Temu, a rival of Shein and Amazon, is revolutionizing online commerce
The new Chinese giant is already positioned as the most downloaded app in several countries, with the firm already expecting global sales worth $13 billion annually. Users are torn between doubts and the low prices
Dozens of orders await in a small food store in Madrid. The shop has largely been converted into a collection point for the e-commerce giants. The orange color stands out, as well as a ribbon that makes the name of the brand clear: Temu. “I don’t know what it is, but [these packages] keep coming,” the clerk shrugs. He wonders if they’re meant to be gifts, or if they’re just really good deals.
This employee may be one of the few people who doesn’t know what this new Chinese e-commerce giant is all about. Temu has already become the most downloaded app in several countries, leaving behind other heavyweights in the sector, such as Shein or Amazon, according to data.ai.
Just by entering the website or app, the reasons behind this rapid consolidation are more than clear. Discounts reach up to 97% of the product value, while returns are free. There’s a big difference with the rest of the e-commerce platforms. According to a report by Morgan Stanley, prices for a number of products on Temu — such as vacuum cleaners or makeup kits — are up to 70% cheaper than the equivalent items on Amazon.
“At a time when the ongoing cost of living crisis demands more conscious purchases, Temu’s kitchen utensils and electronics — with prices between $5 and $10 — are very attractive,” explains Fátima Linares, an analyst at Euromonitor International, in an interview with Bloomberg. This is of particular relevance to young people: 45% of millennials and 35% of centennials point to high prices as their main concern, according to data from a recent study by Deloitte.
Added to these deals is an aggressive promotional campaign, with a large number of Temu ads popping up on social media. It’s not just about cheap prices: advertisements point out that, if you register for Temu or get your friends to sign up, you can obtain free products. To encourage downloading the application, Temu has even begun to launch new games from time to time, which offer various prizes, such as credits to shop on the platform, gifts sent to users’ homes and balances transferred to PayPal accounts. The non-delivery of these gifts appears to be the main complaint of Temu users on social media.
In September, the combination of this fast-paced strategy saw Temu’s U.S. sales surpass those of fast-fashion retail rival Shein. In total, Temu’s global sales could exceed $13 billion in 2023, according to the global asset management firm AllianceBernstein. In comparison, Shein reached sales of $22.7 billion in 2022.
On the heels of the giant
Despite the comparisons, Temu is far from reaching the same popularity as other powerful stores of Asian origin, such as Shein and AliExpress. Furthermore, not all news is positive. The rise of Temu has been associated with another term: scam. The search for this term in relation to the site has increased by 200% in recent weeks.
User doubts are combined with other complaints about the firm’s customer service. The site only offers a messaging option in case of questions or inconveniences, while there is no telephone contact option. For those who are more adventurous, the platform notes that its offices are in Dublin… although it clarifies that in-person returns are not accepted.
Behind the bright colors and online advertising campaign is the company WhaleCo, which is registered in the state of Massachusetts. The company is associated with the Chinese giant PDD Holdings, which controls the online retailer Pinduoduo, a subsidiary that mostly deals in selling agricultural products.
PDD is listed on the New York Stock Exchange, where Temu’s success hasn’t yet materialized. The company’s shares have appreciated 21% so far this year, compared to 58% for Amazon. Investor distrust is pinned on the high price of this boom: Temu could experience an operating loss of $3.65 billion this year.
However, the shortcomings of the parent company have little to do with the products that are crammed into warehouses, post offices and collection points. The products arrive directly from Chinese manufacturers, which allows users to skip the middleman and reduce costs. Of course, there’s a logistical problem: some of the firms that Temu uses can take up to six weeks to deliver, although the firm highlights that most packages arrive “between 5 and 14 business days.” Those interested in doing their Christmas shopping on Temu should start filling their digital carts right about now.
Shipping isn’t the only point of tension around this company. The U.S. Congress has warned of an “extremely high risk” that products sold through Temu are made with forced labor. “American consumers should be aware that there is an extremely high risk that Temu supply chains are contaminated with forced labor,” a recent report notes.
Sources in the online retail sector all seem to have one question: will Temu be able to retain its buyers? At the moment, comments on social media raise doubts about the company’s long-term viability. “Let’s see when [the product] arrives, what the quality is like… I don’t think I’ll order again,” a user notes.
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