What is Temu, which has recently exploded in popularity in the West? How does the Temu marketplace work and what does its explosive growth mean for Finnish and European product manufacturers?
Temu is an e-commerce platform owned by Chinese PDD Holdings, which has recently gained explosive popularity in the West. Temu offers a wide range of products in many different categories and attracts customers with its extremely low prices. But what makes Temu so successful and what challenges and opportunities does it offer to retailers?
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What is Temu and how does it work?
Temu is an e-commerce marketplace where sellers can list their products and sell them directly to consumers. The platform aims to offer its consumers unprecedented low prices by removing unnecessary intermediaries between the manufacturer and the customer. As a result, Temu is currently composed almost entirely of Chinese sellers, who ship products directly to the Western end-customer by air freight. Despite this, Temu promises free shipping and a 90-day return policy, in an attempt to make the platform an attractive alternative for consumers who doubt the quality or reliability of the products.
Temu’s air freight deliveries account for more than 4000 tonnes of air freight daily.
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In March 2024, Temu also started inviting Western third-party sellers to join the platform in an attempt to westernise the platform’s offerings. In addition to this, the company has also sought to offer more efficient logistics to vendors in Europe through strategic partnerships. Whether Western product manufacturers will adopt the platform as their own will largely determine Temu’s offering and position in the Western e-commerce market. This is why it is very important for us to understand how Temu works and the importance of its growth for Western online retailers.
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In addition to its low price, Temu has also become known among consumers for the poor quality of its products and counterfeits. Even Temu itself warns its users about the electronic products sold on the platform, which are often not what is promised in the sales ad. User reviews show how Temu’s products are often not what users think they ordered, or arrive ready-made and defective, if at all. Shein, a company with a similar business logic, was recently found to contain toxic substances in its clothing, which raises even more questions about the safety of Temu’s offerings.
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Why is Temu growing?
The growth of Temu in the West has been explosive thanks to aggressive marketing and low prices. Temu is rapidly taking over search engines and social media, and is not afraid to spend money to acquire new customers. The Temu app is currently the most downloaded free app in many European markets and even the most downloaded iPhone app in the US in 2023. In Europe, Temu has overtaken many local competitors in search volume and taken millions of active users from its Western peers, including Amazon.
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Temu has managed to double the amount of time its users spend on the app through gamification, where users can earn discounts by playing in-app mini-games. According to a GWS survey, the average Temu user spends an average of 18 minutes a day on the app, compared to an average of 8 minutes a day on the apps of major competitors (Amazon, eBay, Shein).
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Will Temu come to Finland and what does it mean?
The growth of Temu is shaking up e-commerce in Western countries and thus requires a wake-up call from Finnish companies as well. A recent consumer survey by PostNord found that Temu has already become the most popular online shop in Finland among people over 50. Despite the gamification measures, the platform is therefore not only an attractive option for the younger generation, but its impact on Finnish e-commerce is already very significant.
“Temu’s popularity in Finland presents a whole new challenge for Finnish product manufacturers. Temu has been the first major e-commerce platform to bring international competition to Finland and serves as a cautionary tale about the impact this can have on local businesses. Consumers are moving towards cheap goods imported from China by direct airfreight and the Chinese giant’s huge resources are pushing up the price of keyword advertising beyond the reach of local businesses. We in Finland need to wake up in time to what the growth and arrival of Temu and other e-commerce platforms means for us, so that we can grow with them rather than be left behind. “
-YAP Growth CEO Tommi Sassi remarks.
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Threats and Opportunities for Sellers
As mentioned, Temu is open to companies interested in selling. The platform’s huge user base and rapid growth rates make it an attractive option, but sellers need to be aware of a few important points.
Opportunities
- Large user base: Temu provides access to millions of potential customers in the Western world, offering an exciting growth opportunity.
- Aggressive advertising: While Temu’s aggressive advertising budget is dominating the Western market, it can also work to the advantage of companies selling on the platform. If Temu’s offering were to include European brands in addition to low-cost Chinese goods, these companies would also benefit from Temu’s heavy marketing efforts.
- Growing popularity: In addition to the challenges, this presents an interesting opportunity for Western vendors to grow with the popularity of the platform.
Threats
- Price competition: The low price level in TEMU and the large number of Chinese competitors means that price competition is extremely fierce. Even if you stand out from this offering with a quality product and brand, it is worth remembering that consumers on the TEMU platform are looking for lower prices.
- Quality problems: Customers easily associate the general quality level of the platform with all products sold there, undermining trust and sales for Western brands as well.
- Limited support services: Even the removal of direct counterfeits on the Temu platform can prove difficult or impossible.
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Although Temu’s growth looks very strong at the moment, it remains to be seen how well it can compete with Amazon and other major online retailers in the long term. Temu’s strategy of low prices and aggressive marketing has worked well so far, but long-term success also requires offering quality services and products.
Temu can be an attractive option for vendors looking for rapid growth and access to a large user base. At the same time, vendors need to be aware of the platform’s operating principles and the challenges and risks it poses.
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