E-commerce platforms like Temu and Shein are attracting a lot of attention for leveraging China’s technology and logistics advantages to bring cheap products to shoppers in the UK directly from manufacturers in China. But critics have raised concerns about sustainability, quality and data privacy
Since launching in late 2022, Temu has captured the attention of millions of shoppers worldwide with its promise to let you “shop like a billionaire” at rock-bottom prices. However, its exponential growth has raised concerns within the business community. In this article, we delve into the background of Temu, its remarkable growth, concerns surrounding its business model, and the implications of its expansion for British companies in China and beyond.
What is Temu?
Temu (pronounced ‘tee moo’) is a discount e-commerce platform shoppable via an app and website that launched in the UK in April 2023. The platform sells ultra-cheap products across a range of segments – from tech to kitchen gadgets to clothing – shipped directly from China. It has been compared to other discount e-commerce sites like Ali Express, Wish and Shein. Shoppers are encouraged to buy with “lightning deals”, clearance sales and free shipping; at the time of writing, some of the lightning deals on offer included an iPhone charging cable for £0.47 and a ‘crystal’ necklace for £0.89.
The platform keeps prices so low by shipping directly from a network of small manufacturers and independent sellers, avoiding the need to spend on warehousing. The low value of most individual orders also means that it avoids UK customs duties, which only kick in on shipments valued above £135.
Since first launching in the US in September 2022, Temu’s app has been downloaded more than 117 million times, making it one of the fastest-growing apps of all time. Monthly spending on Temu is reported to have reached $700 million in May 2023, surpassing even that other Chinese e-commerce behemoth, Shein.
This success has been achieved partially by super discounted prices and a strong novelty factor but also by a massive marketing push, including spending huge sums on ads on Meta platforms (Facebook and Instagram) and Apple’s app store, and taking out two TV spots during Super Bowl LVII in February 2023 (reportedly costing more than $14 million).
Who owns Temu?
The company is operated by PPD Holdings, best known for its flagship e-commerce platform Pinduoduo. Starting out life as a group buying platform for agricultural produce, Pinduoduo has grown into one of China’s biggest e-commerce platforms, with a particularly strong customer base in third and fourth-tier Chinese cities. As it has grown, Pinduoduo has created a vast network of manufacturers and suppliers in China, and Temu has drawn on this network to scale quickly. The success of both platforms pushed PPD Holdings’ profits to $1.2 billion (£944 million) in Q1 2023.
Are there any criticisms of Temu?
Temu’s rapid growth has generated much conversation in the business community.
Some have raised questions about the long-term viability of the business. A Wired investigation found that Temu is losing an average of $30 per order and may lose up to RMB 6.73 billion per year in total. It is also putting a lot of pressure on Chinese manufacturers, which are already feeling the pinch from China’s slower-than-expected post-Covid economic recovery, to cut costs or even supply products for free.
As with Shein, environmental groups have criticised Temu’s sustainability credentials, arguing that its business model encourages impulse purchases that lead to waste, and that parcels come in excessive, un-recyclable packaging. Of course, the same criticisms have long been levelled at other fast-fashion companies like Zara and H&M. Proponents of Shein and Temu’s models say that by gathering data on what consumers are buying and then directly feeding it back to manufacturers, they can reduce the production of unwanted items.
Like other Chinese platforms, Temu is facing scrutiny about the collection and use of data, especially in the US. A report published by the US-China Economic and Security Review Commission in April 2023 accused platforms like Temu of “data risks, sourcing violations and trade loopholes”.
Temu’s expansion may pose challenges for British businesses. Of course, most companies will be unable to compete with Temu on pricing, so to stay relevant and competitive, British brands may need to explore innovative strategies, such as offering unique and differentiated products or focusing on niche markets, advice that applies to both the UK and Chinese markets.
Call +44 (0)20 7802 2000 or email enquiries@cbbc.org now to find out how CBBC can further help you identify the best e-commerce platform for your brand and target market in China.
