The 30-second Super Bowl commercial is the world's most expensive screen real estate.
The world's biggest brands plan their year around the big event, devoting their best creative minds and bringing in Hollywood celebrities to entertain the more than 100 million viewers who have tuned in. Only the most famous names in advertising are required.< /p>
But this year, a shopping app that few people could pronounce, let alone use, bought not one, but two slots. Temu (pronounced “tee-moo”) invited people to “shop like a billionaire” with an app that sells clothing and homewares at seemingly impossible prices. The ad cost the company $14m (£11m), the highest paid per second for a Super Bowl ad.
The Temu app only launched in the US last September, but by February it had already climbed to the top of the Apple App Store. And after launching in the UK at the end of April, it did the same, becoming the most downloaded iPhone app in the UK over the past month.
More than 7 million Britons have installed Temu, according to data compiled by research firm Sensor Tower. It has been downloaded 117 million times worldwide, making it one of the fastest growing apps of all time. Monthly spending on the site rose from $192 million in January to $700 million in June. Analysts at Tech Buzz China say total spending this year could reach $10 billion, the amount Amazon has spent 12 years on. delivery. vans and on doorsteps. And social media is brimming with influencers posting their “Temu trophies” of fake AirPods, super strong magnets and 98p water bottles.
Temu was founded by Colin Huang, who also helped set up Google in China. Credit: Qilai Shen/Bloomberg
The app is owned by PDD, the Chinese e-commerce company behind online shopping giant Pinduoduo. The company was founded less than a decade ago by Colin Huang, the 43-year-old serial entrepreneur who helped found Google in China.
Huang's $24 billion net worth makes him one of China's richest men, although unlike billionaires like Alibaba's Jack Ma, he largely avoids a public profile.
Huang stepped down as PDD's chief executive and chairman a few years after the 2018 New York stock offering, saying he wants to focus on life sciences research, although he remains its largest shareholder. The company is currently run by co-founders Lei Chen and Jiazhen Zhao, with public outreach in the West largely limited to routine quarterly calls to investors.
Temu can significantly outperform its Western competitors by shipping directly from warehouses in China to your doorstep, cutting higher logistics network costs in the UK, US and Europe and taking advantage of its parent company's close relationships with Chinese suppliers.
This isn't the first time: Alibaba, Wish.com and fast fashion retailer Shein have been trying to attract Western buyers by shipping direct from China.
0107 Temu challenges Amazon
But none have taken off as quickly as Temu, whose combination of aggressive pricing, free shipping, and relentless marketing has put big online sellers like Amazon at risk. One e-commerce executive describes Temu's rise as “intimidating.”
Temu's site has few brands or recognizable products (except for one of its best-selling books, Lenovo's headphone set).
Its website lacks the ordered product listings of most shopping sites, instead displaying a seemingly random jumble of cheap gadgets, clothing, and toys.
FOMO (fear of missing out) is a key ingredient: many products with significant The discount is advertised as limited “lightning deals”. The clock next to the words “free shipping” counts down to midnight, giving the impression that the offer expires, at least until it resets to zero the next day.
Neil Saunders, retail analyst at GlobalData, says Theme Shopping can be more fun than useful, which is handy considering delivery times typically exceed a week.
“It's a way to shop without having to spend a lot of money,” he says. “Honestly, a lot of it is a purchase for the sake of the item itself, and not because people need it.”
The app successfully keeps people on the hook. According to Sensor Tower, the average user spends about 28 minutes a day on the app, nearly double the 16 minutes spent on Amazon.
For Western consumers, prices seem incredibly low. Two packs of shower organizers sell for £6.56; an Amazon listing with identical images is advertised for £16.99. A £100 fryer on Amazon sells for half the price of Temu. On average, prices are about half that of its US competitors.
The online shopping platform has rapidly increased its market share by selling cheap daily commodities shipped directly from China at low prices. Photo: Temu
Items ship directly from Temu's warehouses in China, and the low cost of each individual order means customs duties are largely avoided (only £135 in the UK). Shipping costs are kept low thanks to a deal with Indonesian logistics giant J&T Express, which is itself suffering heavy losses on the contract as it tries to gain market share ahead of its upcoming Hong Kong stock offering.
The key ingredient, however, is the relentless pressure on suppliers to keep prices low. Temu has tapped into Pinduoduo's deep network of manufacturers, many of whom are suffering from China's downturn in consumer spending and are looking for alternatives.
“What we are seeing right now in China domestically is a race for value,” says Howard Lake of research firm Kantar. “Consumption is struggling to recover from Covid and Chinese consumers are still incredibly wary. Prospects for long-term growth in China look rather limited.”
0906 Producer Price Index
Temu first attracted local traders who wanted to get rid of excess inventory by promising them a growing new market of comparatively affluent consumers.
Since then, however, he has increasingly relied on factory makers and pitted them against each other. Every Monday, the company holds a “reverse auction”, asking manufacturers to compete to offer it the lowest price on essentials.
Suppliers are penalized for too many defective or late arrivals, or threatened to overstock warehouses by arriving too early. Temu sets the prices, often applying a mark-up that is several times what it pays the producers. Sellers are not paid if goods stored in Temu's warehouses are not sold out within seven days, even if the company later sells them.
One Chinese report described the company's strategy as a boiled frog: suppliers never agreed to terms The theme from the very beginning, but gradually they were prepared.
Temu's own workplace is reportedly equally Darwinian: “jumping”. strategy pits teams against each other to create new features and services. Teams that fail are disbanded, managers are demoted, and employees are made redundant from time to time.
Temu's other weapon was an ongoing marketing blitz. Temu has not only followed TikTok's lead by spending huge sums on Facebook and App Store ads, but has also attracted its users to sign up new ones by offering them credits and free items.
Those who sign up are being bombarded with emails and app notifications (multiple text messages led one disgruntled consumer to sue the company in May, claiming it amounted to harassment).
If that sounds like a recipe for wasting money , you're right. The combination of shipping costs, discounts and gifts means that Temu loses an average of $30 per order, according to Wired, a huge loss considering the average order is only $25.
“You can't sell products for $2 when they cost $20 or $30 to produce and ship. It's just not a viable strategy,” says Sky Kanaves, an analyst at Insider Intelligence, who expects prices to rise in the future.
For now, though, Temu can afford to lose billions. Its U.S.-listed parent PDD tripled its first-quarter earnings to $1.2 billion thanks to the success of Pinduoduo, its Chinese arm. Temu reportedly expects to break even in 2025.
This assumes that no one will stand in his way, which is hardly guaranteed. Temu's rise has been linked to the growing scrutiny of his Chinese properties, which clearly escaped much of the Communist Party's tech crackdown in 2021. Temu's website says the app was based in Boston and its holding company moved its headquarters from Shanghai to Dublin earlier this year.
However, this did not stop the pressure from American politicians. Last month, a congressional committee said there was a “high risk” that the site contained goods made using forced labor in Xinjiang.
Montana, which is due to ban TikTok from next year, said the app should not be used on government devices. In March, Pinduoduo was removed from the Google app download store due to security concerns.
Amazon, however, seems agitated for now. The retail giant refused to include Temu in its famous price-matching scheme, saying the company failed to meet standards such as anti-counterfeiting. Some Chinese merchants claim that the company has started selling products at a discount to compete.
“For the past two decades, Amazon has taught consumers that they should expect very fast delivery and endless choice,” says Juozas Kaziukėnas. , research firm Marketplace Pulse. “But obviously they will never be as cheap as Temu.”
Temu did not respond to requests for comment.
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