Chinese E-commerce Upstart Temu Gunning for Amazon

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The United States and China are locked in battles across a wide swath of issues, but the one that may be of most interest to consumers is the e-commerce challenge Temu presents to Amazon.

Temu, which launched in 2022, has gone on an advertising blitz that netted $2 billion for Meta and millions more for Google, The Wall Street Journal recently reported. The Journal said Temu disputed the $2 billion figure but declined to supply an alternative. For the second year in a row, the company also ran Super Bowl spots. The four commercials, which urged consumers to spend like a billionaire, cost an estimated $7 million each.

Temu still is playing David to Amazon’s Goliath, but U.S. shoppers have taken notice of the former’s more inexpensive offerings.

The question is whether consumers are willing to trade Amazon’s speed and quality guarantees for the risk that the merchandise in question may be of lower quality – if it arrives at all, experts told The Food Institute.

Amazon reported revenue of $574.78 billion in 2023. eCommerce Insights pegged Temu’s 2023 revenue at $14 billion and predicted it would outperform Shein, Wish and Alibaba this year.

“Consumer reviews indicate that Temu attracts customers with its competitive pricing and wide range of products. However, some customers have reported order inaccuracies and difficulties with customer support, highlighting areas for improvement,” Joanna Clark-Simpson, head of consumer research at the review platform, told FI.

Cody Bollerman, a web analytics instructor at the University of San Diego, said there’s no doubt Temu wants to expand its U.S. market share, but has yet to pose any significant threat while CEO Michael Yamartino of Route, which provides shipping insurance, said Temu shoppers are finding that company’s discount-over-speed model attractive.

“Since Temu launched, they’ve captured the boomer audience and found ways to counteract everything that Amazon’s known for,” Yamartino said. “This is because older shoppers are willing to be more patient in exchange for steep discounts. Additionally, navigating Temu’s app is easier than Amazon.

“Finally, gamification works – take Temu’s ‘spinning the wheel’ for discounts. Where millennials see through this tactic, since it peaked with the millennial demographic, gamification is new to many other shoppers.”

DealA CEO Oleg Segal said Temu’s future success will depend on whether it can maintain its low-price strategy while ensuring product quality and improving delivery times.

“Temu’s parent company has successfully captured a considerable share of the Chinese market by appealing to cost-sensitive shoppers, demonstrating its capability to scale rapidly and effectively. This model, when adapted for the U.S. and global markets, represents a potential threat to Amazon’s dominance,” Segal said.

Temu’s marketing blitz added to a loss of $7 per order in 2023, Goldman Sachs estimated. Advertising analyst Brian Wieser told the Journal if Temu decides the push isn’t working, that could pose a problem for Meta and Google, although China’s overall spending is extremely broad.

ShipMatrix estimated Shein and Temu ship 2 million packages a day to the U.S.

“I don’t see Temu ever coming close to being a serious threat to Amazon. As someone who sells on Amazon for over 15 years and who consults for startup and existing brands in the e-commerce world, there is no one close to being a threat to Amazon,” Evan Cohen of the consulting firm MyEcomGuide, told FI.

“I was very curious about Temu myself when it came out, but the issue that I’ve seen (along with feedback from others) is that I usually receive something in very poor quality compared to the listing,” Cohen added. “That’s unacceptable in the online world and is not a sustainable model.”