What is Temu?

Temu is an international e-commerce marketplace that gives both sellers and manufacturers the opportunity to sell directly to consumers.

Although Temu was only launched in 2022, it quickly rose to become one of the world’s top marketplaces, rivalling Amazon and Walmart. By April 2023, the Temu app had been downloaded over 10 million times across 100 countries.

Its consistent marketing campaigns, daily promotions and low prices have worked in attracting consumers – 104.2m users in April 2023 – to use the app and order products time and again.

Temu is headquartered in the US and owned by parent company PDD Holdings. Temu’s sister company, Pinduoduo, is based in China and uses its large network of local manufacturers to sell directly to consumers across the globe too.

Why are Temu prices so low?

Temu products are sold at market-beating prices because the company partners with manufacturers that produce quickly and adapt products to customer feedback making innovation and change happen quickly.

They do this by:

1.Bidding Wars

Temu holds weekly auctions with its suppliers to encourage a bidding war where orders are won at the lowest price.

2.Local network

As they’re a part of PDD Holdings, Temu has access to their extensive network. This lets the Chinese manufacturers and suppliers send goods directly to customers once orders are made on Temu’s website or app.

3.Packaging

Customers’ orders are packed in Temu’s signature orange packaging and collected by courier J&T Express. The distinct uniform wrapping keeps costs low.

4.Tax

Temu is likely to be exempt from paying most export taxes in China as the Chinese government has adopted a zero tax rate policy on the majority of exports.

It’s also likely that they are able to save on tax costs by shipping small, low value parcels – worth roughly $30 on average – directly to consumers. For example, in the UK, the majority of Temu’s parcels would fall below the £135 import duty threshold, and in Australia, the $1000 AUD import tax threshold is very often never met.

5.Free shipping and returns

One of Temu’s USPs is its policy of free shipping and returns. Even though it can take up to 20 days for an order to arrive, it’s ultimately still free for customers. Both Temu and J&T absorb the cost of delivery, which Haitong Securities estimated it costs Temu roughly $9 USD per parcel by having this policy in place.

Additionally, when it comes to returns, it is often the sellers in China who absorb the losses when customers send orders back.

6.Promotions

Temu has made unique efforts in its marketing and advertising campaigns, particularly on social media. By the end of 2023, Temu is expected to have spent around $1.4bn USD on advertising on various social media platforms.

The company also uses various affiliate marketing strategies including partnering with social media influencers. Together, with extensive promotion on TikTok and YouTube, the company managed to attract their ideal audience: younger customers who are less likely to pay large amounts of money for their products.

Alongside this, Temu often attracts new and returning customers through its flash sales and limited time discounts when products first launch.