5 Learnings from the Temu Ecommerce Strategy

If there’s one thing we know about the retail sector, it’s that consumers are adaptable. They’re also fickle about where they shop, particularly when saving money is involved. 

Retailers can quickly shift from being the disruptor to the disrupted, based on consumer appetites, new technologies, and market changes. Case in point: Temu, currently the top shopping app in the U.S is becoming even more popular than Amazon. According to Statista, the Temu app was downloaded nearly 53 million times in May 2024 – yes, that’s in just a single month. 

Temu hasn’t even hit its second birthday, yet one survey suggests that nearly 90% of Americans have heard of the app. So, what’s the deal with Temu? And why is it so successful? We have some thoughts.

What is Temu?

Temu is a Boston-based online marketplace launched in September 2022 by PDD Holdings, the parent company of successful Chinese ecommerce platform Pinduoduo. 

It offers a wide range of heavily discounted products, from clothing and electronics to home goods. Temu connects consumers directly with manufacturers and wholesalers. 

This model enables Temu to provide steep discounts and fast shipping because it allows suppliers to respond directly to consumers’ in-the-moment needs and wants. It reduces the cost of production by avoiding producing unwanted products and storing excess inventory.

Examples of Sites Similar to Temu

Temu’s business model – focusing on affordable, trendy products shipped directly from manufacturers to consumers – is not new. Several ecommerce platforms use this same approach.

Shein: Chinese fast-fashion retailer Shein, launched in 2008, is incredibly popular, with 65 million app users and 74.7 million total global users. While they once sold only wedding dresses, Shein now offers an enormous selection (hundreds of thousands) of low-priced clothing and accessories. They add new styles and products daily, using AI to analyze trends and create their own Shein-branded labels.

AliExpress: Launched in 2010, AliExpress is a global retail marketplace owned by the Alibaba Group. It serves over 150 million active buyers across 230 countries and regions. It connects buyers with merchants who have a wide range of incredibly low-cost items across categories like electronics, fashion, and toys. AliExpress cuts out the middlemen and directly sources items from buyers to manufacturers. They can offer very cheap or free shipping thanks to subsidies by the Chinese government. 

Wish: Also founded in 2010, Wish is based in San Francisco and is another major player in the bargain basement ecommerce space. A marketplace with no direct inventory of its own, Wish partners with over half a million merchants that sell an enormous selection of low-priced items across categories like baby gear, pets, gadgets, tools, and fashion.

The success of these apps can be largely attributed to their mobile-first approach, which caters to the growing preference for online shopping via smartphones. They also maintain web-based platforms to accommodate customers who prefer browsing and purchasing through desktop or laptop devices.

How Does Temu Work?

Temu operates as an online marketplace, connecting manufacturers directly to consumers. Shoppers can browse and purchase products through Temu’s app or on their website. Temu leans heavily into affordable pricing and fast shipping, with promos pricing featured prominently alongside product images.

Kids’ shoes featured on Temu’s website

The social proof elements that appear beside products (e.g., “Best Seller” and “Almost sold out”) fuel urgency and FOMO. As shown with the above items, Temu also uses time-based pricing and offers to motivate people to purchase (e.g., $5.57 today only!).

The company employs a “next-gen manufacturing” model which uses consumer data and AI to forecast demand and optimize supply chains. It’s an approach that lets Temu offer competitive prices by reducing costs associated with traditional retail models. When a customer places an order, Temu facilitates the transaction and coordinates with the manufacturer to ship the product directly to the consumer. 

Temu uses advanced data analytics and streamlined fulfillment to make shopping easy for customers. It’s a particular favorite of Gen Z consumers who are comfortable shopping from their phones. The low prices are, of course, another strong pull for young consumers. 

The platform also incorporates engaging features like gamification and social sharing to incentivize users to stick around longer while collecting data which helps them personalize the shopping experience.

How Does Temu Compete with Companies like Amazon?

Temu’s secret weapon, when it comes to competing with retailers like Amazon and Walmart, is its incredibly low prices. Amazon supports various types of sellers, including individual merchants, brands, and resellers. Temu primarily focuses on direct connections between manufacturers or brand owners and consumers, bypassing resellers who add markups.

By connecting consumers directly with manufacturers and brands, Temu eliminates the need for intermediaries. This keeps costs for sellers low which enables lower prices for shoppers. It’s an approach that challenges traditional retail models that involve multiple layers between producers and consumers. Temu’s ability to offer highly competitive prices is, in part, a result of the low manufacturing costs of mass-produced unbranded items in China, along with efficient supply chain management.

Temu also curates products versus offering the glut of inventory that Amazon is known for. While they have a large selection of products, Amazon still has many more items for sale. 

Temu leans into trendy, low-cost items that appeal to young shoppers. This focus on affordability, trendiness, and gamification helps Temu overcome one of its main drawbacks—slower shipping. Since items come directly from China, it can take anywhere from 6 to 22 days to receive an order from Temu. Even so, Temu resonates with price-conscious consumers who may find Amazon’s vast product range and pricing less appealing. Temu also uses social media incredibly well, leveraging platforms like Instagram, Facebook, and TikTok to showcase their brand and products. 

5 Key Takeaways from the Temu Ecommerce Strategy

Temu’s meteoric rise in the ecommerce space offers valuable insights for retailers who want to up their game when it comes to reaching mobile users, younger consumers, and bargain hunters. Here’s a roundup of strategies that can help you compete with giants like Amazon and social media darlings like Temu and Shein:

1. Prioritize Mobile-First Experiences

Temu owes much of its success to the ubiquity of mobile devices. As a mobile-first retailer, the company caters to consumers’ growing preference for shopping via smartphones. Their user-friendly app has features like personalized search, visual results, and easy navigation. Take a page from Temu’s book by prioritizing mobile optimization so your shopping on a mobile device is as easy and intuitive. 

2. Leverage AI and Data 

Temu uses data and AI to forecast demand, optimize supply chains, and personalize experiences for shoppers. Analyzing consumer behavior and preferences allows the retailer to offer relevant product recommendations for each person, provide tailored search results, and keep the buying process streamlined and easy for users. A personalized ecommerce search engine like Monetate can you create the kind of hyper-relevant experiences that shoppers love. 

3. Offer Competitive Pricing if Not Fast Shipping

Temu’s focus on affordability has helped them compete with sites like Amazon even when they can’t compete with fast, free shipping. Partnering directly with manufacturers and leveraging efficient supply chain management allows Temu to set these highly competitive prices. 

Prompt delivery is helpful, but very low prices, combined with trendiness mean consumers are willing to wait longer for their haul. Explore ways to optimize your pricing strategies and streamline fulfillment processes, so you can keep pricing competitive and delivery as painless and low cost as possible. 

4. Gamify the Shopping Experience

Temu incorporates engaging features like gamification and social sharing to keep users on the platform longer. Rewards, discounts, and interactive elements create a fun and immersive shopping experience that helps Temu gather data on customers while motivating shoppers to return. You can take inspiration from this approach and explore ways to gamify your own ecommerce website.

5. Continuously Refine and Adapt

Staying agile is crucial in the retail space, which is why Temu continuously refines its strategies based on consumer feedback, market trends, and new technology.  Experiment with new strategies, channels, messaging, and product merchandising approaches. Learn from your successes and failures, and shift your strategy based on what’s working in the moment.