For many adult Americans, the ad breaks during this year’s Super Bowl may have been the first time they had heard of online marketplace Temu and its call for consumers to “shop like a billionaire.” But for millions of teens, Temu has already been a buzzword for some time.
Since its launch in the U.S. last September, the Boston-based sister company to Chinese retail platform Pinduoduo has rocketed in popularity, becoming the second-most downloaded marketplace app in the U.S. last year, lagging only Amazon. Thanks to a multi-billion dollar campaign introduced last autumn, it is now almost impossible for the millions of Americans spending time online to go a day without encountering some kind of marketing from Temu.
By placing customers in direct contact with product manufacturers — in its words, “removing layers of middlemen and breaking the confines of geography” — and offering innovative ways to shop, Temu has mirrored the success of other Chinese-owned companies such as Shein and TikTok in gaining a widespread international following.
As videos pile up online from social media influencers and other customers opening their distinctive orange Temu bags and declaring “It’s not a scam!”, a broader question remains: Is Temu here to stay?
This week The Wire looks at Temu: the story so far, how it has managed to hook U.S. consumers, and what challenges it might face as it looks to expand further.
THE TEMU TIMELINE
Temu is a subsidiary of PDD Holdings Inc., which also owns Pinduoduo: Temu’s website describes the two as “sister companies that both leverage on PDD Holdings’ global network of sourcing, logistics, and fulfillment capabilities.” In practice, that means Temu is able to tap into the roughly 11 million suppliers that already operate through Pinduoduo.
But while Pinduoduo is focused on selling products to the Chinese consumer market, Temu is targeting the U.S. and beyond: it recently launched its services in Canada, Australia, New Zealand, and the U.K., and is planning further expansion into Europe and Latin America. The site’s launch last autumn came after PDD had sent staff to the U.S. and Europe to gather information on consumer preferences earlier in the year. As with Shein, Temu’s range includes plenty of fashion items, but shoppers also head to its site for products from electronics to pet food.
Temu’s ‘consumer-to-manufacturer’ model helps to keep prices low for shoppers, a huge part of its appeal amid a sharp rise in the cost of living globally.
GAME ON
Another key aspect to Temu’s success has been its ability to entice social media influencers to promote the site on platforms such as TikTok and YouTube. Temu operates an affiliate program, offering budding influencers up to $20,000 a month to promote its products and services, allowing them to provide followers with discount and referral codes. For influencers with an established social media following, Temu has a seeding program which gives them free items to review and promote.
Temu’s use of online games to draw in consumers is where it really stands out. Users can play its games — from spinning wheels, to ones that involve raising fish, to others that rely on physically shaking phones — to generate rewards and discounts that they then can apply to their purchases on Temu. While this sort of ‘gamification’ of shopping has been popular elsewhere before, it is relatively new in the U.S.
Source: screencaptures from Temu’s mobile application
The biggest reason for the success of apps like Temu is that they take a radically different approach to shopping, showing customers a highly personalized feed that keeps them entertained, says Jonathan Reeve, an online retail strategy and e-commerce expert.
“What’s amazing about Temu and these other apps is that they have taken the Chinese way of shopping to other markets – and consumers everywhere seem to love it,” says Reeve. “It’s online shopping as entertainment and it seems to be working.”
ONE STAR
The rise of Temu, as well as Shein, has shaken up the U.S.’s online shopping scene long dominated by Amazon, eBay and Walmart. But amidst rising U.S.-China economic tensions, and increasing scrutiny towards Chinese owned companies, Temu is facing uncertainty on several fronts.
Firstly, it’s unclear how profitable Temu is. PDD Holdings Inc.’s recent fourth quarter earnings call described Temu’s impact as ‘relatively small.’ Rui Ma, an investor and Chinese tech industry analyst, suggests that the company “is not profitable at the moment,” and is instead choosing to “focus on growth for now, as much of the savings for [Temu’s] model will come from economies of scale.”
Secondly, with more eyes on Temu, there may be more scrutiny over the origins of the products sold on the platform. The company has to date avoided any major controversy over the supply chains of the merchants that advertise on its site, despite heightened U.S. and international scrutiny of items produced using forced labor in Xinjiang.
Virginia Newman, a lawyer with Miller and Chevalier, a Washington D.C. law firm that advises companies on how to comply with the Uyghur Forced Labor Prevention Act, suggests that Temu could be avoiding inspections because their shipments fall below the level that attracts scrutiny from U.S. customs.
“Some companies have a business model of importing smaller, low-value packages that don’t necessarily trigger the same types of reviews that we are seeing with the larger shipments that are being detained,” she says. “And for the most part, those companies therefore aren’t experiencing enforcement.”
Newman suggests that if credible allegations were brought against a company such as Temu, Customs and Border Protection could move “pretty quickly,” particularly given that “there’s so much congressional focus on this area right now.”
Ultimately though, it might take a major shift in public opinion for things to change significantly. “Until customers demand or show that they’re not willing to buy products without having some visibility into where they’re coming from and the environmental and labor practices related to that production, small-value importers may not be incentivized to bolster their supply chain due diligence programs in the ways that many other companies are right now,” Newman says.
Ella Apostoaie is an editorial associate at The Wire. She is a 2021 graduate of Wellesley College, where she majored in East Asian Studies, with a primary focus on Chinese history and politics. Ella grew up in Norwich, England and is now based in the Boston area.
