After researching and participating in the global ecommerce market for over 20 years this is by far the craziest thing I have ever seen. Compared to this, even the rise of Amazon looked rather slow. Temu is breaking up with \u201cbest price, biggest selection and fastest shipping\u201d and replacing it with a \u201cmuch bigger selection, much better price and slow shipment\u201d paradigm that customers are adopting in such a rush that I am asking myself if Amazon\u2019s multi-billion investment in fast shipment logistic infrastructurewas maybe a stupid move.<\/p>\n
Who needs that in a F2C dominated world? Even with a better handle on import custom fees and a level game on the VAT side, Temu\u2019s products would be 30-50% cheaper than the same products on Amazon. Who wouldn\u2019t wait a few days to secure this discount? Is this understood? From what I could read so far on the topic, I am not so sure.<\/p>\n
Reuters\u2019 <\/em>@Arriana McLymore writes that Temu and SHEIN are \u201cdrawing millions of window-shoppers to their websites this holiday season, but they far lag market leader Amazon.com where it counts \u2013 turning those visits into actual sales.\u201d This view is referring to a market that is very similar to the \u201csold by China\u201d and not \u201cmarketed by China\u201d phases I mentioned earlier. We are now in the platform economy, where selling products is just a measure to collect even more consumer data which then could be offered through marketing programs to sellers. We know from TechHQ\u2019s @Dashveenjit Kaur that Temu is the \u201csecond most popular e-commerce app in the US, behind only Amazon Shopper.\u201d<\/p>\nTemu is gathering data quicker than Amazon which is why Temu\u2019s parent company, PDD Holdings, overtook online giants like Alibaba only five years after its foundation. And to be honest, Temu is turning these visits into lots of sales, leading to $5-10 billion in revenuein the US alone in 2023 \u2013 only one year into the business.<\/p>\n
Reuters <\/em>also writesthat Temu is \u201csuccessfully taking on U.S. dollar stores including industry leader Dollar General.\u201d I disagree that this revenue comes mainly out of the dollar store\u2019s pockets. According to the article, as of November 2023, \u201cTemu accounted for nearly 17% of market share in the United States within the discount stores categories.\u201d This revenue comes more from Amazon than from dollar stores already. It\u2019s one of the oversights I am experiencing in those discussions, that experts only see \u201ccheap stuff\u201d on Temu, but in reality almost everything we can move by hand comes from Chinese manufacturers these days including the high quality merchandise, like your new smartphone, drone, battery powered LED lamp, etc.<\/p>\n@Tracy Wen Liu has another point saying that the main limitation Temu faces is not the counter offer of Amazon or Walmart, but limited logistics capacity. Sellers allegedly \u201caren\u2019t able to ship their products because there isn\u2019t space.\u201d Analysts are also concerned that due to low prices, Temu \u201cmay struggle to turn a profit\u201d and another articleestimates that Temu is losing $30 per order. I don\u2019t necessarily agree with this estimation. I believe it would be closer to losing $10 per order, although with two million orders per day processed in December, that still amounts to a big loss.<\/p>\n
But isn\u2019t there more to consumer decision making than just price? @Julia Waldow at Modern Retail<\/em>writes that for brands looking to compete on price, \u201cthere is little hope. But price is just one of the variables.\u201d While it\u2019s true that Temu is also \u201cchanging the way advertising is conducted,\u201d my recommendation is to really look into potential retailers\u2019 unique selling points and adapt quickly.<\/p>\nThe retail market lost ten years during Amazon\u2019s reign, still believing more curated assortment (less) and offline service (stores) will convince customers to finally come back. If they do the same now in a F2C world, this is just a guaranteed path to defeat. F2C is here to stay and by mixing it with a true approach to discovery commerce, all search based commerce approaches might run into a problem.<\/p>\n
Please ignore for a moment the negative economic and ecological impact of a Temu\/SHEIN dominated retail industry in the US and Europe. Here are the questions I am asking clients in strategy meetings to help understand the impact this kind of marketplace is having on their businesses. What is changing now and how are you affected by\u2026<\/p>\n
\nAn upside down supply chain where products can be created and shipped within days.<\/li>\n Discovery driven commerce where customers don\u00b4t need to actively search anymore but are truly inspired.<\/li>\n A world where every business model that needs to make money based on a product margin eventually pays high fees to the platform that owns customer access.<\/li>\n Where the speed of development (app, product data, etc.) renders every board meeting decision useless as at the time the problem statement is agreed on, this specific problem is not relevant anymore.<\/li>\n<\/ul>\nWhen we started our Spryker platform I quickly adopted the quote \u201cinnovate or die.\u201d It never felt more relevant than now. Santa Claus from China is knocking \u2013 13 million actually.This is the number of sellers active on PDD Holdings.<\/p>\n
When starting to analyze Temu over a year ago I thought it would be another passing brand. Now it\u2019s started phase 3 of ecommerce. Now even well developed platforms look like old slow moving giants in comparison. Regardless of how we feel about this change, we need to accept that it\u2019s something businesses will need to adapt to.<\/p>\n
What do you think? Am I too pessimistic? What do you believe the future holds for Temu and other marketplaces of tomorrow?<\/p>\n
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