.4 billion on ads during the first nine months of 2023. Additionally, the company boasted an average of 70 million monthly active users during the same period, showcasing its impressive growth and popularity.
As Wish transitions into the hands of Qoo10, the new owner may face an uphill battle. Analysts from Morgan Stanley recently noted that the number of U.S. shoppers on the platform has been declining. This raises questions about whether Qoo10 can revive Wish’s former glory or if it will experience a similar fate.
The acquisition of Wish by Qoo10 sheds light on the challenges faced by discount retailers in the e-commerce industry. The need to consistently attract shoppers while maintaining profitability proves to be a difficult feat. As the market becomes increasingly competitive, it will be interesting to observe how these players navigate the evolving landscape and find ways to sustain growth in the future.
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