Interviews, insight & analysis on digital media & marketing

How Shein and Temu’s algorithms are transforming the world of ecommerce

by Craig Smith, UK Country Manager at ecommerce technology platform, Scayle

We’re in the midst of an ecommerce revolution, with Chinese ecommerce giants Shein and Temu leading the charge – and it’s making competitors nervous. The two brands have leveraged aggressive marketing strategies to achieve monumental sales figures.

Temu, which only launched in September 2022, achieved a gross merchandise volume of $635 million in May 2023. Meanwhile, Shein accounts for one fifth of the global fast fashion market, with net sales more than doubling from $10.4 billion in 2021 to a whopping $26.2 billion in 2022

This disruption isn’t paying off for everyone, though. Together, Shein and Temu are rapidly increasing air-freight costs, arousing suspicions of forced labour and producing millions of tonnes of CO2 a year to create and meet demand for their low-cost offerings. So why are both companies booming, when their Gen Z target audience is so focused on sustainable consumerism

The answer lies in algorithms and how they can be influenced, both internally and externally, to create effective and engaging campaigns that cannot be ignored. By observing their business practices – the good, the bad and the ugly – brands can learn to equip themselves to compete with these ecommerce monoliths, without risking their reputation in the process.  

Data is king

What sets Shein and Temu apart from other online retailers is that their entire business models are centred around data capture, which ultimately enables them to provide a unique, personalised shopping experience for every single customer that uses their app or website. 

Once a user has signed up and begins to engage with the app or website, the algorithm automatically presents more personalised offerings based on their behaviour and similar behaviour from other users. Data is gathered across all channels – from the app and desktop websites to advertising and email campaigns. 

The Shein and Temu apps are constantly adjusting their user interface to keep consumers engaged, offering fun, rewarding experiences such as outfit contests and minigames to punctuate the product feeds, elevating their apps from an online shopping stroll to a holistic experience. Meanwhile Shein incentivises users to return frequently to the app to win bonus points, which can be used to receive basket discounts of up to 70%.  

Shein and Temu use real-time data to continually adjust their business models at large, maximising sales and optimising margins while reducing manufacturing waste. Temu has demonstrated this by developing their reverse-manufacturing model, aligning customer demand with the amount of products their manufacturers produce in real time. Shein acts in a similar way, producing each item in small numbers to meet a dizzying level of demand without sacrificing profit. While effective, this model (and the fast fashion renaissance it has incurred) has brought about significant environmental concerns which businesses should seriously consider before emulating. 

Gamifying the customer experience

As demonstrated by popular social apps like TikTok and Instagram, consumers now prefer to view content in an infinite scroll. This is advantageous for businesses, as it provides larger quantities of user data than paginated layouts while reducing the cost of interaction

Shein and Temu have replicated this ‘infinite scroll’ on their apps and websites, making the experience more addictive for customers. Both brands’ mobile apps are inundated with multiple product feeds: Shein’s “New” page offers an endless stream of recommendations, with additional interfaces for new products that drop as the user is scrolling. Similarly, the Temu app provides multiple unique feeds that categorise deals, seasonal products and new arrivals, which can be completely refreshed with a single swipe. The more products the user sees and engages with, the more data they acquire to inform the algorithm and optimise sales. 

Temu has also created free in-app games, consistently rewarding users with high-value coupon bundles. This multi-pronged gamification approach establishes even more channels for direct marketing efforts that can resolve abandoned carts and increase overall spend, effectively creating a self-sustaining algorithmic feedback loop that benefits the business and its customers.

Influencing external algorithms 

Temu and Shein invest heavily in influencers in exchange for organic content that sway the algorithms of popular platforms such as TikTok and YouTube.

Temu additionally utilises an aggressive digital marketing strategy, spending up to £500M per quarter on digital ads that will generate new app users, while the organic content targets existing customers to ensure continued engagement. With this holistic approach, Temu ensures that popular platforms host a range of promotional content, both organic and paid, on its algorithms for maximum pickup. 

Shein invests more in social commerce than it does digital marketing. Its strategy of leveraging a wide variety of macro and micro influencers has led to the successful implementation of trends such as the ‘Shein Haul’. The ‘haul’ has existed since 2008, but Shein’s digital strategy took the trend to new heights, with the sheinhaul hashtag amassing over 2.5 billion views on TikTok in 2021. As of 2023, over 13,000 influencers are still jumping on the bandwagon, a testament to the durability of Shein’s brand. 

It’s undeniable that Shein and Temu’s aggressive marketing strategies achieve results, and they can be replicated organically, even without millions of dollars to throw at Super Bowl ad spots. If nothing else, brands should be investing in a multi-pronged algorithmic approach to gather valuable insights, attract new customers and maximise brand awareness and loyalty. Get it right, and it will generate a self-sustaining cycle.