Temu is another e-commerce platform that launched in September of 2022. Think of it like Alibaba or Aliexpress. But with a different business model. Lower prices but faster shipping.
Temu has gone all out on marketing. Spending upwards of $100 million on advertising. For instance $14 million on a 30-second Super Bowl ad. With these marketing campaigns. They have grown exponentially.
Becoming the 6th most visited e-commerce website. With over 226.3 millions visits and downloaded by 50 million people!
Temu revenue is estimated to be close to $6 billion.
But the big question, is it profitable?
In other words,
Is The Temu Business Model Sustainable?
Temu sells goods directly from the factory mainly in China to the end consumer. Which drives costs down significantly. But the differentiator is the short delivery times. Unlike Aliexpress and Alibaba they transport products from China to the US using airplanes instead of cargo ships.
This enables Temu to boast shipping times of about 1 week in contrast to Alibaba’s 1-2 months delivery time.
It costs the company about $10 per order and with an average order size of about $25. After paying for marketing, production, and shipping the burn rate sets in. Temu is definitely losing money.
All these perks are incredible for the end consumers, however, they come at a cost. According to Wired, Temu is burning cash at an annualized rate of about $500 million - $ 1 billion a year to run its operations.
Temu’s current business model is unsustainable. If so,
What’s The Game Plan?
By spending so much money in the short term they can attract enough loyal customers that will continue using their e-commerce platforms even after they raise their prices.
Will this strategy work? In my opinion no; if the whole concept is based around only offering unbranded products and cheap prices. The moment prices are raised I don’t think customers will stay around.
Amazon had this same approach. But remember, Amazon only became profitable by implementing other services such as Prime membership or AWS services.
Therefore the only way I see this strategy working is by Temu pivoting to other services.
Either way time will tell if Temu is on to something or this would be a big flop
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Looks scammy, wouldn’t trust it personally
I heard they can offer these low price also because they buy stock of other Chinese marketplace that are in financial difficulties at the moment.
Personally if they go up in prices there is no sense for me buying there, quality sucks for 50% of the items
It’s a Chinese information mining operation. The US hacked a bunch of Chinese shit we hacked back and Temu was introduce right after congress signal real consequence for tiktok.
It’s China using their overwhelming market power of cheap goods to try to tank amazon and ebay , both global American companies. But the entire purpose is still data and other things
its the war of money, wars are still going between giant nations but they fight with sales rather then weapons. the demage can be big and burn their citizens for real.
The fact that Temu is a Chinese app should be enough for a big red flag. Just sayin
“thEreFore tHe OnlY wAy i SeE tHis StrAteGY woRkiNG is By tEmu. piVOtiNG tO oThEr SerVicEs”, my brother in Christ, Temu is yet another CCP data harvesting operation. They don’t give a singular flying fuck about profitability. Good job shilling your newsletter though
i stopped using aliexpress months ago after they failed to refund me for items that never arrived and customer support is like talking to a brick wall, so i have just placed 2 orders with temu that are due soon, hopefully they will be ok, i used paypal to pay as i wouldnt want to give temu my debit card info ( i have experience of paypal being useless when things go wrong but feel bit safer using that )
Temu is in fact only a rebranding of pinduoduo and was always the competitor from alibaba but because of dirty things like malware they got removed from the appstores.
I wonder if they carbon offset the flights? Flying is very bad for the environment. It didn’t occur to me that they would airfreight things.
Think it’s safe to assume they are not 😂
Well in your argument youre bundling operating cost and gross margin as a snap shot of the present.
Since volume at scale changes the relationship where small gross margin will significantly change bottom line as well as OC lowering once they have their desired market share its hard to tell without a p&l and budget.
Penetration strategies are usually budgeted for 5-15 years.
If your strategy post-penetration isn’t at least 18 years, you’re in trouble.