The explosive progress of Temu, the U.S. arm of Chinese language e-commerce big Pinduoduo , might spell bother for some main retailers, based on Financial institution of America. Temu provides merchandise immediately from producers worldwide, permitting it to maintain prices and costs low. It generated gross sales of round $12 billion in 2022, equal to 12% of Goal’s gross sales, based on the Wall Avenue financial institution’s evaluation of bank card information. Simply six months in the past, Temu’s gross sales have been solely 4% of Goal’s. Customers have welcomed Temu’s fast progress, however opponents are more likely to lose market share and will see smaller earnings within the close to future. “Retailers focusing on younger adults at low worth factors are significantly susceptible,” mentioned Financial institution of America’s analysts, led by Thomas Thornton, in a word to shoppers on Nov. 17. The analysts say Temu’s progress has been fueled by aggressive promoting utilizing influencers, social media and search, with day by day lively customers reaching 40% of Amazon’s degree. Retailers in danger The BofA analysts say retailers competing on worth alone are significantly uncovered to Temu’s disruption. They counsel Outdated Navy and Kohl ‘s personal manufacturers are “prone to being out-priced.” Vogue-oriented firms like Revolve , City Outfitters , and American Eagle may be undercut on worth, the financial institution mentioned. European retailers aren’t resistant to Temu’s disruption both. Financial institution of America believes on-line vogue retailers like Boohoo and Asos are susceptible to dropping their market share, whereas H & M is extra uncovered than Zara mother or father Inditex , which may leverage provide chain pace and better costs. Regardless of the broad dangers to Western retailers, Financial institution of America cautioned that Temu’s fast enlargement will not be sustainable in the long run if the urge for food for losses and advert spending by its mother or father wanes. Nonetheless, Pinduoduo is predicted to develop advert spending once more in 2024, which might assist Temu keep away from slowing down within the medium time period, the analysts mentioned. Insulated retailers In the USA, the analysts counsel Walmart and Goal have benefits that ought to insulate them. These embody long-standing client belief, notion of product high quality, and ease of entry. Financial institution of America additionally thinks 5 Beneath might be resilient as its worth proposition goes past worth. Similar to the grocers, 5 Beneath’s in-store expertise creates urgency and drives repeat visits in a manner on-line purchasing doesn’t, the analysts mentioned. Individually, analysts at UBS funding financial institution additionally see Temu’s progress in an analogous vein. “Total, we expect the danger that Temu will considerably disrupt many of those retailers is restricted,” the Swiss financial institution’s analysts wrote in a word to shoppers on Nov. 20. UBS mentioned Costco , ULTA , House Depot , Lowe ‘s, and auto half retailers have been the “most insulated” from the rise of the Chinese language e-commerce app. — CNBC’s Michael Bloom contributed to this report.