Temu Marketplace Launches in AU & NZ: What You Need to Know
Temu seems so far to be the most legitimate attempt of a Chinese eCommerce giant entering the western market. It’s important for Australian and New Zealand retailers, especially those with a “low price” strategy or selling non-branded products, to watch Temu closely.
Temu launched in Australia and New Zealand just over a week ago, on 13th March. I had conversations with a few friends in the retail and eCommerce industry, and most of them have no idea what Temu is. Some have heard about it but are still wondering if it’s actually legit.
Well, Temu is legit, and I think AU & NZ online retailers need to pay attention to it.
Before I go ahead and talk more about Temu, check out their Super Bowl commercial launched in February.
So, what is Temu?
Temu, pronounced “tee-moo,” is a new online marketplace that first launched in the US in September 2022. Temu sells a vast array of items — ranging from fast fashion and homeware to toys and electronics — at extremely low prices.
Temu is headquartered in Boston and is owned by its parent company PDD Holdings (Nasdaq: PDD), a publicly listed company in the US stock market. Although listed in the US, PDD Holding is a Chinese company and the parent company of the Chinese eCommerce giant Pinduoduo.
You can think of Temu as an improved and localised version of AliExpress. This is another Chinese eCommerce giant entering the western world with a “low price” strategy in a localised manner after the successful attempt of SHEIN.
Understanding the relationship between Temu and Pinduoduo
As discussed previously, both Temu and Pinduoduo are child companies of PDD Holdings, which means essentially Temu and Pinduoduo are sister companies. However, Pinduoduo is a hugely successful Chinese eCommerce business (3rd largest in China, actually), and Temu is seen by the Chinese people as the international or global version of Pinduoduo. This means Temu was built upon the infrastructure that was established and perfected over the past few years by Pinduoduo. This is really similar to the Douyin & Tiktok relationship, where TikTok is essentially the international version of the Chinese social media app Douyin.
Pinduoduo was known for its impressive capabilities to acquire market share via social networks, and you’ll be seeing the same for Temu, ranging from the $14 million Super Bowl ad to the $10 million giveaways in the “Shake & Win” sweepstakes campaign.
However, the core capabilities that people don’t seem to notice about Pinduoduo are their strengths in supply chain and logistics. Most of the early investors of Pinduoduo come from supply chain & logistics giants. Supply chain and logistics are the foundation of Pinduoduo’s success, and that’s why Temu is able to offer products at such low prices and deliver them in a timely manner. Temu’s free standard shipping delivers orders to New Zealand in 7–14 days in one package. That’s pretty impressive, considering all sellers have to deliver the goods first to Temu for consolidated shipping. This alone makes Temu a more appealing option than AliExpress and other competitors.
How did Temu do in the US before launching in AU and NZ?
Temu had about 50 million installs since its launch in September 2022. Both SHEIN and Wish took about three years to cross 50 million installs, whereas it’s taken Temu about seven months, which is incredible.
Temu is currently leading the top free app chart in the US iOS App Store and Google Play Android app store. It is ahead of not only other shopping apps such as SHEIN, Amazon, and Wish, but also apps such as WhatsApp, Instagram, and TikTok.
The monthly user sessions of Temu are sitting around the 400m — 500m mark, which is pretty much the same as SHEIN but still nowhere comparable to Amazon, which sits in the billions mark.
It’s also worth noting that Temu has a 2.14/5 score on the Better Business Bureau, indicating some customers have had negative experiences with the business. There are also skeptics on social media questioning the legitimacy of Temu, mostly because of its incredibly low prices, scammy-looking interface, and some bad shopping experiences shared by customers.
Nevertheless, it is still fair to say Temu had some significant success prior to launching in AU and NZ.
Will Temu be successful in AU & NZ?
While I don’t have a crystal ball, I do think Temu has a good chance.
Firstly, I think there’s a genuine need for decent quality goods at low prices, especially in the current economic environment. “Low price” is Temu’s biggest weapon. Even in China, where affordable goods are generally accessible to most of the population through the likes of Taobao.com, Pinduoduo is known for taking the low-price strategy to the next level. On that front, it’ll be quite difficult for any western companies to compete. Temu is not the place where I would buy a motorcycle helmet or designer fashion, but I would easily buy a pair of socks or Halloween costumes.
Secondly, I can see the effort Temu is putting into localising the experience for the AU & NZ market. They are offering payment options such as credit card, Apple Pay, Paypal, and even Afterpay. Shipping is free and delivered within 7–14 days, which is acceptable for non-urgent items. Returns are also free within 90 days, which is even better than most of the retailers in AU & NZ.
Lastly, I can see there’s a significant commitment from Temu to make this work. They’ve made a huge investment in marketing in the US and are planning to do so in AU and NZ, too. Temu knows how to play the social media game to drive traffic and has deep pockets to do so — The parent company, PDD Holdings, has a market cap of close to $100 billion.
Money can bring them traffic; however, I do see Temu needing to overcome at least a couple of issues to ensure their long-term success.
The first one is the UX of the app. Both the Temu website and app look somewhat spammy with a lot of promotional messages going on. While this is a UX that most of the Chinese population is familiar with, it is quite different from a typical western eCommerce UX. This is one of the reasons why some people are skeptical about shopping on Temu. Temu has to optimize their UI and UX and provide a UX that is better balanced for promotions and visual aesthetics.
The second one, which is potentially more important, is quality control. There are reviews from customers about receiving low-quality products or not receiving their orders at all. While this can be a minority experience, it will have a significant impact on Temu’s reputation. Pinduoduo in China had a similar problem, and it is one of the biggest challenges to solve when you are selling products from multiple suppliers and at an extremely low price point. Temu & Pinduoduo will need to solve this issue as quickly as possible. They’ll soon find that the western market is likely less tolerant of low-quality products, and the damage of not getting this right is not only on profitability but also on the feasibility of the business.
Conclusion
Temu seems so far to be the most legitimate attempt of a Chinese eCommerce giant entering the western market. It’s important for Australian and New Zealand retailers, especially those with a “low price” strategy or selling non-branded products, to watch Temu closely. While Temu has a long way to go to properly optimize its shopping UX and customer services to the Australian and New Zealand standards, they do fulfil the needs of customers and are backed by a billion-dollar business.
Temu’s success will depend on their ability to adapt to the local market, improve user experience, and maintain a focus on quality control. If they can address these challenges and continue to leverage their strengths in supply chain and logistics, they have the potential to become a significant player in the AU and NZ eCommerce landscape. Retailers in these regions should keep an eye on Temu’s progress and be prepared to respond to the changing market dynamics that may result from their entry.
