Updated: 2022-12-20 16:53:58
Have you heard of Temu? It is a US shopping app launched by the Chinese e-commerce company Pinduoduo in early September 2022, and quickly became a hot topic in the e-commerce business world. What's incredible is that Temu has become the top of the most downloaded shopping apps in the US since it was published!
Source: App Intelligence & Analytics by appfigures
If you are running a dropshipping business, now you must be wondering why Temu grows so fast in such a short time, whether can Temu becomes a dropshipping supplier, and what impact Temu has on dropshipping businesses.
Keep reading, this article will give you more information about Temu!
Temu is a new shopping app launched on September 1st, 2022 in the US, aiming to offer affordable, high-quality goods with the best shopping experience to American consumers. And since it was launched, it has reached an average of $1.5 million daily in GMV, completely shocking significant online marketplaces like Shein and Wish.
Temu’s success comes from its relationship with its parent company, PDD Group, which is founded in 2015 that has grown well since then to become one of the Chinese e-commerce giants. You may never have heard of it, but it is a well-known shopping app in China.
PDD has developed a wide network of global suppliers and processed more than 61 billion orders in 2021 with a revenue of $14.7 billion. Now it is able to share the sourcing, supply chain, and logistics capabilities they have built over the years with Temu to deliver quality goods to consumers at wholesale prices.
It can be said that Temu was inspired by the success of the Chinese brand Shein. Similar to Shein, Temu offers items in different categories, including men's and women's clothing, jewelry and accessories, children's clothing, supplies, and more.
Also, compared to other online shopping platforms like its rivals Amazon and eBay, everything on Temu is very cheap, with most items priced below $20. And it offers free standard shipping on all orders.
Temu appears to combine Amazon's "everything store" option with the low prices and social elements that have made fast-fashion giant Shein so successful.
According to information on its website, Temu is currently running a Christmas sale where buyers will enjoy free shipping on all orders, a 20% discount, and a 90-day free return policy. In addition, there are various attractive discounts such as up to 90% off during Christmas, $8 off on a $50 order, etc.
The success of its parent company, PDD, relies mainly on its marketing and pricing strategies, as does Temu's rapid growth.
The launch of Temu and its viral in the US coincided with the holiday shopping season, with "70%-90% OFF" everywhere and plenty of "$0.99 specials" on its website. The discounts cover major categories such as home furnishing, clothing, 3C digital, etc., and the prices of most products are below $5.
When the average American consumer visits the Temu app or its website, they are sure to be amazed by its low prices and free shipping service. Getting wholesale prices directly from suppliers has been nearly impossible for them in the past. Even for experienced dropshippers or e-commerce entrepreneurs, such prices and discounts are incredible. So why is Temu so cheap?
Temu is currently in the early stage of its development. In fact, the product pricing does not include the cost of marketing and shipping and even does not consider profits. All the costs and losses are covered by its parent company PDD.
And relying on PDD's supplier network, Temu is able to select the cheapest product to sell as much as possible, so for the suppliers, the prices of most Temu products are basically unprofitable.
In terms of new user benefits, Temu provides a 30% discount coupon for new users, and the first three orders will receive free delivery services.
It has to be said that Temu has gained as many new users as quickly as possible by offering cheap products, big discounts, and free shipping to consumers at the risk of getting business losses. However, such a low-price strategy is not going to be a long-term solution.
Temu's meteoric rise has been fueled almost entirely by advertising. According to informed sources, Temu invested about 140 million dollars in advertising in September. Temu advertisements can be seen everywhere on FaceBook, TikTok, and other platforms.
According to Meta, Temu has posted more than 1,000 ads on its platform since September and both in English and Chinese.
So how did Temu reach the top of the iOS App Store shopping list? "I believe it’s driven almost exclusively by ads", said Juozas Kaziukėnas, founder of e-commerce analytics firm Marketplace Pulse.
Also, Temu has also launched the Referral Bonus mode in North America, moving PDD's social fission marketing overseas. This mode allows users to choose their favorite products and if you want to get them for free, you need to invite new users to download and register for Temu App through their referral links. If you successfully invite 5 friends, you can also receive $20 directly.
When searching Temu on Facebook and Twitter, you can find "Credit giveaway" promotions posted by users all over the platform to earn rebates. Also on Reddit, there are a large number of posts that earn credit by sharing invitation codes and fission links.
Source: Facebook, Twitter
On major social media, you can see Temu product displays, unboxing videos by top influencers, new registration inviting posts, affiliate marketing, and other promotions. Temu also set up an Influencer collaboration entrance on the homepage of its official website, inviting bloggers, influencers, and other affiliates to assist in the promotion through multiple channels, and give them rebate commissions in return.
For example, there are many unboxing videos of Temu on Youtube recently. And on TikTok, Temu has teamed up with influencers to launch interactive promotions such as try-on haul out of the box and has attracted many young users. The TikTok topic #temuhaul has reached 4.7 million views.
In addition to unbeatable prices, deep discounts, and lots of 1-cent items, Temu also offers a purchase protection program that qualifies customers for a full refund for products that don't arrive, arrive damaged, or don't match descriptions. This undoubtedly opened up the minds of users for Temu.
"Money is not spent in vain. It uses the 'crazy' low price to break the rationality of consumers and cultivate consumers' habits", a YouTuber called JoJo commented on Temu. She pointed out that her shopping habit on Amazon for many years has been broken. Now before buying many products, she will first look on Temu and then on Amazon.
Temu’s motivation for doing this is obvious, as once consumers get used to buying on Temu, the platform will start recommending higher-priced products for long-term profits.
Many dropshipping sellers are also attracted by the favorable product prices on Temu and wondering to use Temu as their dropshipping supplier. So is it possible?
To be honest, Temu is an excellent platform for consumers, but for business owners, whether Temu can act as a dropshipping supplier remains to be considered. Let's take a look at what must-haves a dropshipping supplier should have that Temu lacks.
As we can see, as of now, Temu's advantage seems to be cheap products only. And such an advantage depends on the subsidy of the platform behind it. In order to avoid large-scale losses, its low-price strategy cannot last for a long time. It is expected that after Temu has accumulated sufficient traffic and users, it will definitely adjust the strategy to improve profitability, such as adjusting the category structure to increase the unit price of customers.
It is reported that Temu currently adopts a self-operated model. The Temu sellers are only responsible for the supply and delivery to Temu's warehouse, and the rest of the pricing, selling, marketing, logistics and distribution, and after-sales are all taken care of by Temu itself. In order to sell on Temu, the sellers almost gave up the pricing power of the product. Many high-quality suppliers will not choose to sell on Temu because sometimes the products are unprofitable on Temu.
Secondly, There is a relatively low threshold for selling on Temu, It allows companies or individuals to settle in and open a store, which means that the quality of suppliers is hard to control. Many of them use Temu to sell the backlog of inventory at low prices, when the products are out of stock, they will not restock in time. So you'll find many out-of-stock products on Temu.
The important thing is that even if those consumers who choose to buy from Temu receive poor quality products, they have already formed the perception of "the product is no brand, low price, and it's not a pity to throw them away". However, poor product quality can be fatal to a branded dropshipping business, and you must don't want your target audience to be buying just for the low price.
At present, Temu’s product sources mainly come from Chinese suppliers, and the delivery time has no advantage compared with most Chinese dropshipping suppliers. Moreover, Temu’s shipping service seems to be unstable. You can see a lot of consumer feedback from Temu on Trustpilot that the packages were not delivered as promised.
Because Temu will handle the order and shipping in a unified way, the logo pattern of Temu is usually printed on the product packaging. If you ship Temu’s products to your customers through dropshipping, your customers will directly know that the products come from Temu, which will likely directly cause customers to give up buying from your store.
In addition, Temu currently does not have a brand and packaging customization business, which is also a major limitation for dropshipping businesses.
It’s worth noting that a poor customer service experience is the most common complaint made by consumers in the Trustpilot review section. After many consumers complained that the products were lost or damaged, there was no after-sales answer or solution. If you use Temu as a supplier, you are likely to be responsible for all after-sales issues yourself.
Generally speaking, as an online shopping app, Temu’s main target group is low-income American consumers who are struggling with inflation. But if it wants to try to provide supply chain services for dropshipping, it is still a long way to go before becoming a professional dropshipping supplier.
If you are looking for a low-price dropshipping supplier, you may wish to use SourcinBox, a professional dropshipping agent. Compared with Temu, SourcinBox not only directly works with the source manufacturers to obtain high-quality products and wholesale prices but also focuses on dropshipping sellers to provide more high-quality and reliable dropshipping fulfillment services with brand customization available. If you are interested, please contact us to learn more.
Since Temu is less likely to be your dropshipping supplier, it will undoubtedly be one of your competitors. Temu has become one of the most popular shopping apps in the United States since its launch, directly challenging Amazon, AliExpress, Shein, Wish, and other e-commerce shopping platforms. For dropshippers, Temu is also becoming a threat to the dropshipping market. But you don't need to worry too much, you can compete with Temu from the following aspects.
Although Temu sells common products, but it keeps the product pricing too low. The product supplier is likely to do shoddy work or use inferior material in order to guarantee profits, resulting in poor product quality or wrong versions. (At least on the PDD platform this is common)
Most consumers who choose to buy from Temu are looking for low prices and new user benefits, but the customers you need to win are those consumers who are looking for higher-quality products and services. Therefore, insisting on selling high-quality products and providing excellent customer service is one of the best ways to make your dropshipping business stand out.
For example, you can cooperate with a professional dropshipping agent like SourcinBox, which can help you source high-quality products from manufacturers at wholesale prices. Also, SourcinBox provides 1-on-1 customer service to help you with dropshipping order fulfillment. You can easily get refunds or reshipments for your customers when there are after-sale issues with the products.
Temu’s low-price strategy at the beginning was to attract new users not to make profits. If you also use low-price strategy to compete with Temu, it is almost impossible, because you will not be able to afford the risk of business loss. In addition, blindly low prices will reduce the value of your brand in the minds of customers, and it is irreversible.
If you find that you are selling the same product as Temu, you should avoid price competition and instead consider other ways to differentiate your product and make your product price acceptable to customers. For example, you can add value to your product through brand customization.
The emergence of Temu does not mean the demise of dropshipping, because the target audiences of the two are fundamentally different. In the past, platforms such as AliExpress, Wish, and Shein also provided low-cost products, but they still failed to hinder the vigorous development of dropshipping.
It is believed that Temu’s initial low-price impact will not last for too long, and its defects will gradually be exposed as the number of users increases. Temu still has a lot to improve in terms of customer service, fulfillment services, etc. if it is to compete with the major e-commerce shopping platforms. As a dropshipping seller, all you need to do now is stay sane and strengthen your own brand trust.