According to foreign media, Temu is frantically “burning money” to enter the US market. In order to maintain the high download volume of its users, Temu has taken a series of measures, including reducing product prices, providing subsidies to consumers, and providing free international logistics services. At present, Temu remains in the top few on the US App Store leaderboard. Since its launch in the US, Temu has been downloaded 50 million times in just seven months. According to WIRED’s analysis of the company’s supply chain costs, Temu suffered an average loss of $30 per order during its entry into the US market. China Merchants Securities, a financial company, calculated that Temu lost 4.15 billion to 6.73 billion yuan annually in the markets of Canada, Australia and New Zealand. In addition, the company reduces product prices by putting pressure on sellers, reaching almost unprofitable levels.
In the Chinese market, Pinduoduo attracts consumers through substantial discounts. Its main customer target groups are low-income people such as rural areas, which is different from the market dominated Taobao and Jingdong at that time. In the United States, Temu also wants to adopt the same strategy. Temu mainly subsidizes consumers by providing free international logistics. Data shows that even sending a small package from Temu’s warehouse in Guangzhou to the United States costs about $14. Even if logistics partner J&T Express bears some of the costs, Temu still needs to pay $9-10 per batch of goods. However, J&T Express is about to go public, and some analysts have pointed out that the logistics company has been building market share by subsidizing customers. However, once it goes public, it may be necessary to reduce these subsidies to improve profitability, which will also have an impact on Temu’s costs.
In addition to transportation costs, Temu also incurs an average loss of approximately $30 per order in the United States, including discount coupons and service management costs. This figure has been confirmed by internal personnel of the company, who mentioned that its long-term goal is for Americans to purchase 30 times from Temu per year, with an average order volume of $50, but this is a difficult target to achieve, Their main target consumer group is low-income consumers with an annual household income of less than $30000. The insider said that Temu believes that gaining brand exposure through advertising is an important strategy for expanding its consumer base, and plans to spend $1.4 billion on advertising activities in the United States this year, compared to $4.3 billion next year.
Temu is also putting pressure on sellers to reduce costs. Most sellers are striving to enter overseas markets, and many have a large amount of inventory that urgently needs to be processed due to the pandemic. Therefore, they see Temu’s listing in the United States as an opportunity to clear inventory. However, some sellers have found it difficult to make a profit once they enter Temu’s supply chain. Some sellers claim that they have almost no control over pricing, and Temu often requires sellers to lower product prices, otherwise they face the risk of being taken off the shelves. Temu’s entry into the United States has invested a large amount of money, which has also caused dissatisfaction among some sellers, but this may be a helpless move. As Chinese consumers’ consumption decreases, other giant e-commerce companies
Post time: Jun-13-2023