Hours after Super Bowl viewers were inundated with ads from discount retailer Temu, an online dollar store that used to have similar buzz was acquired at a price that shows the difficulty of sustaining growth in e-commerce. Wish, once valued at $14 billion during its IPO in 2020, shocked the industry on Monday by announcing its acquisition by Singapore’s Qoo10 for just $173 million in cash, marking a 99% drop from its peak price. This acquisition highlights the challenges faced by e-commerce companies in maintaining long-term success.
Founded in 2010 and based in San Francisco, Wish gained popularity by offering ultra-cheap goods primarily sourced from Chinese manufacturers. Co-founder Peter Szulczewski’s strategy hinged on customers accepting extended delivery times in exchange for highly affordable prices. This approach appealed to cost-conscious shoppers, propelling Wish’s initial growth.
The recent marketing blitz by Temu, which dominated Facebook and Instagram in the lead-up to the Super Bowl, mirrors the promotional efforts employed by Wish in the past. Wish heavily invested in Facebook’s platforms to attract shoppers and even secured a partnership to display its logo on Los Angeles Lakers jerseys. However, these aggressive marketing tactics came at a cost. Wish faced significant financial losses, prompting the removal of Szulczewski as CEO and subsequent exploration of strategic alternatives.
With the acquisition of Wish, Qoo10 now enters the competitive e-commerce landscape alongside Temu and Shein, both of which originated in China and maintain strong ties to the Chinese market. Additionally, China’s ByteDance, the owner of TikTok, introduced an online marketplace in the United States last year. These companies have shown a willingness to invest heavily in attracting customers through various incentives, such as free shipping and substantial discounts. While their advertising spend may boost the revenue of platforms like Facebook’s Meta, it has posed challenges for other retailers, including Etsy, whose market share has slightly eroded due to the presence of Temu and Shein.
During and shortly after the Super Bowl, Temu launched several ads under the theme “shop like a billionaire” and enticed viewers with the promise of $15 million in giveaways. Reflecting the continued trend of exorbitant ad spending during the Super Bowl, multiple brands paid approximately $7 million for a 30-second ad slot. Stifel analysts estimated that Temu allocated between $600 million and $1.4 billion on advertising over the first nine months of 2023. Moreover, Temu boasted an average of 70 million monthly active users during the same period. The substantial financial resources of Temu’s parent company, PDD Holdings, have contributed to its aggressive marketing strategy.
Founded in 2012, Shein aggressively pursued social media advertising in recent years. As the hype surrounding Wish fades, Qoo10, as the new owner, may join the race to capture the attention and wallets of online shoppers. Morgan Stanley analysts noted a decline in the number of U.S. customers using Wish, with increasing competition and saturation in the market playing a significant role.
Wish’s acquisition by Qoo10 serves as a reminder of the challenges faced by e-commerce companies in sustaining growth. Companies like Wish, Temu, Shein, and TikTok have utilized aggressive marketing tactics and considerable ad spend to attract customers, but maintaining profitability while offering low-priced products has proven to be a difficult balancing act. As the online retail landscape continues to evolve, companies will need to adapt and differentiate themselves to navigate the increasingly competitive e-commerce market.