What is Temu – and is it really a threat to Amazon?

Temu is a name that western internet users have become used to seeing over the past eighteen months, appearing frequently in YouTube, gaming, and social media ads accompanied by its memorable slogan, ‘Shop like a billionaire’.

Most recently, Temu made a splash during the Super Bowl, notoriously the biggest event in US broadcast advertising – teaching millions of viewers how to pronounce its name in the process. (It’s not “Tee-moo”, as many had assumed, but “Teh-moo”).

Even those who keep a close eye on the retail and ecommerce space could be forgiven for wondering: Where exactly did Temu come from? How has it become such a ubiquitous name in such a short space of time? And does it really pose a threat to ecommerce juggernaut Amazon?

What is Temu?

Temu is an online marketplace characterised by low-priced goods, a vast range, and a user experience that nudges people towards products they didn’t know they needed. The ecommerce brand launched in the United States in September 2022 and expanded progressively throughout 2023 in North America, western Europe and Asia. It is now present in 49 countries, most recently launching in South Africa.

Temu is owned by Chinese company PDD Holdings, a name that may be familiar to those who have been keeping a close eye on the Chinese ecommerce space: PDD Holdings also operates Pinduoduo, a Chinese online retailer of low-priced goods that made rapid inroads into the Chinese market following its launch in 2015.

In November, PDD Holdings overtook Alibaba Group, the parent company behind Chinese ecommerce juggernaut Alibaba, to become China’s most valuable ecommerce company – and a lot of its recent growth is thanks to Temu. And while Pinduoduo’s ecommerce sales and market share still lag behind rivals Alibaba and JD.com, it shows that the company is a force to be reckoned with.

How is Temu growing so quickly?

Most companies, when they venture into expanding overseas, will launch in a few select markets and make sure that their foothold is secure before they expand into others.

Temu, however, has been much more aggressive with its expansion, making sure that it has a widespread presence across international markets. Its marketing has been similarly aggressive; writing for The Atlantic, Amanda Mull reflected that Temu is “speedrunning American familiarity” with its prominent and ubiquitous television ads, adding that, “[Advertising is] almost never enough, on its own, to make a product or service into a phenomenon from scratch … But in the global consumer system, advertising of some sort usually is a necessary pretext for whatever success you’re trying to achieve.”

Temu’s advertising push resulted in it becoming the most downloaded free app in the US in 2023, and it also topped the download charts alongside fellow Superbowl advertisers Microsoft Copilot and Paramount+ in the wake of the event. The data suggests that downloaders are sticking around, too, with Apptopia analysis revealing that the average user spent 7-8 minutes longer on the Temu app compared to rivals like Amazon, eBay and AliExpress.

Temu also enjoyed record US sales in the wake of Black Friday 2023, although data from Bloomberg Second Measure suggests that its sales declined during December and January – all the more reason to throw its weight behind advertising during the Superbowl.

Temu’s approach to international expansion also shows an understanding of the global, interconnected nature of marketing (and communication): even when advertising is specific to one region, it rarely just reaches that region. I had heard about Temu before I even saw an ad for the company, because it was already widely talked-about (both on- and offline) and I’m well aware of its Superbowl advertising push despite not living in the US. A global footprint therefore allows Temu to take advantage of awareness wherever it is.

The drawbacks of omnipresent marketing

There are drawbacks to generating this much buzz in a short space of time. Search for ‘Temu ads’ and you’ll quickly encounter articles and discussions critical of the volume of Temu advertising, with many inquiring how to remove or block Temu ads from browsers or places like Google Shopping.

A lot of the negativity seems tied to perceptions of low quality. It’s an association that Temu will need to shake if it wants to establish itself as a serious competitor to the likes of Amazon (and the signs suggest that it does). Its Chinese counterpart, Pinduoduo, faced similar challenges as it scaled, and responded by cracking down on millions of listings for counterfeit and low-quality goods as well as by establishing a fund to handle after-sales disputes. While this didn’t completely solve the quality issues on Pinduoduo, it showed a commitment to addressing the problem.

What’s the difference between Temu and Shein?

A Chinese online retailer that has rapidly captured the attention of overseas consumers with rock bottom prices and a concerted advertising push – readers can be forgiven for thinking that this sounds a lot like the rise of Shein a few years ago.

And indeed, there are similarities between the two companies – business rivals who are currently jockeying for dominance over the category of selling low-priced goods made in China to overseas customers. It might surprise some to learn, however, that Shein has been around since 2008, originally launched as ZZKKO by entrepreneur Chris Xu. It launched in the United States in 2017, and by 2021 had become the US’ largest fast fashion retailer, soaring to prominence during the early years of Covid-19 aided by savvy use of TikTok marketing.

Shein is also exclusively a clothing retailer, while Temu has a broader remit that includes homeware, toys and games, pet supplies, health and beauty, and yes, clothing. There are differences in sales format, as well, although not as many as there used to be. Temu is an online marketplace selling a variety of goods from third parties, while Shein originated as a retailer of its own clothing products, but launched a third-party marketplace in May – bringing it into even more direct competition with Temu.

Temu and Shein’s rivalry has already resulted in multiple lawsuits, as Shein sued Temu over alleged intellectual property infringement in December 2022, while Temu accused Shein in July 2023 of forming exclusive agreements with manufacturers that barred them from working with Temu.

However, Temu has also been happy to take on manufacturers dropped by its former rival due to no longer meeting Shein’s requirements, according to the Financial Times, and has offered them a platform to sell their excess stock.

Does Temu really pose a threat to Amazon?

Much has been made of the potential for Temu to threaten Amazon’s dominance of the US ecommerce market – but how much of a threat does it really pose?

Despite Temu’s outsized marketing push and corresponding surge in popularity, its actual share of the retail market in the United States is still very small, estimated at around 0.2% [Chinese-language source] by Chinese publishing and data company 36Kr. Within the discount stores category, however, Temu accounted for nearly 17% of market share in November 2023 – overtaking discount chain Five Below (8%) and nipping at the heels of Dollar Tree (28%), although still well behind category leader Dollar General (43%).

It remains to be seen what impact Temu may have on sales at brick-and-mortar discount stores. However, Temu’s ambitions for US ecommerce don’t end with the discount category. In January, the company reportedly held a recruitment seminar for suppliers in China that own warehouses in the US and Europe. Meanwhile, Amazon made its own pitch to Chinese sellers in December, announcing plans to open an “innovation centre” in Shenzhen and promising to “promote sellers in the Asia-Pacific region in product launch, brand building, and digitization.”

Many Chinese manufacturers have realised that an Amazon listing is a fast track to gaining a foothold in the US market – see the related trend of Amazon aggregators,  groups of brand grown chiefly via FBA (fulfilled by Amazon). Anker, a Chinese electronics producer, became a household name largely off the back of its considerable success with selling through Amazon. However, manufacturers now have locally-based options in the form of Temu and Shein that are engaged in building a significant presence in the US – which means that Amazon needs to make sure its offer stays competitive.

Amazon recently dropped its seller fees for clothing priced under $20, in a move that was widely perceived to be a response to competition from Shein and Temu in the category of low-priced goods.

Last June, Amazon also made it known that it was excluding Temu from competitor price checks designed to ensure that its merchants don’t charge significantly more than rivals, saying that the marketplace failed to meet its qualification standards.

However, it’s of little doubt that Amazon will be aware of the potential for Temu to grow into a much more serious competitor, even if it isn’t yet – and with Shein also moving into the online marketplace category and TikTok growing its retail arm, TikTok Shop, Amazon has even more incentive to shore up its relationships with Chinese sellers and its hold on the lower-priced items category in order to stay ahead.