The secret of Temu’s success

19 March 2024 - 15:00

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What is the secret to Temu’s success? In this article, we’ll look at the many factors that made the Chinese e-commerce app so successful.

The secret of Temu's success

On the Temu website you can read the history of the ultra fast fashion online store. Searching for the secret to Temu’s success on this page, you instead end up coming across short paragraphs on payment security and delivery guarantees.

Temu tries to answer two of the most common questions for those who have even heard of resale sites like Wish or sales and production sites like Shein, namely: how do they offer such low prices and what is the quality of the products. The orange sales platform writes that it manages to offer low prices, indeed lower than the others, because it puts economically advantageous customers and producers in contact. Therefore one of the secrets of Temu ’s success (low prices) is explained through the elimination of multiple intermediaries, complete with shipping from factories to consumers. Furthermore, according to the Temu website, it offers top-quality products.

The secret of Temu’s success seems to be the "quality" and "reduced price" of the products. After all, this is the brand’s claim: “Shop like a billionaire”. But is it like this? Regarding the quality of the products, the hundreds of thousands of negative reviews speak for themselves, while there is a lot to be said about the system of selling products at negligible costs. It is not enough to link the poor quality of the products to their cost; the production system of these is the true dark side of the ultra-fast fashion giant.

The secret of Temu’s success is not even the exploitation of labor, even if it is an integral part of the strategy. The reality behind Temu’s success is hidden in the hands of one man and his plan to conquer the market: Colin Huang.

Temu’s success through the loss strategy: up to 30 dollars for each order

Every day thousands of products are placed on the most popular orange site in the world. This is precisely Temu’s secret for success, which ships approximately 170 million orders per day from China to every part of the world. Even these data alone show the pervasiveness of Temu, making it a huge success for a project born very recently.

The success of Temu, like other ultra-fast fashion shops from Asia, is given by the low and sometimes even zero price of the products sold. According to several experts, this is an aggressive growth strategy, which aims to swallow up the competition. Adrien Naeem, e-commerce sector specialist, tried to explain the "Temu model".

According to Naeem, the site is running at a loss. For each order Temu loses around 27-30 euros. The platform therefore aims to consolidate itself in the public imagination, as was the case for Amazon in the past. When opening Temu is as obvious as doing it for Amazon when thinking about a purchase, then the company will have achieved its goal. The steps of the strategy include: running at a loss in the first few years, investing in advertising through social media and other media (such as advertising during the Super Bowl which brought a 34% rise in app downloads), stifling the competition and, only after have consolidated, increase prices to have a viable model.

Beyond the model there is more: Colin Huang’s economic empire

Colin Huang is the third richest entrepreneur in China and the twenty-fifth richest in the world. This is the now well-known story of a self-made man, an entrepreneur who was not born with billions in his pocket, but who had the right idea for the right audience. Even before Temu, Colin Huang had already thought of an online site for reselling products that were difficult to find, especially to poorer consumers or those far from shops in larger cities.

With Pinduoduo the entrepreneur had already introduced those dynamics which were later refined, with Temu. Not only is the claim catchy, simple and that anyone can appreciate, but he also had the idea of inserting games into the site to lower or eliminate the price of a product. In the case of Pinduoduo, the goal was to share the link of a product with friends: the more shares, the greater the discount, until the item was free. For all his companies, Colin Huang’s target has always been the price-sensitive user who makes purchases while saving money for the entire family.

The secrets of success: exploitation and pollution

Bloomberg investigated to verify Temu’s supply chain. What emerged is that about ten products sold by the site for the United States come from companies located in Xinjiang. The comment of those who investigated joins the debate on exploitation in factories for ultra-fast fashion. In particular, it is the location of the companies that makes us believe that there is behind the facade a not new system of [abuse of the Uyghur people.

The United States has banned the entry of products from a common, but well-oiled practice which makes Uighur slavery the engine of the mass production of Chinese products marketed in the world.

Temu does not disclose its supply chain and does not respond to the allegations. Instead, he sued Shein - another ultra-fast fashion producer which in turn is accused of exploiting the Uyghur people imprisoned in the Xinjiang region - for creating exclusive contracts with manufacturers in China.

Finally, there is the issue of pollution. A company that pays attention to materials from the beginning to the end of the production chain cannot sell at low cost. The impact of ultra-fast fashion, on the dynamics of hyper-consumerism, is enormous. The formula is simple: many products, often updated campaigns, poor quality (high-impact material, especially petroleum derivatives such as polyester and not very healthy), and short life. The result is a new geography that redraws physical and political maps of waste and exploitation. It is this, all this, the secret of Temu’s success.

Original article published on Italy 2024-03-17 18:05:52. Original title: Il segreto del successo di Temu


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