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• How is Temu so cheap? 🛍️🛒

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 How is Temu so cheap? 🛍️🛒

So, the other day I went on a little shopping spree—you know, living the dream, buying wireless earbuds, a couple of cozy jackets, and even one of those robot vacuums that zips around cleaning your floors, fully expecting a total that would make my wallet light.

But when I went to check out? My grand total came out to .… well, next to nothing. I’m talking about “cheap dinner” cheap.

How? It’s all thanks to Temu. The shopping app that says: “Shop like a Billionaire”.

Now, I know what you’re thinking. “Shop like a billionaire? Really?”

Well, obviously, I’m not talking about private jets and yachts but even if you see a robot vacuum for $20, you think to yourself: What’s the catch here?

So what’s the real story behind Temu? Let’s dive into it.

Temu Here, Temu There, Temu Everywhere

If there’s one place you want to show off when breaking into the U.S. market, it’s the Super Bowl—America’s marketing Olympics, where companies throw millions of dollars just to grab a few seconds of attention. And Temu? Oh, they came to play.

It didn’t matter if you went for a bathroom break during the commercial break for Super Bowl 2024 because Temu made sure you watched their ad. How? 

By airing not 1, not 2 but 5 ads during the Super Bowl dropping an estimated $36 million.

With over 123 million people watching, they didn’t just advertise $10 smart watches— they made sure everyone knew how to pronounce its name. 

FYI: It’s Teh-Moo, not Teemu.

But the Super Bowl was just the beginning. Temu’s go-big or go-home marketing has been followed up with an all-out assault on social media. 

• Scrolling through Instagram - Another Temu Haul.

• Google wireless earbuds - yup, Temu’s got them cheaper than lunch.

The result? While Amazon has spent almost two decades building a U.S. base of 67 million users, Temu has amassed 51 million monthly active users in just 2 years—an impressive example of blitzscaling.

So, if Temu is such a new player, where is it getting the funds to fuel such massive marketing campaigns?

Who’s the sugar daddy here?

Pinduoduo: The Powerhouse Behind Temu

Temu’s rapid rise didn’t come out of nowhere—it’s backed by Pinduoduo, a company that’s been shaking up the Chinese e-commerce market.

Launched in 2015, Pinduoduo defied the odds and went toe-to-toe with industry giants like Alibaba and JD.com—and actually pulled it off. Today, they control 13% of China’s massive e-commerce market. But how did they do it?

Pinduoduo went the innovation route to tackle incumbents. First, they introduced social shopping, where friends and family could team up to score discounts, turning shopping into a group activity. Suddenly, shopping wasn’t just about finding deals—it became a social experience.

Then there’s gamification. Instead of browsing for products, people were completing challenges, earning rewards, and staying hooked. Shopping started to feel more like a game. And while competitors relied on middlemen, Pinduoduo went straight to the source. By working directly with manufacturers, they offered prices so low it was hard to ignore.

Now, they’re bringing that same strategy to the U.S. with Temu, betting that affordable prices, social engagement, and a little fun will capture American shoppers just like it did in China.

The Gamification of Shopping

If you haven’t ever opened up the Temu app, do me a favor and please do so. The moment you open the Temu app, it’s like walking into a mini-casino.

You’re greeted with flashing countdowns, spinning wheels, pop-up deals—it’s not just shopping, it’s a game, and every tap feels like a chance to hit the jackpot. Discounts flash on your screen like a slot machine payout, turning a casual browse into a full-on race against the clock.

It’s like Vegas, but with less regret.

But why does this work so well in e-commerce? Simple: it taps into the same psychology that keeps us hooked on games.

Every time you spin the wheel or unlock a deal before the timer runs out, you get that little dopamine hit—the rush of instant gratification. Whether it’s scoring a limited-time deal or unlocking a 50% discount, Temu gives you the thrill of feeling like you’ve outsmarted the system, even though you’re only scoring $3 wireless earbuds.

This gamified experience keeps shoppers coming back, not just for the low prices but for the fun of it. Flash sales, rewards for frequent users, and time-limited bonuses create a sense of urgency and excitement that turns each shopping trip into a mini-adventure. 

This is a brilliant business strategy. By keeping users engaged and entertained, Temu turns casual browsers into frequent buyers, ensuring that their attention—and their money—stays within the app.

The Economics Behind the Low Prices

But fun and games aside, what about those prices that you keep double-checking to make sure it’s not a glitch?

The jaw-droppingly low prices are what is keeping everyone hooked on Temu. But how exactly are they managing to pull it off? 

Don’t tell me you haven’t though once how is it possible to buy a smart-watch for less than the price of a Pumpkin Spice Latte?

It all comes down to cutting out the middlemen. 

On platforms like Amazon, third-party sellers have to go through a maze of steps to get products from a manufacturer in China to your doorstep. Here’s what that process typically looks like:

• Step 1: Order a huge batch of products from the manufacturer.

• Step 2: Pay for sea freight to ship those products halfway around the world.

• Step 3: Clear customs and pay duties to get the goods into the country.

• Step 4: Transport everything to a warehouse where they wait until someone finally buys them.

• Step 5: Factor in storage costs, handling fees, and the seller’s profit margin.

Let’s say you’re buying a simple phone case. After all these steps, a $2 phone case from the manufacturer might end up costing you $12 by the time it’s listed on Amazon. Every step adds a little extra to the price tag.

But Temu? They skip all of that.

Temu goes directly to the manufacturers in China and ships the products straight to you—no bulk ordering, no middlemen, no warehouses. Sure, it might take a week or two for your package to arrive, but when you’re paying $3 for something that costs $12 elsewhere, waiting a bit is a small price to pay. Literally.

There’s another trick Temu’s using to keep costs low: the De Minimis tax loophole. Under this U.S. rule, goods valued under $800 can enter the country without paying customs duties or tariffs. 

This loophole has been a game-changer for companies like Temu and Shein, allowing them to avoid the import costs that traditional retailers have to shoulder. In fact, Temu and Shein together account for an estimated 30% of all goods shipped under this rule.

To put it in perspective, retailers like H&M and Gap spend hundreds of millions of dollars on import duties each year. 

Temu and Shein? They bypass those costs entirely, giving them a huge edge when it comes to offering ultra-low prices - although that might soon change.

So, what’s Temu’s strategy? In many ways, it follows a familiar playbook in the tech world: burn cash now, acquire customers fast, and worry about profits later. Temu has deep pockets thanks to its parent company, Pinduoduo, and it’s not focused on making money right away.

Instead, it’s all about building a massive customer base. Once that’s in place, the profits will come. For now, Temu’s mission is simple: get as many people on board as possible and dominate the market before shifting its focus to profitability.

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