Temu is an online marketplace operated by the Chinese e-commerce company PDD Holdings. It offers heavily discounted consumer goods which are mostly shipped to consumers directly from China, and first launched in the US in late 2022, Temu has become known for its cheap products, incessant marketing and a gamified shopping experience. Temu is available in almost 50 countries around the world, but Whale Co Inc. (the name the company is also known by) lists its location in Ireland – a popular base for international tech companies.
Despite this, many of the goods sold on Temu are made and shipped from China.
The retail app and website sells a broad range of goods, from clothing and craft supplies to power tools and electronics. But it's perhaps best known for its small everyday household products and novelty items.
Why is Temu so cheap?
Temu's low prices become obvious after spending just seconds on its app or website.
On a recent visit, we found a men's belt being sold for less than $6.89 (a similar item on other sites cost at least $20) and a suitcase for $43.79 (similar products were often around $100 elsewhere). Plastered across Temu's pages are promotions of constant sales with discounts reaching highs of over 90%, and promises of free shipping.
According to Temu, its low prices are possible because it connects consumers directly with the factories that produce its goods, many of which are in China, allowing it to cut out "multiple middlemen" and deliver "wholesale" prices to consumers. The company says this process constitutes a "teaming up" (hence the name Temu), which pushes prices down.
Temu, which is catching more established players in the US, like Amazon and Walmart – and already is 20% bigger than Shein in the US – gets 42% of its business from the US, Mexico and Chile. But it is turning its attention to Europe, amid Washington data concerns and worries over the impact on US businesses, and wants to do so rapidly, said the WSJ.
Temu has spent billions acquiring a US market. Its parent, PDD, paid Meta nearly $2bn for ads last year and was also a top advertiser on Google, said WSJ. But it has redirected its ad spend to Europe and other markets – including Mexico, from where it can deliver parcels to US consumers.
There are also worries that Temu’s business model – it does its sorting in China then sends direct to the consumer – has an unfair tax advantage as that system allows it to make full use of the US de minimis tax exemption, now also also being reviewed by US lawmakers. Rival Shein, meanwhile, has decided to continue its focus on the US, and has been attempting to ensure compliance. It has even tried to join the National Retail Federation.Increased scrutiny of China’s ecommerce platforms could also lead to changes in the air cargo industry.
They ship directly without having to establish infrastructure in countries, like Amazon would do, setting up warehouses, etc. They are shipping directly from source to final buyer. It takes a bit longer, but for the prices that are being charged I think people are prepared to wait.