Temu - The Next Amazon?

July 31, 2023 (1y ago)

Temu is one of the fastest-growing online marketplaces in the world, taking the U.S. by storm with its incredibly low prices on a massive range of products. But how does Temu achieve such consistent low prices, in comparison to its competitors, such as Amazon? And is Temu’s business model really sustainable for the long term, or is the company doomed to fail?

Temu, founded in July 2022, is the Boston-based American spinoff of the Chinese e-commerce platform Pinduoduo. Temu offers heavily discounted goods that are mostly shipped directly from manufacturers in China to consumers in various countries. Temu’s business model, called “Next-Gen Manufacturing”, relies on user data to directly pair users to manufacturers. As a result, Temu is able to drastically cut down shipping and manufacturing prices.

However, although the company’s approach may seem revolutionary, Temu is losing millions of dollars in order to offer such low prices to its customers. According to China Merchant Securities, Temu is losing between $588 million to $954 million per year. This amounts to an average loss of $30 per product sold, due to the fact that the company provides massive sitewide discounts as an incentive to attract more American customers.

In addition to this, according to the Better Business Review, Temu has also received numerous complaints from customers who have experienced issues with the quality, delivery, and customer service of the products they ordered from the site. Temu currently has a C rating on the BBB, and an average customer rating of 1.4 stars out of 5, although only from 20 reviews. Some have accused Temu of being a scam, and have reported undelivered packages, unknown charges, wrong orders, and bad customer service. On the other hand, many people have enjoyed shopping on Temu and have praised its service, shipping, and wide catalog of products, and have compared Temu to other popular online retailers like Amazon and Wish. According to Temu’s website (temu.com), they have over 100 million users worldwide and a 98% customer satisfaction rate.

In conclusion, while Temu's innovative approach to e-commerce and its incredibly low prices have certainly captured consumers' attention, there are clear issues with their business model given the substantial financial losses they have. However, it remains to be seen whether Temu will succeed in the long term.