Ultra-low-cost e-commerce platform Temu has started selling to Japan, marking its first foray into the Asian market. The marketplace, the sister site of the Chinese discount e-commerce platform Pinduoduo, ships everything from clothing to electronics and home goods, mainly from merchants in China to customers overseas, at rock-bottom prices.
Temu has been a massive success since its launch in the US last year, where it has topped app download charts and created a shopping frenzy among consumers struggling with inflation and cost-of-living pressures. But the Boston-based company is also battling questions over how it can sell so much stuff for such low prices, whether it’s being transparent with customers, and how much environmental waste its operations generate.
The company, owned by PDD Holdings (PDD.O), has kept its US expansion plans relatively low-profile. Still, analysts say the Chinese company is seeking new growth channels outside its domestic market when its economy is slowing.
Since its launch in the US, Temu has made waves in the online retail industry by offering low-priced goods from a wide range of Chinese suppliers. The company’s model removes intermediaries and lets sellers directly connect with consumers to cut out markups. By contrast, big players like Amazon and eBay rely on their warehouses and logistics to deliver consumer items.
But some have questioned how the company can keep costs down and still make money when it’s taking in billions of dollars in orders each month from a global base of shoppers. To address those concerns, Temu plans to open a US warehouse and expand its supply chain to include more manufacturers that can ship products directly to customers.
Another way that Temu can reduce costs is by letting sellers tap into valuable consumer insights for free. The company’s analytics can help sellers optimize their product designs, identify target markets and schedule efficient production and order fulfillment. That can drive down costs and pass on the savings to consumers, encouraging more sales.
For example, in a recent social media campaign, Temu offered credits to consumers who signed up for the service and referred others. Some of those people could earn enough credit to receive free home goods without giving Temu their credit card details.
The move is part of an ongoing effort by the company to boost user numbers and loyalty in its US operation, which currently has more than 20 million registered users. The company says those users have bought more than 11 billion items worth around US$90 billion. The company’s US headquarters are in Boston, but it is still being determined if the local office has any warehouses or distribution centers. Temu’s Boston presence will likely be used for customer support and other operational activities rather than storing inventory. Temu says it’s looking into other locations in the United States for its next warehouse.