Temu has revolutionized the way retail works, so much so the U.S. government is now taking steps to limit its reach. Retailers can learn some great lessons from Temu; how to succeed in growing digital world, how to use shopping apps to their advantage, and what not to do.
In September 2024, the Biden administration announced a shift in trade policy which would restrict the trade provision that allows China-founded e-commerce companies (Temu, Shein, etc) ship to the U.S. with ease. The “De Minimis” law allows Chinese companies to ship into the U.S. duty free and minimal scrutiny at customs.
This loophole has been key to China-founded e-commerce companies such as Temu, which sees just under 152 million Americans using it’s app every month, according to the BBC.
We’ll be analyzing how Temu is changing up retail and what U.S retailers can learn from every step of Temu’s journey.
Our report uses data with the highest in market accuracy – 94% correlation to ground truth, over 15 data inputs, and a full 90 days of predictive feeds. See how retail trends are shaping each year, month on month, in our Retail Pulse report.
Jump to:
- What is the “De Minimis” law?
- How Temu started
- Temu at the Super Bowl
- How Temu operates
- Controversies
- What Temu means for the retail landscape
- Biggest brands impacted by Temu
- What Temu means for the future of retail
What is the “De Minimis” law?
Before we explore how Temu operates, there’s some important context we need to lay out.
De Minimis is an international trade policy law where in the United States items imported valued under $800 are duty-free. The average De Minimis amount varies widely from country to country: in Hong Kong it’s 0 while in Australia it’s 1,000 AUD.
The move to close this loophole for China-founded e-commerce companies in September 2024 by the Biden administration received bipartisan support. While the Trump administration as of yet may differ, and the law as of December 2024 has (as of yet) not passed the House, few objections or roadblocks have made themselves known, making it likely the loophole will be closed.
What retailers can learn from Temu’s closing loophole
- While a system or law or trend can benefit you, it may not last forever. Always future-proof and prepared for a world where that benefit no longer exists.
- International trade policy, once a non-priority in U.S politics, is now at the forefront with the Biden administration’s move and Trump’s possible tariffs. Keep up to date with the latest developments and adjust as needed.
Our report uses data with the highest in market accuracy – 94% correlation to ground truth, over 15 data inputs, and a full 90 days of predictive feeds. See how retail trends are shaping each year, month on month, in our Retail Pulse report.
How Temu started
To understand Temu’s impact on retail, we need to go back to the beginning. Temu first launched in the U.S. In July 2022, closely followed by the UK in April 2023 and the rest of the world. It now ships to over 50 countries around the world.
Temu is a subsidiary of PDD Holdings, which also owns Pinduoduo. During the COVID pandemic, Pinduoduo grew popular in China for digitizing in-food food marketplaces, which could no longer rely on foot traffic during lockdown. In 2021, Pinduoduo generated $383 billion GMV.
PDD Holdings found a successful formula with Pinduoduo, one where customers see low-prices and move through game-like features in app to encourage purchase decisions.
This success by PDD Holdings led to Temu’s launch one year later. Temu launched in the U.S. offering discounts, coupons, free shipping, and a wide variety of products from clothes to home decor.
Temu’s slogan “shop like a billionaire” clearly had mass appeal. Equipped with features already tested in Pinduoduo, Temu launched to success.
In December 2022, Temu was the most downloaded free application on the App Store and Google Play in the US, just a few months after its launch.
What retailers can learn from Temu’s launch
- Data is the key to Temu’s success. PDD Holdings found the formula through Pinduoduo and arguably learning from fellow China-based e-commerce fast fashion company Shein.
- Shopping apps are here to stay. Having a web page for your store is helpful, but apps are suitable for many companies to keep customers engaged and returning to their basket.
- Temu uses game-like in-app activities to make shopping more fun, rewarding and time based. Consumers can tap on the screen to “unlock” coupon deals and get free gifts with their orders if they buy in time.
- Customers love discounts. Temu offers large discounts and coupons on products. The app also shows customers the amount they’ve saved so far in their basket.
Our report uses data with the highest in market accuracy – 94% correlation to ground truth, over 15 data inputs, and a full 90 days of predictive feeds. See how retail trends are shaping each year, month on month, in our Retail Pulse report.
Temu at the Super Bowl
For context, a Super Bowl ad is not cheap! You’d need around $7 million for a typical ad lasting 30-seconds during the Super Bowl.
In February 2024, Temu had six ads during the Super Bowl.
Was the ad successful? No question about it–Yes.
- The ad quickly went viral, as viewers’ attentions were caught by the catchy tune and animated advert.
- The ad also pronounced the name Temu as “Tee-moo” rather than “Teh-moo”, which led to a series of already brand-aware customers commenting online they’d been pronouncing it incorrectly. The comments then led to more people learning about the ad.
The impact of the ads were two-fold: brand-awareness and app downloads.
Data from SimilarWeb suggests visitors to the Temu app increased by nearly 25% on the day of the Super Bowl compared to the Sunday before it.
What does that mean for other retailers? In the same period, Amazon and Ebay’s visitors were down by 5% and 2% respectively. If even giants like Amazon and Ebay can feel the effect, then it’s certainly felt by other retailers and e-commerce platforms.
What retailers can learn from Temu’s Superbowl ad
- A good ad showcases the spirit of your brand in a memorable way and gives a clear call to action.
- A catchy slogan is one thing, but a slogan that captures the “vibe” of consumer’s feelings and economic situation has an even greater impact. Think carefully about the wording of your slogan, advertising and marketing to speak to consumers in an approachable way.
- Hit ad viewers with something they’d want to comment about. For Temu, it was the unexpected way of pronouncing the brand’s name.
- Big costs can mean big risks, but you don’t get big gains without a cost.
How Temu operates
According to Temu itself, “Temu is an e-commerce company that connects consumers with millions of merchandise partners, manufacturers and brands with the mission to empower them to live a better life. Temu is committed to bringing affordable products onto its platform to enable consumers and merchandise partners to fulfill their dreams in an inclusive environment. Temu was founded in Boston, Massachusetts in 2022.”
In other words, Temu is a marketplace platform which allows sellers based in China to sell products on their platform to a global audience, similar to Amazon and Ebay. For customers, it means goods at prices they couldn’t get before.
How Temu operates for sellers
For China-based sellers, Temu offers an opportunity to sell overseas and grow a business.
Yao Kaifei, founder of e-commerce startup BrandAI, told Rest of World the country’s e-commerce sector is desperate to chuhai, or venture overseas. Sellers and platforms want to shed the reputation of selling cheap “made in China” gadgets, and make a name for themselves exporting whole brands and business models.
The only issue for China-based sellers is that Temu gives them a very limited profit margin to keep those prices as low as possible. This way of operating only works because Temu is able to draw in so many customers with very low prices.
Temu controversies
While Temu is able to draw in many visitors and does make significant profits, Temu’s brand reputation has struggled since its launch for a variety of reasons. We’ll go over a few of them and what they mean for other retailers.
PDD Holdings seller protests
In July 2024, Temu sellers in China went on protest against PDD Holdings penalties and fines, claiming harsh treatment, lack of explanation, and supposed squeezing of seller’s profit margins as Temu expands on the global scale.
Platforms such as Amazon, AliExpress, Etsy, Shein, and Tiktok shop all other similar services for sellers. The competition further complicates matters for PDD as merchants continue move to competitors. The protests are an ongoing issue for PDD Holdings, with analysts expecting more issues in 2025.
PDD’s shares slid by -3.5% in a single day in July 2024, directly linked to these protests.
What retailers can learn: When you are a market-place business, merchants are your lifeblood. They can make or break you. For all types of retailers, though, responding quickly to feedback is never a bad thing, especially when the alternative is losing business to your growing number of competitors.
Safety standards
In September 2024, the Consumer Product Safety Commission Commissioners Peter A. Feldman and Douglas Dziak cited “recent media reports that deadly baby and toddler products are easy to find on these platforms [Temu and Shein].”
U.S Commissioners aren’t the only ones blaring alarm bells over products available from Temu.
In August, authorities in Seoul, South Korea, reported women’s accessories sold by Temu contained “contained toxic substances sometimes hundreds of times above acceptable levels”.
What retailers can learn: Sometimes, retailers have to recall a product when an issue is found. However, ensuring this doesn’t happen again is imperative for brand reputation.
What Temu means for the retail landscape
As Temu continues to make waves in the retail landscape, its impact reverberates across multiple facets of retail operations and strategy. For retailers, Temu’s rise highlights:
- Pricing structures
- Digital shopping experience
- Gen Z
- Supply chains
Pricing structures
One significant change is the pressure it places on pricing structures. With Temu offering competitively low prices, retailers are prompted to reassess their pricing strategies to stay competitive. This could mean lower profit margins for some, or necessitating innovation in cost reduction techniques.
Digital shopping experiences
Temu’s success highlights an evolving consumer preference for seamless digital shopping experiences. Retailers can glean valuable insights from Temu’s user-friendly app interface and convenience, seen as pivotal elements in modern consumer purchasing behavior. For many, investing in technology to enhance online shopping experiences has never been more critical.
Gen Z
The demographic shift towards younger consumers using the app is another trend. As these consumers’ purchasing power grows, Temu’s ability to capture their attention should urge other retailers to align their marketing efforts towards younger audiences. The methods Temu employs, such as targeted advertising and presence on popular digital platforms, offer valuable lessons for expanding or refining marketing strategies.
Logistics and supply chain
Finally, the remarkable agility and adaptability of Temu in its logistics and supply chain management illustrate key areas for potential improvement in traditional retail operations. By harnessing data and technology, Temu optimizes every aspect of its operations, setting a new benchmark for efficiency that could inspire profound structural changes in retail supply chains.
Biggest brands impacted by Temu
Not all problems retailers face in the U.S are directly caused by Temu, but Temu is causing some retailers issues. Particularly for retailers competing in the market on price, Temu is a strong challenge.
While brick-and-mortar can feel the sting of Temu, it’s often other online marketplaces such as Amazon, Shein, AliExpress, Wayfair, and the TikTok shop that are its main competitors.
Read more: Black Friday 2024 – Full Report on Physical Store Visits
1. Jane.com
In November 2023, e-commerce platform Jane.com ceased operations. The platform was then acquired by Elshair Companies. At the time of the closure, Jane.com CEO stated it was “impossible to compete on price” with websites like Temu and Shein, which dominate online shopping.
2. Etsy
Also in November 2023, in an Etsy Q3 2023 Earnings call Josh Silverman responded to a question about the competitive environment in e-commerce, particularly from the newer Chinese entrants. In response, Josh Silverman answered:
“There’s no question that Temu and Shein are having an impact in the market. You don’t get that big that fast without taking share from many people… And the other thing that is happening is they’re spending a large amount of money on marketing, not clear that they’re using ROI thresholds to do that. And so I think those two players are almost single-handedly having an impact on the cost of advertising, particularly in some paid channels in Google and in Meta.”
3. Amazon
In November 2024, just a year after Jane.com ceased operations, Amazon made its move by launching Amazon Haul. The new service, available in beta in app, offers goods under the $20 price point.
Amazon has based its business model on delivering items to customer as quickly as possible through Prime. But Haul delivers within a two week time frame. The budget marketplace alternative clearly seeks to be a competitor to Temu and others like it.
What Temu means for the future of retail
As we’ve seen from the closure of Jane.com and Etsy’s shift in startegy, retailers are more than aware of Temu’s impact and are already making moves to adjust. Competing on price asgainst Temu isn’t an easy strategy and certainly not a viable one for many retailers and e-commerce platforms. However, it is possible to use similar strategies of discounts, rewards, coupons and account credit to keep customers engaged. Amazon is taking this a step further by launching its own budget marketplace–whether it’s effective or not we’ll have to wait and see!
While some brands have named Temu directly, others are more quiet about it and it’s not clear to see how much of an impact Temu is having–only that it is. It’s clear then that if nothing else China-based e-commerce platforms are impacting retailer marketing strategies. For Etsy, that means a focus on product quality and shifting marketing spend to other channels.
Retailers can learn much from Temu. Some of that also includes what not to do and how not to operate. Temu has been named by law-makers around the world for its controversial business practices and the likely closure of the duty-free imports law could spell trouble for the rising star in e-commerce.
The future of retail as impacted by Temu is one where retailers must strategically choose when and how to compete on price, remember price isn’t everything, and carefully plan marketing campaigns.
