Temu's rapid rise: Threat to Amazon as market leader

Published: 2024-11-09 13:01:05 ET AMZN

Key takeaways

Recent statistics indicate that Temu, PDD's e-commerce arm, is rapidly gaining popularity worldwide. With its user base reaching 91 percent of Amazon's in August, it has become a formidable competitor in the global marketplace. A survey of 84 countries and regions found that more than 60 percent of users preferred Temu, especially prominent in Europe where 28 countries preferred the platform over others. This data, from analytics company Sensor Tower and reported by Japanese news publisher Nikkei, suggests that Temu's user base could surpass that of Amazon by the end of the year.

Temu's business model

Temu's success can be attributed to its low-price strategy, selling a large volume of unbranded goods and minimizing intermediate links in the supply chain to control price increases. The platform also uses local tax mechanisms for low-priced goods to effectively manage costs. When entering foreign markets, Temu adopts a model of "direct delivery" to consumers, reducing inventory management costs and further lowering prices.

Experts' views

Experts see Temu's triumph as a microcosm of Chinese e-commerce's rapid expansion on the global stage. The platform, which operates through PDD Holdings' temu.com website and Temu app, offers a diverse range of products, efficient logistics and competitive prices.

Regional expansion

Hong Yong, associate research fellow at the e-commerce research institute of the Chinese Academy of International Trade and Economic Cooperation, stressed that Temu's user base is approaching that of Amazon, but that continued efforts to improve the user experience, strengthen trust in the brand and improve competitiveness in the global market are crucial to its future success.

Market performance

Temu's regional expansion demonstrates this commitment. Data from Sensor Tower indicates that Temu was the top shopping apps on iOS devices in the U.S. in the third quarter, with more than 8 million downloads. In Southeast Asia, Temu's presence is growing rapidly with recent launches in Vietnam and Brunei, bringing its total operations in the region to five markets.

Global growth

By July of this year, Temu had expanded to more than 70 countries and regions, achieving remarkable global growth. According to media outlet 36Kr Temu's gross merchandise volume reached about $20 billion in the first half of the year, exceeding its full-year sales target of 2023.

Challenges and opportunities

Hong claims the website's success reflects China's cross-border e-commerce expansion, driven by government policy support, market diversification, increasing brand influence and technological innovation. He acknowledges challenges such as increased competition, high logistics costs, intellectual property protection concerns and cultural differences. Hong emphasizes the need for Chinese cross-border e-commerce platforms to prioritize branding, technological innovation, deepen international cooperation and strive for higher quality global development.

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