How Retail App Temu Lures US Shoppers With Mind-Bending Prices

On Oct 26, 2022

The prices seem almost too good to be true: Lenovo wireless earbuds for $3.70, an eyebrow pencil for 59 cents, two outdoor solar lamps for $6.39—all delivered for free. Welcome to Temu, which brings the rock-bottom prices and frenetic energy of Chinese ecommerce to US shoppers.

Temu’s website and mobile app launched on September 1, the first US storefront from Chinese ecommerce giant Pinduoduo. Amazon, eBay, and other Western online stores feature plenty of goods from Chinese suppliers. Temu’s bargain prices are an experiment in cutting out the middleman, by allowing Chinese vendors to sell their products directly to US consumers, and shipping directly from China rather than building out a network of US warehouses.

Temu seems to marry the “everything store” selection of Amazon with the low prices and social elements that have made fast-fashion juggernaut Shein so successful. Temu, like Shein, features extensive reviews and user photos on its product pages, and it promotes collaborations with influencers. So far, the strategy seems to be working. On October 24, less than eight weeks after it launched, Temu was ranked at 39 on the list of most downloaded free iPhone apps in the US, and fifth among free shopping apps, behind only Amazon, Shein, Walmart, and Nike.

Temu looked desolate when it first launched, but it now adds thousands of new products each day, the company claims. Rui Ma, an investor and analyst who founded Tech Buzz China, a podcast and investor community, says the store has evolved at “China speed”—the kind of fast-iteration and growth Chinese companies are known for, and that US companies can struggle to keep up with. “I think it’s offering a pretty good customer experience,” she says. “I’ve ordered from there three times already.” Her haul includes household items, and those dazzlingly cheap Lenovo headphones, which are among Temu’s top sellers.

Temu may be artificially tempting right now. It offers free shipping with no minimum purchase and widespread 30 percent discounts, but Pinduoduo could be subsidizing early customers in a bid to gain word of mouth. “The question for investors would be, how profitable is this?” Ma says.

Pinduoduo, one of the biggest online shopping sites in China, can afford to invest in a swing for US customers. The company, which did not respond to interview requests, listed on the Nasdaq stock exchange in 2018 and reported nearly $15 billion in revenue in 2021. In China, Pinduoduo allows companies—including farmers—to sell directly to consumers through a popular mobile app very different from those offered by US retailers. It includes gaming and social components, such as shopping via livestream. A popular group buying feature lets friends band together to get a product for an ultra-low price. But the company’s success in China is built on a logistics network of warehouses and delivery partners.

Winning the loyalty of US shoppers who have many other, more familiar options will be one of Temu’s greatest challenges, says retail marketing consultant Cathy Hotka. Its low prices appear to be winning converts, but they also come with a risk of blowback over poor quality and inaccurate sizing, she says.