Marketplace Briefing: What a $20,000 container house for sale on Temu says about its ambitions
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 →
An automatic meat slicer for $3,100. A stainless steel ice cream maker for $1,600 and even a container house for $20,000. These are just some of the bizarre — and expensive — products now available from local warehouses on Temu’s online marketplace.
On the one hand, the hodgepodge of offerings on Temu is nothing new. Temu built its reputation as a digital flea market hawking ultra-cheap odds and ends like $11.97 sweatshirts to $3.47 sunglasses since it made its splashy U.S. debut in late 2022. Temu also forced itself into the cultural spotlight with an aggressive and expensive marketing blitz that included “Shop Like a Billionaire” Super Bowl advertisements. Temu quickly became one of the most downloaded apps in the country and positioned itself as a legitimate threat to the Sheins and TikTok Shops of the world.
The increased array of products on Temu signals that the e-commerce darling is no longer in the business of exclusively selling cheap dupes and knickknacks in the spirit of AliExpress and Wish. Throughout 2024, Temu focused on expanding its business beyond the “direct-from-China” model of shipping small packages through air cargo and started building out domestic warehousing in the U.S.
By expanding its logistics infrastructure to accommodate bigger and more expensive items, Temu is betting it can attract new customers, such as those looking for a broader range of products, and also shed its reputation as a discount-only online store. In doing so, Temu has its sights set on Western domination, competing with behemoths like Amazon and Walmart.
The question remains whether Temu will be able to pull it off. The company faces a tough road ahead, including stiff competition and heightened regulatory scrutiny.
“We’ve seen tractors for sale. We’ve seen furniture for sale. We’ve seen e-bikes for sale,” said Juozas Kaziukėnas, founder of Marketplace Pulse.
“Early on, Temu focused on being able to shock consumers with these super cheap items over time. It’s trying to do less of that,” he said. “If anything, Temu is trying to not only sell more expensive items but also sell more items at the same time to increase the average order value and thus achieve better unit economics.”
Modern Retail previously reported on Temu’s strategy to broaden its appeal in December, when sales representatives for the platform pitched footwear brands at an expo in New York City on the value of its marketplace. A spokesperson at the time told Modern Retail that shipping merchandise directly from local U.S. warehouses “allows us to diversify our offerings further, catering to various budgets and preferences while maintaining our focus on providing value.”
As Kaziukėnas put it, “A few months ago, I talked to someone at Temu, and they positioned this transition as going from cheap to affordable.”
‘Temu has proven the naysayers wrong’
Temu’s initial debut, particularly its expensive marketing blitz, raised questions about whether or not it could keep up with its own success. For instance, in a note to clients, Morgan Stanley analysts led by Simeon Gutman wrote, “Temu may not be able to offer its current low prices indefinitely, which could result in the erosion of its key value proposition.” It was a fair prediction; there are plenty of buzzy e-commerce companies that have failed to go the distance, including Wish, Jet and Zulily.
But Temu’s growth in the last two years shows the platform has more staying power than its predecessors, according to Sky Canaves, a retail analyst at eMarketer.
“Temu has proven the naysayers wrong,” she said. “One of the big differences between Temu and a platform like Wish is that Temu is owned by a company that also owns Chinese e-commerce giant Pinduoduo, so they have a lot more resources and experience to create a platform that has now gone global and drawn consumers worldwide.”
In the two years since its launch in the U.S., Temu has grown rapidly. Market research firm EcommerceDB predicts that Temu will more than double its gross merchandise volume to nearly $30 billion this year. That may seem minuscule compared to Amazon’s 2024 expected GMV of $757 billion, but the data shows Temu is gaining steam. Temu’s website now gets more than 800 million visits worldwide every month, according to Similarweb, and Temu was the most downloaded iPhone app of 2024 in the U.S., according to Apple.
Challenges ahead
Temu is not without its problems. For one, Temu needs sellers to meet the demand it’s trying to create if it wants to go head-to-head with Amazon. Shein has struggled for years to recruit more sellers to its third-party marketplace, particularly recognizable and big-name brands, according to Canaves, and Temu will likely face a similar challenge in onboarding more sellers in the U.S.
“It’s always a challenge to get name brands onto a new platform like that, where it’s untested, where there’s so many inexpensive products,” Canaves said.
Kaziukėnas agreed. “A huge hurdle is not only selling more expensive items but also finding a way to sell more expensive items from recognized brands,” he said. “Amazon still struggles to this day to get brands to sell on Amazon.” The fact that there are major brands like Birkenstock and Nike that refuse to sell on Amazon helps explain why Temu has focused its recruitment efforts on existing Amazon sellers, who may be more willing to join a new and emerging platform, Kaziukėnas added.
Additionally, legislators in both the U.S. and the European Union are working to tighten rules around the de minimis exemption, 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 keep prices low against e-commerce behemoths like Amazon. Temu has taken strides to reduce its reliance on de minimis by building out its domestic logistics in the U.S. Half of Temu’s sales in the U.S. come from those local warehouses, according to The Information. But Temu will still probably be forced to raise prices to maintain the same profit margin when changes to de minimis go into effect, Kaziukėnas said.
Amazon also won’t make it easy for Temu to gobble up market share in the U.S., and indeed the Seattle-based company has already taken steps to slow Temu’s growth. For instance, Amazon has reportedly offered some of its sellers incentives to drop Temu listings if they sell on both sites, per The Information. Late last year, Amazon also rolled out a Temu-like discount store called Haul that uses the same direct-from-China shipping model that made Temu famous.
Still, it seems to be ready for a long-term battle.
“I think Temu is still here to stay,” Canaves said. “The U.S. is a big market for it.”
Marketplace news to know
- Rakuten is leaning on AI to bring in more brands, the Business of Fashion writes.
- Walmart is doubling down on the metaverse with a new experience on Zepeto.
- TikTok may shut off the app entirely to U.S. users on Sunday if the Supreme Court doesn’t intervene with the band, according to sources speaking with The Information.