If you haven’t heard of Temu, I’d be surprised – the odds are you’ll have seen one of their adverts in your social media timeline.
The platform entices shoppers in with rock-bottom prices by cutting out the middleman and connecting consumers with millions of sellers.
In the midst of a cost of living crisis, who wouldn’t pay £1.97 for a garden hose or £1.77 for a humidifier?
It’s a mix that has seen it grow to the point that it now handles more than 60 billion orders every year.
It all sounds too good to be true and, according to its opponents, it probably is – with concerns about quality, delivery times, customer service and even security.
However, what’s indisputable is that Temu has the potential to turn the eCommerce world on its head – and not even giants like Amazon are safe.
So what is Temu and why is it so disruptive?
Temu, which is pronounced tee-moo, means ‘team up, price down’.
One interested observer is Les Yates, who has over 15 years’ experience in eCommerce and now works as a strategy director at eComplete.
The company was launched in November 2020 by former THG execs Paul Gedman and Andy Duckworth to act as a growth partner and capital investor in eCommerce brands.
The startup recently bought a stake in beauty retailer CurrentBody and Yates said the appeal of Temu in an economic downturn is obvious.
He said: “Temu describes itself as an online marketplace that connects consumers with millions of sellers, manufacturers and brands around the world.
“Browsing through the website you will see a vast range of products that are sold at comparatively low prices (non-named brands).
“In general, this is great for consumers and typically businesses with this model will do well during times of economic uncertainty as consumers are forced to look for more affordable means to their traditional buying behaviours.
“What is important to understand with Temu is that the model seems to be based upon manufacturers (not brands) selling directly to consumers via the Temu platform.
“Looking at a number of products, the majority of items appear to be delivered between six to nine days.”
Yates gives the example of a teeth whitening product currently available on Temu’s website as a potential concern.
“The challenge is that it’s hard to validate exactly whom or where you’re buying from,” he explained. “Most sellers are using obscure names and the seller profiles provide no information about the seller’s business you are purchasing from.
“In comparison, if I’m buying from Amazon they will provide full transparency on who the seller of the product is.
“The model itself appears to be a replication of Wish.com, which consumers may recall from a few years ago.
“Wish.com grew in popularity in a very short space of time driven by the same narrative of exceptionally low prices for every day items.
“However, the model itself was not sustainable. Whilst consumers were drawn to the low prices, the quality and experience wasn’t available to back it up with many consumers reporting to have received items that were not as described or of low quality and then poor customer support to resolve issues.
“This subsequently led to a quick fall from fame, shrinking significantly as a business with heavy losses.
“The challenge here is simply: where is the quality control and protection for the consumer?”
According to Yates, the challenge presented by Temu for UK’s discount retailers is that they’ll drive prices down even further.
“This places real pressure on a business’ ability to balance the books which can lead to significant job losses,” he said.
“The second challenge is quite simply, where does the money go? A typical consumer will see a website that sells 10,000’s at incredibly low prices and feel like they’ve got a bargain (if the quality matches up to expectations) – and to an extent that is true.
“However, the challenge comes from what happens behind the scenes. Whaleco UK Limited is listed as the legal entity for Temu UK website.
“For this business it can be traced back to both China and Singapore so the theoretical expectation would be that income generated (not all, but most) by Temu would be leaving the UK economy (alongside the payments to manufacturers who also appear to be non-UK based).
“Whilst it’s great for consumers to get a great deal and make items more affordable, it actually goes full circle as it will place greater pressure on the economic performance of the country which in turn creates further potential pressures in terms of tax increases, interest rates etc (if Temu was to make a significant market share capture in the market).”
Kevin Jones is the CEO and co-founder of Stockport-based SaaS business Shopblocks. He said Temu’s tactics were simple.
“Clearly they’re using super-aggressive pricing for new users to try to capture them and look to profit later on,” he said.
“It’s an interesting strategy but, for me, I just ignore the unbelievable prices and assume all of their products are poor quality and will break the instant I open the box.
“I remember when Amazon looked at their advertising budget in the US and realised it was about the same as their total delivery cost, and figured ‘hey, let’s stop advertising and give everyone free delivery instead’.
“The strategy worked so well they then decided people would pay for ‘free’ delivery and then we got Amazon Prime. Crazy.
“Every marketplace needs something to hook people in. I’m not sure what to make of Temu yet but it seems to represent everything that’s wrong with the world in some way. Will it last? Time will tell.”
Adam Pritchard is the founder and CEO of pay-as-you-grow eCommerce platform Shopit and said the world was watching the fate of Temu.
“Temu – like Wish before it – balances lower prices with longer lead times; compared to the opposite Amazon model where ‘normal’ priced items are sent out speedily,” explains Pritchard.
“As a business model it offers a good alternative for those who don’t shop in a panic; but the quality of goods can vary widely across the hundreds of Temu sub-retailers – the same issues that Wish faced.
“Low prices are clearly a customer acquisition tool, but to what end? The Chinese government is already subject to international suspicion over data management and security, as is their relationship with the larger Chinese companies.
“Temu is an offshoot of the successful Pinduoduo marketplace platform for agriculture which itself was removed from the Google Play Store amid malware concerns.
“Temu is testing the appetite for Westerners for low prices versus their identify security and data; a battle that seems increasingly won by penny-pinched pockets and consumerism.”
- What do you think? Email [email protected]