It can only be China: Creating an e-commerce platform less than 1 year old but making the whole SEA ‘tremble’, about to usurp Amazon thanks to ‘cheap but not oh’ products

Temu e-commerce platform attracted the attention of American consumers through an advertisement during the Super Bowl event in February. With the message of “shopping like a billionaire”, Temu’s strong hand spent money on advertising. Advertising is not a random marketing “trick”.

According to Data.ai, Temu had 10.8 million downloads from December 11, 2022 to March 4, 2023, making it the most downloaded free app in the US, on both the App Store and Google Play. The platform’s monthly gross merchandise value (GMV) also surged from $3 million in September 2022 to $192 million in January 2023, according to YipitData.

Within a few months, Temu emerged as Shein’s biggest rival. Both Temu and Pinduoduo (a large Chinese e-commerce platform) are units of PDD Holdings – a corporation listed on Nasdaq, USA). Inheriting a lot of “gray matter” from Pinduoduo is probably the reason why Temu can operate so effectively.

Globally, inflation makes many e-commerce platforms difficult. Even Amazon has had to lay off 18,000 employees, close many warehouses and many unnecessary parts.

However, a gloomy market still has bright spots. In September 2022, when the US consumer price index rose to 8.2%, Temu appeared. The fact that it entered the market at the right time, at the right price has attracted a lot of attention from the market.

Thanks to Pinduoduo, Temu has a global network of merchants. “ This can help Temu sell many quality items at good prices all year round ,” a Temu representative told Tech in Asia.

Even when Temu was “just an idea from Pinduoduo management during a meeting last January”, it still grew rapidly because “Pinduoduo knows which factories and merchants can deliver at a discounted price. ‘, said Ed Sanders, a digital technology analyst.

In a recent Temu analysis report, Momentum Works emphasized that Pinduoduo has mastered the C2M (consumer-to-manufacturer) model, which is a consumer-oriented production model and a series of zero intermediaries, “with digital large volume of orders directly to manufacturers”.

This approach causes Pinduoduo to pick “sweet fruit”. After many years behind Alibaba, the platform will record 788 million annual active users by 2021, surpassing even heavyweights.

” Cheap is usually mine, but Temu clearly doesn’t want to follow in the footsteps of Wish – the American company that was once known as the “USD store on the Internet “. According to a New York Times report, Wish chose to grow at all costs, regardless of quality. This caused the number of users and its stock price to quickly plummet, currently trading at only $ 0.5 per share.

This is different from Temu – the platform has a “strict product quality control process”. It reserves the right to end any business relationship with non-compliant sellers.

Ed Sanders describes Temu as a regulated e-commerce platform. This means that it spends a lot of effort to control the quality of its inputs to satisfy American consumers.

The quality of goods on Temu is still considered “pretty good” in the price range. “ I think that’s the position they want. If there are too many low-quality products, users will soon lose confidence ,” said Ed Sander.

Over the past few years, Amazon has terminated relationships with 50,000 sellers by 2021 because of the problem of virtual reviews. For Chinese sellers, accordingly, consider Temu as an alternative.

In February this year, Temu officially expanded to Canada. It is also expected to launch in Australia and New Zealand soon, and then to the European market.

According to Allison Malmsten, Research Director at Daxue Consulting, it is not excluded that Temu will come to Southeast Asia, but the level of competition is not high because this market already has many low-priced products.

The question is how long can Temu maintain the low price strategy?

In the business report in November 2022, Mr. Chen Lei, CEO and chairman of Pinduoduo, only mentioned Temu as “an international e-commerce platform”. He acknowledges that global expansion “will be challenging” and that the company “will persevere with this ambition”.

According to Momentum Works, Temu’s loss in the first year of operation could reach 720 million USD. Pinduoduo’s earnings report for the third quarter of 2022 is a bright spot, but that doesn’t mean Temu can continue to splurge on marketing expenses. To attract and retain price-conscious consumers, the platform has implemented a number of attractive services and encourages users to refer friends to download the app.

” Temu rose to the top of both US app store charts in November. This position has remained strong to this day ,” said Abe Yousef, adding that Temu was particularly successful in collecting sales. Attract new users by offering extremely low prices and lightning deals, sometimes up to 89% off on some items.”

By: Tech in Asia, CNN