You’ve probably started seeing ads for the new e-commerce giant everywhere lately. Here’s what it’s all about.
I keep seeing ads for ‘Temu’ all of a sudden – what is it?
Temu is an online shop that sells things for very cheap. Owned by Pinduoduo, a massive Chinese e-commerce company and major competitor to AliExpress and Alibaba, it launched in the US in September last year, and became available in Australia and New Zealand in March. So far, it seems to be incredibly successful: if you search the brand on YouTube, videos with hundreds of thousands of views come up, many of them sponsored.
What does it sell?
Seemingly everything. The company’s website says that it “connects consumers with millions of sellers, manufacturers, and brands around the world to empower them to live their best life”. While the supposition that a good life is achieved through buying things is arguable, there is certainly a massive diversity of items available, from wedding dresses to drill bits to toothbrushes to whatever this is. It does sell some branded products, such as a range of technology that is verified to be direct from Chinese hardware manufacturer Lenovo.
Are the products good? Or even authentic?
Shein, which uses a similar model, has been accused of stealing designs (although others have stolen designs from them); Temu hasn’t had any high-profile intellectual property scandals but many listed items have tens of clones.
The interface of the website is a smorgasbord of online shopping purchase incentives: at the time of writing, a countdown timer declared that there were only a few hours left of unlimited free shipping (the counter reset multiple times when The Spinoff visited the site over a few days), little bubbles kept popping up declaring that someone else had bought an item, or that 12 other people had the item in their carts, and nearly everything seemed to be on sale. To be picked up by search terms each item is titled with a parade of descriptors, such as: Adjustable Portable Hooded Hair Dryer: Style, Color & Condition Your Hair with Our Bonnet Accessories.
How is Temu different to Wish, AliExpress and Shein?
All four companies have relatively similar business models, with ultra-fast turnaround, thousands of suppliers and no physical store presence. These products are largely sold by vendors who list their wares on the site, with the company itself mainly providing the software and the platform. In some cases, companies like Temu and Shein are selling the exact same product, which may mean that they work with some of the same manufacturers, although there’s very limited transparency and it’s hard to tell. To get a sense of how Shein operates, this article is a great primer; these other stores use similar techniques.
Is Pinduoduo (and Temu) a successful business?
The direct manufacturer-consumer model allows Temu to operate at massive scale, with low prices partially a result of having no middlemen making profit along the way. Additionally, with little to no information on where or how the products are manufactured, it’s hard to know just how little is being paid for the making of them (more on that later).
Like Shein, the company shares information about what products are trending with the suppliers, so if something goes viral on TikTok the manufacturer can immediately increase production. According to the company’s About page, it has 10,000 employees, 61 billion annual orders, and US$20b in cash to hand. It’s unclear whether this includes parent company Pinduoduo’s operations, as Temu has been operating for less than a year. Pinduoduo itself currently has a market cap of US$ 82b.
Will the items I ordered look anything like the product pictures? Or is this a dropshipping situation?
Temu claims to have effective shipping. While products ordered from Wish and Shein may arrive in separate parcels, Temu co-ordinates shipping between suppliers, and items in an order will usually show up together in distinctive orange packaging. The company offers a $5 credit for every day that a delivery is late and offers free returns for 90 days. Whether Temu or its manufacturer-vendors is responsible for the return isn’t clear, but returns are notoriously expensive for companies and often end up as waste. Reviews on the Temu site itself are nearly universally five stars, but on third party sites users complain of issues with quality and items not showing up.
Why is it suddenly so popular?
That would be because of the enormous advertising budget. Temu is all over Google Ads, and is also targeting people on social media, as well as working with influencers who are given money to shop on Temu then offered affiliate links when they post about it. The company also aired an advertisement during the Super Bowl in February, which used the tagline “shop like a billionaire.” Super Bowl ads cost at least USD $7m for 30 seconds.
A key aspect of Temu’s rising popularity is the social, gamified experience of its app. The mobile app includes, for example, a “feed your fish” game, where if your fish get hungry, you can win items like a plush shark or store credit. The catch? To get fish food, you need to refer friends to use the app too. The social, entertainment aspect of the app allows it to strengthen its knowledge of its consumers, so it can give personalised algorithmic recommendations, tailored to any individual user.
Who makes the stuff?
On the company’s website, Temu lists the company values: “empowerment”, “inclusion and diversity”, “integrity” and “socially responsible”. However, there’s no evidence or examples of how it exercises these principles. The company has limited transparency: the vendor selling an item is named, but the website doesn’t show where that vendor is based and who is making the products. That said, Temu’s parent company Pinduoduo has been accused of an overworked “996” (9am to 9pm, six days a week) culture, especially after an employee collapsed from exhaustion, and another died jumping off a building after asking for leave in 2021.
The conditions of the factories that supply Pinduoduo and Temu are harder to discern, but the very low prices seem to indicate that it will be using very cheap labour. As organisation China Labor Watch has documented working conditions in other parts of Chinese manufacturing are often poor. Workers in industrial hubs, often migrants from other parts of the country, work long hours – shifts can be more than 11 hours – and often work six or seven days a week. The reason all those goods are so cheap is that the labour is cheap, too; the only union in China is state-run, and enforcement of labour laws is limited. These workers are paid as little as 24 yuan (NZ$5) an hour.
What impact is Temu going to have in New Zealand?
While it’s still early days, the New Zealand-based retailers who are most threatened by the existence of Temu and its ilk are the brick-and-mortar stores that also sell very cheap things – except they have to pay rents and wages in New Zealand dollars. Kmart, The Warehouse and two dollar shops will have to be on the alert.
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