Gen Z’s much-loved ultra-cheap throwaway fashion brand Shein that has its origins in China is facing challenges from multiple competitors who have emulated this enormously successful business model. A fellow-Chinese cross-border platform Temu is also off to a promising start. Temu ranks 2nd in the shopping section of Apple’s App Store in the US, following Amazon Shopping with 3.8 stars ranked by 339 people, says Sensor Tower statistics released in October, 2022. The platform is regarded as a successor to Chinese online fashion retailer Shein. Shein now ranks lower than Temu in the shopping section.
Temu takes on Shein
On September 1, Pinduoduo, one of the most popular Chinese e-commerce companies, launched a cross-border e-commerce platform named Temu, marking the firm’s first attempt to target the US market. Temu means “Team Up, Price Down”. Similar to fast fashion retailer Shein, Temu offers goods at incredibly low prices, although Temu’s offerings go beyond clothing. Customers can browse through 12 different product categories, including men and women’s clothing, kids’ fashion, accessories and jewelry, and bags and shoes.
Unlike Shein, Temu can rely on Pinduoduo’s pool of over 11 million suppliers and manufacturers to expand the number of merchants and items on its platform. Chen Lei, Chairman and CEO of Pinduoduo says Pinduoduo “Will not repeat what others have done” but will create unique value from the needs of consumers. Nevertheless, while many consumers are motivated to purchase due to low prices, a portion of consumers may conversely become wary of these ultra-low price-points. This explains why Temu’s top selling items are mostly daily necessities and gadgets, these products themselves don’t cost much and their quality won’t mean a lot to the customers. Although Temu’s top selling items remain daily necessities and gadgets, its categories have been gradually expanding, with products from new sub-categories such as kitchenware and decorative goods also rapidly increasing in sales. Moreover, the arrival of the holiday peak season in the US also led to a boom in festival products sales, all for an astoundingly low price.
Big attraction of group buying
Group buying refers to a way of buying in which consumers unite to increase their bargaining power. Making the sacrifice of small profits for more frequent turnover, merchants can offer discounts for group purchases below retail prices. This is a win-win scenario where customers buy at a more favorable price, while merchants earn a smaller profit per unit but enjoy much quicker sales and an increase in sales volume and profit overall. Temu brings group-buying to the West. On the app, old users can get a 40 per cent by inviting their friends to join the platform through a provided link. By increasing total sales volume, Temu is able to keep the price of their products extremely low.
PDD Overseas Support Program 2022
Pinduoduo Overseas Support Program 2022 was created to help Chinese companies explore overseas markets and, to some degree, pave the way for Temu. In the plan, several measures were taken to attract sellers to Temu. According to Pinduoduo’s arrangement, Temu is not only using various promotional methods to attract new sellers, but also ensuring product quality and merchant diversity through China’s strong supply chain.
In addition to low prices and discounts, Pinduoduo also mimics Amazon’s two key features: free shipping and free returns. In order to attract customers to place orders, Temu launched a limited-time Free Shipping discount for all orders. Currently, the delivery time of Temu products is generally 7-15 days. If the actual delivery time exceeds the estimated one, the platform will refund the goods in full.
