Temu: Chinese platform which encourages customers to ‘shop like a billionaire’ to rake in $40bn in Amazon challenge
Temu, the ultra cheap Chinese retailer, is forecast to rack in $40bn (£31bn) in gross merchandise value (GMV), as it continues to spawn the western retail market.
Analysts at Jefferies agreed today that GMV – the total value of goods sold via e-commerce platforms – could double in 2024 and rise significantly from the circa $16-17bn (£12-13bn) recorded last year by the online giant.
Temu is owned by PDD Holdings, the multi-billion pound firm founded by Colin Huang, China’s third richest man.
It’s been reported the online marketplace, which sells everything from dentures to wedding dresses, poured millions of dollars into ramping up its advertising in the US to compete with Amazon.
A note in the Financial Times last month said Temu paid about $1.2bn (£95m) in advertising on Meta alone.
The brand, which encourages its customers to ‘shop like a billionaire,’ also forked out for a lucrative advertising spot during the 2024 Super Bowl.
Temu, alongside its fellow Chinese e-commerce platforms such as Shein, suck customers in with constant discounts.
Prices can also remain extremely low due to the fact they traditionally employs vendors who ship directly from China cutting out a middleman which leads to cost rises for customers.
Analyst at Jefferies said: “Temu charges its merchants lower fees than Amazon and, when discussing the pricing structure of the two businesses, he [an analyst] suggested that if there was a price war, it would be difficult for Amazon to compete.”
“Indicatively, he talked to Temu, before its Super Bowl advertising, being 60-70 per cent cheaper than Amazon, but that consumers may now be willing to buy at a c.50 per cent discount.”
Flaws in this strategy have been pointed out by a number of outlets. One report on Wired said Temu is losing out $30 (£23) per order to keep prices as low as possible to lure western customers.
The company is thought to be spending big on huge discounts, to gain market share, a strategy that previously worked for its parent company PDD.
Analysts added: “Temu [might] target 30-40 per cent of group revenues coming from the US market, with the next phase seeing Temu look to stabilise its sales prices and increase average order value AOV (‘price hike pressure testing’ was undertaken in December), and reduce the cost base in the region.”
“Temu is increasingly directing its efforts and marketing budget outside the US – towards Japan (currently the most amount of spend globally), the Middle East, Korea and Europe.”
Temu has been approached for comment