Business
China’s Ultra-Cheap Online Shopping Platform Temu Losing its Luster
Temu is an online shopping platform that has gained immense popularity worldwide. Although it has a sizable market share, converting the buzz into revenue is one of the main obstacles.
Temu platform is going through growing pains, just like almost every child does. However, there are a lot of complaints against the extremely cheap online retailer with Chinese origins.
Western experts were initially concerned about the company’s potential to mine user data. Temu’s owner, PDD Holdings, relocated Temu to Boston and changed its legal residence to Ireland in an attempt to allay claims of Chinese government intervention. Presently, fresh issues are taking center stage.
At the moment, it is difficult to avoid the company’s nonstop advertising. Another “shop like a billionaire” commercial that aired multiple times during this year’s Super Bowl made an impression. According to JPMorgan Chase, they invested $1.7 billion (or €1.57 billion) in marketing last year. The US investment bank projects that this year the corporation will spend $3 billion.
Since its release in September 2022, Temu coupon code and App were the most downloaded in the US. Temu platform was the top downloaded app in the UK, France, and Germany last year, excluding the US.
According to consultancy firm GWS Magnify, users have been increasing older, which may come as a surprise given the app’s lasting attraction to older users. Actually, in both the US and UK markets, users 55 and over make up the largest demographic.
Temu eliminates the intermediaries and links customers with Chinese producers directly, in contrast to Amazon, Zalando in Germany, and numerous other online stores. After then, consumers at home receive the products straight from Chinese factories or warehouses.
Apparently in defiance of established e-commerce conventions, quick or same-day delivery isn’t the decisive criteria when using Temu for purchases. For consumers, getting the best deal is paramount, even if it means having to wait a week or two for their order to arrive.
As the online shopping platform seems to be utilizing a penetration price approach to increase market share, this may not be sustainable, according to author and retail analyst Bruce Winder, who is located in Toronto and has been following the company since its founding.
The business will also need to respond to a deluge of reports about hazardous toys, subpar technology, outright counterfeit goods, misplaced parcels, and stolen goods. Also paying attention is the German government. It promises to improve package tracking and surveillance upon delivery.
As the business expands, Winder anticipates more criticism of this kind and cautions that if it wants to stay in business in the long run, it will need to deal with these problems head-on. “As Temu responds to the challenges this will add cost to their business, which may increase prices,” he stated to DW.
Winder emphasized that when the company works out data privacy, environmental sustainability, intellectual property rights, and factory working conditions, nothing less than the company’s credibility is at stake.
Temu packaging is a common sight for shippers and customs officials in the US and Europe. It is orange in color. According to a recent Reuters story, Temu ships about 4,000 tons of cargo out of China every day.
To transport all those products, Temu is snatching up a sizable portion of the global air freight market. Due to this, shipping rates are rising and certain routes are experiencing capacity constraints.
The US House Select Committee on the Chinese Communist Party met in June of last year asking is Temu safe and is Temu legit.
released an interim study stating that Temu and fast-fashion store Shein send around 600,000 packages to the US daily under the de minimis rule, which permits import duties-free entry for the majority of goods priced less than $800 (per person, per day).
According to their calculations, under the de minimis requirement, both businesses were in charge of almost 30% of all packages imported into the US. It’s a privilege that not many people have.
Due to their practice of importing items in bulk in containers rather being individually packaged, Swedish retailer H&M paid $205 million in import charges in 2022, while US clothes giant Gap paid $700 million.
Only items under €150 ($162) are exempt from import charges in the European Union. The European Commission reports that around a billion customs declarations for low-value products were filed in 2022. According to preliminary figures, this rose to two billion in the previous year.
The volume is increasing so quickly that officials are unable to keep up.
Without mentioning any particular company, the European Commission stated in a May 2023 letter that “estimates show that 65% of parcels entering the EU are deliberately undervalued in their customs declaration to benefit from this exemption at the expense of EU businesses.”
Some businesses don’t undervalue their products; instead, they divide larger purchases into multiple bundles in order to keep each item under the €150 cap.
However, package-filled delivery trucks and airplanes don’t convey the whole picture. In actuality, Temu’s initial buzz might be waning.
According to GWS Magnify, the number of monthly active users has decreased after peaking at 17 million in the UK in November 2023 and 83.2 million in the US in September 2023. In both markets, the number of users has decreased since then.
But according to GWS Magnify, consumers in the UK are now spending a lot more time on Temu than they are on other e-commerce sites like Amazon and eBay. Compared to 8 minutes on Amazon, Temu users in February spent an average of 21 minutes a day on the app. While it was only 11 minutes on Amazon, it took 23 minutes on the platform per day in the US.
It’s getting harder for Temu to attract the attention of new users. The internet retailer’s ultimate goal is to entice customers with the best deals. Many analysts believe that in its attempt to gain market share, the corporation loses money on every product. Some predict that it will eventually shift toward more costly goods.
Even while the companies growth has not kept up with that of 2023, there is no denying its status as one of the biggest US and UK retailers. The “customer journey” is the company’s primary priority, according to GWS Magnify CEO Paul Carter.
“Temu has built a significant user and resilient user base, with particular popularity amongst older women,” he stated to DW.
According to him, gamified shopping features that keep users online and personalized rewards are essential to Temu’s success. That level of user engagement will be difficult for rivals to match.
