Competing with Temu & Shein: How Digital and Physical Retailers Can Win the Market & Marketing Wars Against These Giants

As a retailer, you’ve likely felt the impact of Temu and Shein. Ultra-low prices, fast fashion, and, most importantly, massive marketing spending make competition increasingly tough.

Temu, for example, dropped $2 billion on Meta ads in 2023 — making up 10% of Meta’s revenue — while Shein was the 16th biggest U.S. advertiser by spending the same year. That’s an unbelievable level of visibility, so it’s no surprise they’re dominating.

Meanwhile, traditional retailers, both online and brick-and-mortar, are scratching their heads: how to compete with Temu and Shein? In this post, we’ll explain how the right, affordable marketing strategy and tech can help you fight back.

The Challenge: How Temu & Shein Win on Pricing & Marketing

Before learning how to compete and win against retail giants, let’s see why Temu and Shein are giving everyone else a serious run for their money. Here are several challenges they pose to retailers:

AI-Powered Dynamic Pricing

Ever noticed how Temu and Shein prices seem to change daily, always offering irresistible deals? For example, you linger on a product, and the price drops down a bit. Or when a competitor lowers the price, Temu and Shein react instantly. That’s no accident.

These platforms use real-time AI pricing models, which adjust product prices based on demand, competitor rates, and buyer behavior. That’s a huge advantage over traditional retailers who often rely on manual or fixed pricing — being sluggish in responding to market shifts.

Consider, for instance, limited-time deals on Temu. This aggressive pricing strategy works perfectly well for winning over price-sensitive customers. Other giants like Amazon and Zalando leverage AI-driven pricing as well, but not as aggressively as Temu and Shein.

Hyper-Personalized AI-Driven Marketing

Traditional segmentation? That’s old-school compared to what Temu and Shein are doing. They track every move their customers make: every click, every scroll, every second they spend looking at a product. And then, they use AI to create hyper-personalized marketing campaigns.

Take Shein’s recommendation engine, for example. It dynamically updates homepage offers and email promotions based on individual user behavior. If you’re wondering why that dress you checked out once keeps following you around — that’s AI at work. Shein makes sure to put exactly what you want in front of you at the right time.

Temu took their digital marketing even further. The platform’s recommendation engine incorporates trend prediction, social proof, and psychographic data to offer exactly what shoppers seek. The impact? An astonishingly accurate prediction rate of 85%, far beyond the industry average of 65–70%.

So why does traditional segmentation-based marketing fall short? Because it groups customers into broad categories, while AI-driven marketing treats each shopper as an individual.

“Ultra-Fast” Supply Chain Model

Speed is everything, and Shein has mastered it. Their real-time demand model allows them to manufacture only what’s trending, drastically reducing unsold inventory. Shein’s turnaround time for new designs is a staggering 7–10 days, a stark contrast to the months-long cycles of traditional retailers.

A factory manager in Panyu, southern China — where much of Shein’s production happens — described the intense pace: “It’s never easy dealing with Shein orders. We have to finish within seven days, which means we often have to work overtime.”

The Real Cost Advantage: Cheap Labor & Factory Control

One of the less glamorous aspects of Temu and Shein’s success is how they manage to maintain ultra-low prices. Handling production primarily in China, these companies benefit from lower labor costs than the U.S. and Europe. For example, production managers in the States earn over $110K yearly, while it’s below $40K in China. However, this cost advantage often comes with significant ethical concerns.

Investigations have revealed troubling labor practices within Shein’s supply chain. Cases of excessive working hours, with employees working up to 75-hour weeks, and child labor have been documented. And Temu? There are concerns that customers could be buying items made by forced labor.

It’s natural that in such circumstances, Western retailers simply cannot match Shein and Temu’s low prices. They have to follow stricter labor laws and ethical standards and deal with higher operational costs — meaning they can’t just slash prices without compromising their values.

How U.S. & European Retailers Can Beat Temu & Shein

Unethical practices, aggressive marketing, and suspiciously low prices might be Shein and Temu’s strategy, but that doesn’t mean you have to follow it. So, how to compete with Shein and Temu — while staying ethical and sustainable? Here are a few worthy ideas:

Quality Over Quantity

Let’s be honest: Temu and Shein are promoters of the “throwaway culture.” Cheap, disposable products, high return rates, and zero responsibility for sustainability or labor protections. For example, the 2024 Ethical Fashion Report revealed that Shein scored 20 out of 100, while Temu received a score of zero — both companies fell short in addressing labor issues.

Clearly, it’s a race to the bottom, and it’s not a race U.S. and European brands should be running. Instead, double down on quality, durability, and sustainable products. Educate your customers on why it matters: for the internal economy, for the climate, for future generations, and for animal welfare. Tell the story behind your products. Build a brand that stands for something more than just cheap thrills.

Example: Patagonia is a prime example for other retail giants. They’ve built a loyal customer base by emphasizing quality and environmental responsibility. In fact, over 90% of their products are made in a Fair Trade Certified factory.

Faster & More Reliable Shipping — Local Warehousing

One of Temu and Shein’s biggest weaknesses? Those painfully long delivery times of 8–15+ days, sometimes even more. Here, U.S. and European retailers have a significant advantage — using regional warehouses and micro-fulfillment centers to offer same-day or next-day shipping.

Another way how digital retailers can win the market in the U.S. and Europe is by leveraging AI-powered order routing and automated warehousing software. With these solutions, they can process and deliver orders as efficiently as possible.

Example: Zara uses local distribution hubs to speed up deliveries. This lets the retailer restock stores twice a week and fulfill online orders promptly.

Ethical Factor

As we already said, sustainability and fair labor practices are decent ways how to compete in a saturated market — and excessive overtime is a major red flag. Case in point: workers at Temu’s parent company, PDD Holdings, have been reported to log 380 hours per month, far exceeding even China’s legal limits.

Customers are paying attention to such cases, and that’s where fair wages and ethical production can set you apart. Promoting safe working conditions and transparent supply chains would help as well.

Example: Eileen Fisher, a clothing brand, has built its entire brand identity around ethical labor and eco-friendly sourcing. They demand their suppliers to follow strict standards for animal welfare, responsible land management, and full material traceability — from farm to finished product.

Customer Trust & Returns Policy

Temu and Shein’s return policies have been a source of frustration for many customers and, ultimately, lost trust. Complicated return processes and concerns about the ultimate destination of returned items add up to this dissatisfaction.

As a U.S. or European retailer, you can capitalize on this by offering hassle-free, no-questions-asked returns. It’s a simple way to build customer loyalty and demonstrate that you stand behind your products.

Another marketing strategy against big businesses you may apply involves handling mobile or web development of AI-powered product recommendations and sizing tools. These help reduce return rates while keeping policies customer-friendly.

Example: American Eagle, a popular clothing retailer, offers a generous return policy with no time limit for returns. The policy applies as long as customers have proof of purchase — their receipts.

Conclusion

Going head-to-head with Temu and Shein might seem impossible, but here’s the truth: you don’t need to outspend them — you just need to outsmart them.

Focus on quality over quantity, faster shipping, ethical production, and customer trust to offer something these retail giants can’t: long-term value. And the best part? With the right marketing strategy against giants, you can level the playing field.

So, in case you’re looking for cost-effective marketing strategies or retail software development consulting services, contact Integrio Systems. We can implement personalized recommendation engines, AI-driven pricing tools, and plenty of other inexpensive marketing ideas to help you compete — and win.