Marketplace Briefing: How Temu is pitching its platform, and the U.S. market, to merchants
This is the latest installment of the Marketplace Briefing, a weekly Modern Retail+ column about the ever-changing e-commerce marketplace landscape. More from the series →
After two years of rapid growth in the U.S., Temu is emphasizing its meteoric rise in its pitch to merchants, even as its parent company faces a cloudy outlook ahead.
In a slide deck obtained by Modern Retail, the e-commerce upstart lays out why prospective merchants should sell on Temu, how brands should approach selling goods to U.S. customers and what types of promotional strategies are best poised to succeed on Temu. At the same time, Temu is facing a tough road ahead between a bleak earnings outlook, stiff competition and heightened regulatory scrutiny. Modern Retail had the slide deck professionally translated from Chinese to English.
Temu did not respond to a request for comment.
Temu has garnered a lot of buzz since it stormed the U.S. market in September 2022 with its estimated $21 million Super Bowl ad package that encouraged inflation-pinched consumers to “shop like a billionaire.” The company has counted on a costly marketing blitz to win over shoppers, even outbidding retailers on advertising and putting pressure on them to compete. Indeed, a Temu spokesperson told AdAge that the company “credits its 2023 Super Bowl ad campaign for helping put the e-commerce giant on the map.”
But now Temu needs sellers to meet the demand it’s trying to create. As such, is looking to explain to prospective China-based sellers the e-commerce opportunities in the U.S. The slides appear to be geared towards merchants that have have sold through platforms that aren’t available in the U.S., such as Taobao and Tmall. With that, the company is pitching such sellers on the viability of selling goods in the U.S. through Temu’s platform.
Temu’s slide deck tells a story similar to what it’s telling the U.S. press. When it comes to courting U.S. shoppers, Temu attributes the wide viewership of the Super Bowl to its rise in the U.S., despite the eye-popping amount it reportedly spent on the spots that aired during the game. “The Super Bowl is the most-watched sporting event in the U.S.” with an “approximately 111.2 million audience, which is about 33% of the U.S. population,” according to one slide.
One question, though, is whether Temu’s marketing blitz is too aggressive to be sustainable. Data from insights firm Consumer Edge suggests that the discount web store’s explosive expansion has slowed. For example, Temu’s new customer acquisition is down by about half compared to last year for the months of May through July. Temu is also retaining customers at a lower rate. For shoppers who made their first purchase in the first quarter of 2024, 35% made a subsequent purchase in the following quarter. Fifty-one percent of shoppers who made their first purchase in the first quarter of 2023 also made a purchase in the following quarter.
To Juan Pellerano-Rendón, chief marketing officer at e-commerce logistics startup Swap, this could be a sign that Temu’s ubiquitous marketing hasn’t been enough to keep customers hooked.
“That level of spend is is something that is just unsustainable from a marketing standpoint because all all you’re driving is downloads,” said Pellerano-Rendón. “At some point those downloads have to convert to actual shoppers, and there’s no guarantee that just because they’ve downloaded your app that they’re then going to utilize it.”
Temu faces stiff competition from not just e-commerce stalwarts like Amazon but also newer entrants such as TikTok Shop, which launched last fall under parent company ByteDance and has steadily been growing market share. Like Temu, TikTok Shop is a China-backed company known for selling a range of items, especially beauty products, at staggeringly low prices. TikTok Shop aims to grow the size of its e-commerce business to $17.5 billion this year, Bloomberg reported.
“TikTok Shop is seeing the kind of growth or even bigger growth this year than Temu saw last year,” said Jason Goldberg, chief commerce strategy officer at Publicis Groupe. “They have very similar business models, very similar target consumers, but unlike Temu, Tiktok Shop has this huge asset in customer attention on TikTok that they get to monetize through TikTok Shop.
Temu pointed to its advertising-fueled growth as part of its value proposition to sellers. For example, one slide reminds merchants that Temu’s app saw 74 million downloads by July 2023 and topped Android’s Google Play store for 293 days. As of writing, Google indicates the Temu app has more than 100 million downloads and 4.78 million reviews. Temu summarized its surging popularity as such: “One store sells to the world, with unbounded growth.” Temu also claims to have set an expansion record in a single month when it entered 10 new countries in September 2023 alone.
Temu’s appeal also lies in its low-priced items, from $11.97 sweatshirts to $3.47 sunglasses. Temu has built its market share in part because the company subsidizes the cost of international shipping for its sellers. Subsidies also take place in the form of discounts and coupons for customers. Temu’s pitch to prospective merchants emphasizes sales and promotions, including lightning deals, to drive traffic.
In the slide deck, Temu emphasizes the benefits of its “semi-managed,” logistics approach, a model that makes it easier for sellers ship orders to customers using their own domestic warehousing, including facilities in the U.S. According to the slide deck, Temu doesn’t charge its merchants annual fees, commission fees, or advertising fees. Rising fees on Amazon, including fulfillments fees and ads, has increasingly become a pain point for sellers.
Trouble ahead
As Temu looks to onboard more sellers, the e-commerce company faces hurdles looking ahead. For one, merchants who sell on Temu’s platform have accused the the company of imposing hefty, arbitrary fines, as well as withheld payments. In July, hundreds of vendors protested outside of a Temu office in Guangzhou. Such conflict potentially dampens its pitch to new sellers.
Temu’s parent PDD also lost $55 billion of market value in August when the company warned that growth would likely slow. In addition to a murky earnings outlook, Temu is also facing heightened regulatory scrutiny and legal battles.
As Modern Retail previously reported, Temu and fast-fashion rival Shein have been engaged in a legal tug-of-war as the companies fight for market share in the U.S. Last year, Temu sued Shein over copyright concerns. In a more recent lawsuit last month, Shein alleged that Temu loses “an average of $30” on every sale and uses trademark infringement to make up for the losses. Temu also faces a class action lawsuit alleging that it’s sending customers unsolicited text messages.
Legislators in both the U.S. and the European Union are working to tighten rules around the de minimis excemption, which lets companies like Temu bypass duties and taxes for imports below $800 that ship from China to U.S. consumers. This has helped Temu, as well as Shein, keep pries low against e-commerce behemoths like Amazon.
Amazon has seized on Temu’s direct shipping model, with The Information reporting in June that it plans to open a discount store on its website that would ship products from warehouses in China directly to consumers. Separately, Shein launched a marketplace in the U.S. about a year ago, bringing it closer to the likes of Temu and Amazon.
Despite these troubles, PDD Holdings, which includes the Temu brand, posted a whopping 86% year-over-year surge in revenue in the most recent quarter.
Marketplace news to know
- Amazon’s AI bot, Rufus, will soon get ads.
- Thrive Market is getting into the ad space with a new platform built by Instacart.
- Google Shopping is launching a dress try-on feature in the U.S.