Unless you happen to have been living under an extremely large rock with no internet for the past couple of years, you can hardly have missed the meteoric rise of the Chinese ecommerce platform Temu.

Even if you haven’t bought from them, chances are that you’ve been bombarded with Temu store ads (I see them all the time on the BBC news website for example as well as on Flipboard).

Who or what is Temu?

Temu is an online marketplace, belonging to the Chinese Pinduoduo Group (PDD), founded by Colin Huang (one of China’s 5 richest entrepreneurs) & launched in May 2022. They launched in Europe in May 2023.

The site works with the tagline “Temu: shop like a billionaire” and is known for the rock-bottom pricing & heavy discounts, as well as for selling anything and everything… In 2023 Temu topped the download charts of various app stores worldwide and has been aggressively targeting market share in many markets around the world. (I counted 63 countries that they ship to on their website.)

Business Model of the Temu Store

As it’s a marketplace, consumers don’t actually buy from Temu themselves but from the manufacturer.

In the beginning the platform selected the products as well as determining pricing (based on AI driven analyses), being responsible for logistics and after sales. They implemented a policy of zero entry fees and zero deductions for merchants looking to sell there, helping many smaller manufacturers dare to enter the US market once again.

This model may now be changing to a semi-managed model (according to Late Post), transferring responsibility for overseas warehousing, freight and returns to the merchants on the platform in order to reduce Temu’s losses. Free shipping has been costing them a fortune!

The so-called semi-managed model means that the pricing and operating rights still belong to Temu, but sellers do not need to supply and warehouse goods domestically in China. Instead, they can use their inventory in overseas local warehouses (even Amazon FBA warehouses) to directly put them on Temu for sale, skipping the previous process of product selection, sample sending, and version review for domestic sellers. This makes it attractive for merchants to sell on various platforms including Amazon, Walmart and Shein. Shipments coming in directly to customers from China are duty free in the US if under the value of $800 (there is a lobby to reduce this to $10) or for the EU €150 which also keeps prices down for consumers.

Why are cross border exports a topic in the last 2 years?

The surge in cross-border e-commerce from China can be attributed to factors such as overcapacity in factories, as many Western brands have shifted production to cheaper countries like Vietnam and Bangladesh. Chinese webshops effectively utilise this excess capacity to meet consumer demand globally. Also, the Chinese domestic economy has slowed down significantly so accessing international markets helps create additional demand.

Chinese ecommerce often rests on various geographic manufacturing clusters with their own self contained micro supply chains. Design, sourcing and manufacture can all be completed with an extremely short turnaround – ideal for a platform like Temu which has a massive churn on their range – if the data shows that a product isn’t doing as well as expected it’s immediately swapped out for another.

It’s hard for many producers to gain traction on Amazon though as the platform forbids many of the tactics which are typical within Chinese ecommerce, such as offering coupons or freebies for positive reviews. Temu offered an opportunity to clear the post-covid overstocking from the domestic slow down in China but at the same time, it’s really hard for producers to make a profit there.

Some numbers

I gathered these from a whole host of sources, so if some of them contradict one another or are not clearly defined, then I’m sorry!


  • It’s been estimated that Temu had a GMV (= gross merchandise volume) of $16bn in 2023 and that that could triple in 2024.
  • Last July the 7- & 30-day customer retention rates for Temu were at 18.5% and 13.5% so had overtaken eBay, Wish & Shein and were approaching Amazon levels of “stickiness”.
  • As sales grow in other regions, the share of US business is dropping from 60% in early 2023 to around 40% at the end of the year.
  • Average order value in the US has increased by around 30% – this is hard to quantify exactly, but estimates are at between $37 and $50 depending on which source you look at.
  • Goldman Sachs estimated that approximately 28% of PDD’s revenue in Q3 2023 could be contributed by Temu.


  • Around 1 in 4 Germans have already bought from Temu (26%) and 15% of Americans
  • As of April 2024 I counted 63 countries on the website that Temu would deliver to
  • At the end of 2023, the app had been downloaded 200 million times across 47 countries. This is partly a result of the gamification whereby buying multiples as a group brings further discounts (this users-bring-users approach was also used by Pinduoduo (PDD) when they started out in 2015 & is of course a way to keep costs of customer acquisition down a little).


  • Temu’s 2023 marketing budget was estimated at between $2-3 billion. 
  • Before the Super Bowl commercial in February, Temu was spending $100 – $150 million on marketing each month. 
  • The 2 x 30 second spots at the 2023 Superbowl were rumoured to have cost $14 mn
  • In August 2023 alone, Temu spent more than $300 million on advertising.
  • In the 2nd half of last year daily marketing was in the tens of millions of dollars across Meta and Google, forcing Shein to up their promotional spend
  • Temu is still buying up as much online traffic as possible, especially from Google and Meta, regardless of costs and ROI. It ranked first in the download list of every country it launched in.
  • From May, Temu increased spending on Twitter, Snapchat, Line, etc. because Google and Meta no longer had enough traffic to allocate to Temu
  • When US order volume growth slowed down, Temu moved marketing expenses to other markets and sped up launching in other countries.


  • Temu shipped 1.6 million packages per day, mostly to the US. This volume is close to Shein’s level at the start of 2022. Temu expected a volume of 2.2 million packages per day by the end of 2023.
  • The first leg of logistics, from merchants to a Temu warehouse, costs $1 and is split between Temu and merchants. The second leg, from a Temu warehouse to an overseas transhipment warehouse, costs $4-$5. Domestic delivery in the destination country costs $3-$4. This is for the US and for the original fully managed model, it’s changing though now with the semi-managed model I mentioned above
  • After warehouse capacity problems following Temu’s Super Bowl commercials, Temu expanded to 26 US warehouses and tightened logistics processes.
  • Shipping is being transitioned to seafreight for many markets to cut costs and also because airfreight demand grew faster than supply in 2023


  • Temu is using 90,000 suppliers to provide over 1 million SKUs. 55% of those suppliers also sell on the Pinduoduo and Duoduo Maicai (PDD’s community group buying division).
  • The overlap in product categories between Temu and Shein is 30%. The overlap in customers is only 5%. Still, Temu is trying to improve its fashion offering and is promising apparel merchants a 20-25% margin.
  • Prices of products on the Temu store tend to be about 75% of the price on Shein. But they are expected to even out over time as Temu is forced to gradually end its subsidies.


  • Temu has up to 4000 employees as well as up to 50,000 outsourced sorting workers.
  • Many employees shifted from PDD’s domestic projects to Temu including at the management levels.


  • Profits from the Pinduoduo app finance Temu for now. PDD also shifted marketing budgets from the domestic market to international markets.
  • Temu’s overall loss rate is around 30%-35%. Marketing expenses and logistics form the highest portions of the losses. A Temu order cost the company around $32 in 2023, including $8-9 in logistics costs. Hence the urgent need for a restructuring of the business models
  • The platform is prepared to suffer losses for three years.

What are the potential issues?

As a consumer

Probably the huge swings in product quality are what bothers consumers the most. The way that Temu works with their suppliers means that firstly they are always being squeezed to reduce prices (so of course they will cut corners on quality) and secondly the ranges are swapped around so fast that the product you ordered may no longer be available.

Your first experience on the platform could look something like this:

3 clicks into the app, already 3 pop-ups: “3 free gifts for new users”. “Exclusive offers for SMS subscribers.”” Coupon wheel of fortune: win between 10 & 100 euros”. Of course, the wheel lands on the jackpot, so you’ll have a €100 coupon if you buy 3 products.
Then come the special offers: 5 pairs of sneaker socks for €0.54, drill sets for €1.97, an icecube mould in the shape of a hand grenade… Of course everything is “reduced” by 50-90%. Mini prices, poor quality and gamification & those are just the initial impressions!

Next up are the thoughts about sustainability – ultra fast fashion and mountains of plastic being transported halfway round the world are anything but good for the planet, but when prices seem so low then many consumers are tempted, & worries about the environmental footprint go out of the window.

What about other ethical aspects? Can the workers in the factories supplying Temu possibly be being paid a fair wage if the end price for the products is so low…? Again, if Temu are pressurising their suppliers to drop prices then corners will be cut somewhere, and working conditions are unlikely to be great, at either the productions or at Temu themselves. There have been several reports about poor working conditions within the PDD Group after 2 workers died in 2021 – 1 a suicide and the 2nd collapsing after arriving home after midnight after a long shift.

As a merchant

For brands selling on Temu, the platform is a mixed blessing. Firstly, the marketplace offers the opportunity to sell into the US without having to navigate via Amazon, who charges significant fees to sellers.

Chinese webshops are often misunderstood, leading to misconceptions about the quality of their products and their business models. Contrary to popular belief, the low prices on Chinese webshops don’t automatically correlate with inferior quality; in fact, many offer products of comparable quality to those found on platforms like Amazon. Instead of dismissing these price differentials, it’s crucial to examine the underlying reasons behind them. So what I’m saying here is that the quality may be low, but it’s not necessarily any worse than what you’d get on Amazon at a higher price, and sometimes the quality is pretty decent.

Temu typically sells products sourced from the same suppliers as those found on Amazon, where a significant portion of sales come from Chinese merchants. The pricing structure and fees imposed by platforms like Amazon are much higher though. Amazon retains over 50% of the sales price in the form of commissions and fees for services like SEA (Search Engine Advertising) and Fulfilment by Amazon (FBA), required for Prime listing.

Temu also retains control of the pricing of the products on their marketplace which can become a massive problem for their merchants. For example, if Temu decides to reduce the price on an item, the merchant has the option to take over those costs or risk being delisted. This is especially tricky when the goods are already in a Temu warehouse in China and shipping them back to the producer would also incur extra fees.

For Regulators

Here there are 4 main concerns:

  1. Data Privacy: Like many Chinese tech companies, both Shein and Temu have faced scrutiny over data privacy. Users have raised alarms about the amount of personal information collected by these platforms and the potential for misuse or data breaches. These concerns are particularly relevant given the recent rulings regarding TikTok in the US and Temu can expect to come under scrutiny especially if they continue to gain market share. There are already calls for the US-China Economic and Security Review Commission to take a closer look at the marketplace & their use of data on US citizens.
  2. Intellectual Property Infringement: Another issue is the alleged infringement of intellectual property rights by these platforms. Complaints have been made by various brands and designers regarding the sale of counterfeit or knockoff products on Shein and Temu. This not only affects the original creators financially but also tarnishes their brand reputation.
  3. Legal Challenges in Various Countries: Shein, in particular, has faced legal challenges in several countries, so it’s not unreasonable to think Temu could face similar issues. For instance, in India, Shein was banned in 2020 along with other Chinese apps due to tensions between the two countries. Similar bans or investigations have been initiated in other nations concerning data security and national security concerns.
    This also could include product safety issues such as CE marks for electronics or dangerous chemicals in toys (the Toys Industries of Europe umbrella organisation discovered that NONE of the toys they tested from Temu were suitable for children, and a German watchdog found a 95% failure rate)
  4. Ethical Concerns: In the US, there are concerns around transparency as to whether all Temu producers are complying with the Uygur Forced Labor Act (banning use of cotton from Xinjiang, a major cotton growing area within China). Similarly, there are questions under the EU Supply Chain law about the human rights situation at Temu suppliers.

For Competing Brands

From a business perspective, the main challenge for competing brands is the pricing strategy of Temu. They offer products at extremely low prices, often undercutting local competitors. To compete effectively, brands need to differentiate themselves through quality, branding, and customer experience. Emphasising sustainability, ethical production, and unique designs can also help attract consumers who are increasingly conscious of these factors.

It’s more essential than ever for brands to actively manage their reputation and address any concerns or criticisms promptly. Being transparent about sourcing, manufacturing processes, and data handling can build trust with consumers. Moreover, investing in customer engagement and loyalty programs can help retain customers despite the allure of cheaper alternatives.

Temu Store ads on Meta

Is Temu a threat for Amazon?

I would carefully say: not yet, although they certainly have the potential to be so in the future. They are investing hugely in their overseas markets and grabbing market share.

TikTok & YouTube are full of videos of influencers showing off their “Temu hauls” – both the good, the bad and quite frankly the ugly. And as long as consumers see the products as cheap enough to take a chance on the quality they will continue to buy on Temu instead of other platforms such as Amazon.

However the question remains whether they will be allowed to continue with unfettered growth or whether the authorities in the US or EU will intervene at some point. There are already calls for the de minimis customs free limit to be lowered from $800 in the US, or a new law imposing penalty fees of €10 per package in France (€5 from 2025. €10 from 2030 – this will also affect brands such as Zara or Primark as well as sales via influencers).

Amazon are unlikely to join a race to the bottom from a price perspective and as long as they are not perceived as supplying “mainly” Chinese goods then they can continue while perhaps considering how to adapt to the new world of ecommerce that has opened up now post-pandemic.

Some final thoughts

The Temu store / marketplace has stirred a whirlwind of concerns globally, ranging from ethical to legal and competitive issues.

Temu: shop like a billionaire advertising in Flipboard

Chinese marketplaces typically employ aggressive pricing strategies initially, subsidising products and offering free shipping regardless of order value. However, as Temu matures, they may introduce minimum order requirements and shipping costs in order to drive their own profitability. Despite these adjustments, I’d expect prices generally to remain competitive.

Many Chinese webshops operate on a ‘fully managed model’ or consignment model, where factories supply goods to the platform without engaging in marketing or sales efforts. Platforms like Temu utilise a bidding system for factory supply while setting consumer prices, allowing factories to focus solely on production. This model has been widely successful, with other platforms like Shein, TikTok, and AliExpress adopting similar approaches for their cross-border business. It seems as though Temu is starting to move away from this already a little in the name of reducing losses (estimated to be somewhere in the realm of $30/order in 2023 to the US), but the question remains how deep PDD Group’s pockets are.

Will a move to a partially managed model help the merchants who are being squeezed like lemons on the pricing front? Perhaps, at least for those who are also supplying Amazon and Shein in the US or Europe – probably less so for any who are exclusively supplying to Temu.

Concerns about labour conditions in factories supplying Chinese platforms are often not a binary good or bad comparison. Many of these factories frequently serve both Western and Chinese clients so are being potentially also regularly audited externally for their working conditions. That doesn’t mean everything is great, but it means it’s not automatically bad.

Rather than fixating on the success of Chinese marketplaces and their business models, shouldn’t we rather reflect on our own consumption habits? Cheap prices shouldn’t be the sole driver of purchasing decisions, as it’s crucial to consider the broader implications of our buying choices. Do we really need so much “stuff”??? Rampant consumerism is an ugly habit of modern society and as consumers we need to vote with our wallets, however the reality is price often wins over ethics.

Instead of dwelling solely on the data privacy concerns associated with Chinese marketplaces, we should focus on adapting to this evolving retail landscape. This is just the beginning of a new reality that requires thoughtful consideration and adaptation. Consider more broadly how much personal data platforms have about you or your company.

As the Chinese believe, every threat also inherently contains opportunity, so brands looking to compete in this landscape must focus on differentiation, transparency, and building strong customer relationships to thrive in the face of strong competition. Many will decide not to operate on Temu (in the same way that food brands may choose not to collaborate with certain hard discounters) but the marketplace is too big to ignore.

So as a brand you need to learn what you can so that your business can evolve successfully, whilst at the same time not simply disregarding Temu simply for being Chinese owned. They are not inherently either a hero or a villain, but opportunistic for sure.

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