Would you buy a product from a new online marketplace if it costs a fraction of the asking price on other e-commerce sites?
Many consumers would, and that’s been driving demand at Temu for everything from fashion to beauty products, sports equipment to home improvement tools. Launched in September 2022, Temu has become one of the most popular shopping apps in the US in just six weeks, judging by the download rankings tracked by data.ai. The platform offers products across more than 100 categories and prices can start from under $1.
But just how is Temu able to get its prices so low yet maintain quality and service standards?
It turns out that Temu is the US affiliate of Pinduoduo, and both companies are owned by Nasdaq-100 company PDD. Having a sister company that serves nearly 900 million consumers and handled 61 billion orders a year has its advantages. For one, Temu can tap onto one of the world’s most sophisticated and efficient sourcing and fulfillment ecosystems, with more than 11 million suppliers.
Temu sources a wide array of products from different suppliers around the world, including contract manufacturers. It also conducts rigorous checks on products sold on the site to ensure the integrity of the platform.
Temu also stands to gain from Pinduoduo’s plan to work with manufacturers to incubate 100 global brands, which would create a pipeline of unique products. The plan is an extension of Pinduoduo’s “Consumer-to-Manufacturer” innovation model that aims to increase efficiency and lower costs by matching planning production directly with consumer demand.
In the C2M model, manufacturers have more visibility to produce what buyers need through insights gleamed from analyzing consumer spending patterns. This process enables better planning of production and logistics by eliminating guesswork, thereby cutting down on waste and overproduction. Manufacturers can also reach consumers directly and bypass multiple intermediaries. The cost savings are passed on to consumers in the form of lower prices, with no compromise on quality.
For many consumers, that would be welcome news given the pressure of inflation on the household budget.