It took Temu just four months to beat WhatsApp, TikTok and Instagram as the top ranked app in the Apple App and Google Play stores – and it has no plans to stop, with its UK launch understood to take place imminently.
Temu was founded in Boston, Massachusetts, by PDD Holdings, which also operates Pinduoduo – one of China’s most popular ecommerce apps that was suspended from Google over malware this week.
Now, Temu’s said to be coming to the UK, just weeks after entering Australia and New Zealand and starting tests in Canada. But it’s not stopping there. The app is eyeing global domination and is said to be targeting expansion in Africa and Latin America.
Temu on the rise
Since its launch in September 2022, Temu has quickly gained traction and became the most downloaded shopping app in the US earlier this month.
Abe Yousef, a senior insights analyst at analytics firm Sensor Tower, told CNN that “app installations for Temu exceeded those for Amazon, Walmart and Target” in the fourth quarter of 2022.
On Google Play, Temu has been downloaded over 10 million times.
Its rapid sales growth is phenomenal. Gross merchandise value (GMV) increased from $3 million in September 2022 to $192 million in January 2023, according to New York-based market research firm YipitData.
According to Temu, it “connects consumers with millions of sellers, manufacturers and brands around the world with the mission to empower them to live their best lives”.
It actively makes use of PDD Group’s vast and deep network of merchants and logistic partners.
The ecommerce app even launched a Super Bowl ad earlier this year with the tagline “shop like a billionaire”, neatly describing the retailer’s selling point: customers don’t have to worry about their budget because of how affordable Temu’s products are.
Its website focuses on heavy discounts, with up to 90% off on selected items and other “lightning deals”. And while the platform seems to be quite similar to rival Shein, it operates very differently.
Temu Vs Shein
Both Temu and Shein offer cheap products through their online platforms, yet their business models differ significantly.
Shein has evolved from the wedding dress wholesaler Sheinside in 2015 to become the world’s largest fast-fashion retailer valued at $100 billion (£81.9 billion) in April 2022.
Temu, on the other hand, currently has no physical presence.
Similar to other discount retailers like Wish or Ali Express, Shein relies on several wholesale warehouses. It operates four research and development facilities in the Chinese cities of Nanjing, Shenzhen, Guangzhou and Hangzhou, as well as six logistics centres in Foshan, Nansha, Belgium, India and the US, employing over 10,000 people.
However, the online retailer has come under fire after a Channel 4 documentary exposed “inhumane” working conditions at Shein’s supply factories in Guangzhou.
Employees were alleged to work 18 hours a day in violation of Chinese labour laws, and are severely underpaid, with those at one factory earning a base salary of 4,000 yuan a month or £476. Workers make a minimum of 500 garments a day at the factory.
They are also further penalised two-thirds of their daily wage for mistakes. The findings prompted Shein to invest $15 million (about £12 million) to improve standards at suppliers’ factories.
Unlike Shein, Temu operates like an Amazon-like marketplace, selling products from suppliers across the globe, but primarily located in China.
This allows the retailer to offer a wide range of items, escaping Shein’s narrow focus on fashion.
Its business model relies on reverse-manufacturing, where it eliminates the middlemen in the distribution process.
Additionally, it utilises PDD Holdings’ ‘Next-Gen Manufacturing’ model to provide manufacturers with enhanced insights into consumer preferences and shopping behaviours.
Thanks to that, suppliers can design more personalised products, accurately plan production volumes and efficiently manage warehousing and shipping. The additional cost savings from optimszing pre- and post-production stages are passed onto consumers.
Prices and quality
Although Statista named Shein the cheapest womenswear retailer in 2022, with dress prices averaging $15.74 (£12.89), Temu’s dresses seem to sell primarily under $13 (£10.64).
Temu offers free delivery on all orders, while Shein shoppers do not pay for fulfillment on orders over £35.
Temu says to reduce costs for consumers by making manufacturing smarter and more tailored to their needs, eliminating expenses arising from wasteful production and inefficient distribution. It claims to bring consumers “the same, if not better products, at reduced prices”.
“We will not just simply repeat what others have done in this field. What is important to us is that we start from the needs of consumers and strive to create our own unique value,” PDD Holdings chairman and CEO Lei Chen said of Temu last year.
However, quality appears to be an issue at both retailers. On Better Business Bureau, Temu averages a 2.09 rating while Shein is not accredited but has a 1.41 rating based on customer reviews.
Shein claims to carry out regular quality inspections for all items before they go to its warehouse, where employees review the products again during the packaging stage.
To test Temu’s quality, Danni Santana from Insider purchased four items off the platform: a stack of multi-coloured sticky notes, a charging cable, a handheld electric blender and a Tupac decorative ornament, all for $13.41, including free shipping.
It took the parcel two weeks to arrive, although Santana received a $5 gift card as an apology. Allegedly, Temu uses its parent company’s supply chain and logistics network to ship the items.
Overall, Santana concluded that the quality of purchases wasn’t the greatest: “you get what you pay for”.
Santana also complained about slow shipping speeds and a flood of marketing emails spamming his inbox with “flash deals”. In total, he received 30 marketing recommendations from Temu in the two weeks he was waiting for the products to arrive.
In turn, USA Today’s shopping editor of Reviewed Amanda Tarlton said that Shein’s quality is “as inconsistent as the sizing”, with some items performing much better than others.
“You never know exactly what you’re going to get with Shein,” she wrote.
Temu bets on advertising
Along with its Super Bowl campaign, Temu is actively recruiting influencers on TikTok and Instagram to promote the marketplace. It seems to follow the footsteps of the rival Shein, which secured partnerships with such celebrities as Khloé Kardashian.
A job posting on a global job search and HR data analytics platform Recruit invites influencers over 21 years old to advertise the marketplace, offering $1,000 (£817) per hour.
According to Meta’s ad library, in January, Temu invested in some 8,900 ads to promote its most discounted items across the tech giant’s various platforms.
Despite the investments in paid exposure, Temu hasn’t yet gone viral on social media. On TikTok, #temu hashtag has over 400 million views in comparison to over 53 billion views for #shein, 9.3 billion for #aliexpress and 46.5 billion views for #amazon.
Temu also relies on word-of-mouth recommendations to build organic brand recognition and invests in “the quality, affordability, and variety of products” offered on the platform to improve customer loyalty.
Temu: could it rival Amazon?
Temu’s aggressive expansion plans means that not just Shein, but all online giants, including Amazon and eBay, should be watching it closely.
However, it will have to bet on more than cheap prices to succeed. Otherwise, it might find itself following in the footsteps of Wish – another online ecommerce platform that became the US’s third biggest in 2019 before low product standards and unreliable shipping drove its shoppers away, with 2022 sales plunging 73%.