Be­fore last week, I had not heard of Temu, the Chi­nese e-com­merce plat­form that has been in the news re­cent­ly be­cause of its rapid ex­pan­sion over the last year as a re­sult of its cus­tomers buy­ing a wide va­ri­ety of prod­ucts from the com­pa­ny at heav­i­ly dis­count­ed prices.

The com­pa­ny was in­tro­duced to me last week by my broth­er in France, where I was on hol­i­day.

He im­me­di­ate­ly sent me a link to the BBC Busi­ness Dai­ly pod­cast, which is ti­tled “Why is Temu so cheap.”

That pod­cast help­ful­ly pro­vid­ed its lis­ten­ers with some of the things they need to know about Temu:

• Its tagline is “Shop like a bil­lion­aire;”

• ↓It sells thou­sands of dif­fer­ent items from clothes to elec­tron­ics, house­hold prod­ucts and fur­ni­ture;

• ↓It is owned by the Chi­nese com­pa­ny, PDD Hold­ings, which was es­tab­lished in 2015 by Chi­nese soft­ware en­gi­neer and busi­ness­man, Col­in Huang, who first set up agri­cul­ture prod­ucts plat­form Pin­duo­duo;

• ↓It launched in the US in Sep­tem­ber 2022 and shipped to 50 coun­tries around the globe as at March 2024, in­clud­ing Aus­tralia, na­tions in the Eu­rope Union and Mex­i­co, in this re­gion.

In­ter­viewed by the Busi­ness Dai­ly pod­cast, Shaun Rein, who is an au­thor of four books on Chi­na and founder of the Chi­na Mar­ket Re­search Group, said Temu first rolled out in Chi­na the strate­gies that have been suc­cess­ful in its 50 cur­rent mar­kets.

“Temu is owned by Pin­duo­duo, one of Chi­na’s lead­ing e-com­merce play­ers, that ac­tu­al­ly eclipsed Ali Ba­ba in mar­ket cap­i­tal­i­sa­tion a few months ago. Pin­duo­duo is a mon­ster in e-com­merce in Chi­na. Ba­si­cal­ly, every Chi­nese per­son through­out the en­tire coun­try is buy­ing their prod­ucts, whether it be a speak­er or a tee-shirt or socks—when they are look­ing to buy a con­sumer prod­uct—on Pin­duo­duo.

“Pin­duo­duo has made tens of bil­lions of dol­lars in prof­it in the last year, with its stock dou­bling in price.

“So what they have done is that in or­der to ex­pand over­seas, they cre­at­ed this new di­vi­sion called Temu and they are do­ing the ex­act same thing that they did in Chi­na—bring­ing prod­ucts from the fac­to­ry, straight to con­sumers, all over the world at bar­gain-base­ment prices.”

Rein un­der­scored that Temu can sell its prod­ucts for less than its com­peti­tors, by cut­ting out the re­tail­ers (mid­dle man).

“Temu un­der­stands that con­sumers in these times of in­fla­tion and tur­bu­lent econ­o­my are look­ing to buy prod­ucts on the cheap. And Temu is al­low­ing com­pa­nies to be able to sell their prod­ucts at about a tenth of nor­mal prices to be able to sell straight to con­sumers around the world.

“How does Temu do this? Be­cause they are sell­ing straight from the fac­to­ries, they are most­ly sell­ing un­brand­ed goods. So for con­sumers who want to buy an ex­pen­sive t-shirt of­ten have to pay a 50 per cent pre­mi­um if it has a lo­go on it.

“By sell­ing it on e-com­merce, they are al­so able to cut out the re­tail­ers. So, they don’t have to sell through Wal­mart or Marks & Spencer or Ama­zon. They are able to go straight to the con­sumer, straight from the fac­to­ry, which is why they can have such cheap prices,” said Rein.

Ques­tions

Al­though I don’t think Temu is avail­able in T&T as yet, it is on­ly a mat­ter of time.

And, cer­tain­ly, the abil­i­ty of Temu to sell prod­ucts di­rect­ly from the fac­to­ry to the con­sumer, cut­ting out the mid­dle man en­tire­ly, is what par­tic­u­lar­ly caught my at­ten­tion about the pod­cast.

Would the abil­i­ty of a con­sumer in Val­sayn, Mar­aval, Lange Park, Diego Mar­tin or Trin­i­ty to buy clothes, toys, elec­tron­ics, house­hold goods, and even Christ­mas or­na­ments di­rect­ly from Chi­nese fac­to­ries, us­ing the Temu plat­form, im­pact T&T’s re­tail sec­tor?

If a se­nior pub­lic ser­vant liv­ing in Pe­tit Val­ley de­cid­ed that she want­ed to re­dec­o­rate her house for Christ­mas and she could get cur­tains at a frac­tion of the cost that the same prod­uct sells for lo­cal­ly, would T&T’s sell­ers of cur­tains and cloth be af­fect­ed?

In the fu­ture, if a lawyer liv­ing in Champs Fleurs de­cid­ed that she want­ed to en­ter­tain her col­leagues to Sun­day brunch, but on re­flec­tion thought that her cut­lery and din­ner­ware just would not cut it, would she pa­tro­n­ise a lo­cal store or pur­chase the items from Temu?

The ques­tions above are ap­pro­pri­ate be­cause it is quite like­ly that the Christ­mas or­na­ments, the cur­tains, and the din­ner­ware come from the same fac­to­ry in Chi­na, re­gard­less of whether it was ac­quired by T&T mer­chants or from Temu?

On the oth­er hand, what is stop­ping lo­cal re­tail­ers from reach­ing out to sup­pli­ers in Chi­na them­selves…and do some lo­cal mer­chants al­ready do that?

Will the US try to block Temu?

So, clear­ly Temu has the po­ten­tial to dis­rupt the lo­cal re­tail trade, just as oth­er glob­al e-com­merce com­pa­nies, such as Ama­zon and Wal­mart, have done.

PDD Hold­ings has Amer­i­can De­posi­tary Re­ceipt shares list­ed on the US stock mar­ket, Nas­daq.

Temu’s par­ent had rev­enues of US$38.8 bil­lion in its fi­nan­cial year end­ed De­cem­ber 31, 2023.

Ama­zon, on the oth­er hand, re­port­ed net sales of US$574.8 bil­lion in 2023, which means the Chi­nese com­pa­ny is a min­now com­pared to the Amer­i­can great whale.

But Temu’s rev­enue in 2023 in­creased by 90 per cent (in ren­min­bi terms), while Ama­zon’s sales were on­ly up by 12 per cent.

And it is easy to fore­cast that in the same way, the US gov­ern­ment is at­tempt­ing to ban Tik­Tok, if Temu’s growth in the US be­gins to dis­rupt its e-com­merce gi­ants, those com­pa­nies are sure to join with their gov­ern­ment in pres­sur­ing the Chi­nese com­pa­ny.

The pres­sure has al­ready be­gun.

In May 2023, last year, ac­cord­ing to Wikipedia, the Unit­ed States–Chi­na Eco­nom­ic and Se­cu­ri­ty Re­view Com­mis­sion raised con­cerns about risks to users’ per­son­al da­ta on Temu af­ter Pin­duo­duo, its sis­ter app in Chi­na, was sus­pend­ed from Google Play be­cause some of its ver­sions, not avail­able on Google’s app store, were found to con­tain mal­ware.

And in June last year, the Unit­ed States House Se­lect Com­mit­tee on Strate­gic Com­pe­ti­tion be­tween the Unit­ed States and the Chi­nese Com­mu­nist Par­ty stat­ed that Temu does not main­tain “even the façade of a mean­ing­ful com­pli­ance pro­gram” with the Uyghur Forced La­bor Pre­ven­tion Act to keep goods made by forced labour off its plat­form.

The com­mit­tee’s re­port de­liv­ered a crit­i­cal eval­u­a­tion of Temu, sug­gest­ing that there is an “ex­treme­ly high risk of forced la­bor con­t­a­m­i­na­tion with­in Temu’s sup­ply chains.”

The re­port al­so found that Temu had ex­ploit­ed Unit­ed States de min­imis rules to evade cus­toms en­force­ment.

Those cus­toms rules are an in­ter­est­ing av­enue for fu­ture fo­cus.