Pinduoduo's Temu makes big waves in US market

By CHENG Lu

"To take advantage of the free shipping and extremely low prices (hair clips and hooks cost me a total of 16 cents), I purchased seven products. It was completely insane."That's how one Manhattan buyer felt about her time at Temu.

Temu is Pinduoduo's international platform that debuted in the United States at the beginning of September. With only a month and a half, it is already the most downloaded shopping app on Google Play in the US. The number of days it takes to receive an item from Temu has fallen from 10 to 5, but service could be better. Problems include poor customer service and sloppy packaging.

Let's battle commence

The start of the shopping season has seen a battle between ByteDance, SHEIN, and Pinduoduo. With discounts of up to 90 percent, Temu, has opened its doors to the US market incredibly quickly.

Temu duplicated the successful Chinese model of focusing on small towns and advancing up market. But will cross-border retailers follow Temu’s lead? Will US consumers be loyal to Temu? These are not issues that can be remedied only through slashing prices.

The secret to Pinduoduo’s start is nothing more than obscenely low prices. Discounts, free delivery, and unconditional returns are all over the platform’s front page. Small and medium-sized Amazon sellers with weak supply chains felt the effects of the pricing right away. Items are selling for a third of the cost at Amazon.

SHEIN, the fast-fashion house, made US$10 billion (70 billion yuan) last year. Temu's early marketing, prices and consignment model are strikingly similar to SHEIN. All pricing, sales, marketing, logistics, delivery, and after-sales services are handled by Temu.

Temu's competitiveness centers on the supply chain. Pinduoduo’s marketing and supply chain expertise helped it grow during a consumer downgrade in China’s lower-tier cities, and the assault on North America comes as US inflation is at a 40-year high.

Dangerous maneuvers

Temu has started poaching employees from SHEIN in addition to vendors, reportedly offering to quadruple salaries. In reaction, SHEIN has reportedly threatened its employees that they will never be reemployed if they quit for Temu.

One seller describes Temu as an “ecological plague” whose strength makes it tough for competitors. In his perspective, cheap pricing is like saying “don't purchase me at regular prices.”

As Amazon’s fees climb, the platform becomes less viable each year. Amazon’s approach toward Temu may be compared to Alibaba’s attempt to reach global markets using cheap Chinese goods a few years ago.

As Jeff Bezos said in his autobiography, “Executives noticed that Alibaba was charging less than Amazon and was concerned that Alibaba CEO Jack Ma, who was highly competitive, may make the entire service free to secure a solid footing in Western countries, despite the little traffic to Global AliExpress in the US.”

Amazon's retail posture has since changed with the “Small and Light Program,” perhaps due to Temu’s competitiveness. “Small and Light” is a specialized delivery option for small fast-moving, low-cost goods.

Knowing the territory

Pinduoduo’s user base has grown to over 800 million in seven years because of viral marketing, and has persisted with this strategy rather than imitating the fragmented approach of US sellers. Temu advertising is now on Facebook, TikTok, Instagram. and YouTube.

Unboxing videos and tweets increase traffic. On Twitter, if users share the link with new users, both sides can gain a 40 percent discount or US$20 for bringing in five unique individuals.

Pinduoduo’s Q3 report shows sales and marketing costs reaching 14 billion yuan, up 40 percent yearly. Temu’s placement budget reportedly hit one billion yuan in September alone and will exceed seven billion yuan in the next year.

Temu’s present strength is that its advertising is concentrated on a single nation, while AliExpress covers numerous countries. In addition, Temu's ads are actively responding to local culture. Pinduoduo has merely shifted the pie so far; if it directly threatens Amazon's pie, it may provoke stronger countermeasures.

Quality always triumphs

Pinduoduo’s previous method was low-prices to increase users. The domestic site didn't become worried about the “poor quality” moniker until just around its IPO in 2018.

Breaking into and establishing a presence in the mainstream North American market has long been a challenge for Chinese firms and Pinduoduo is very far out of the woods yet.

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