Behind Temu’s surge: a group of sellers are clearing out their stocks at a loss!

When it comes to Temu, many sellers' first impression of it is that it has been growing rapidly. In less than a year, it has opened 16 sites and has firmly ranked first in the list of the most downloaded applications in the United States. In May, Temu's sales in the United States were 20% higher than SHEIN. But behind the rapid growth, Temu also has another side. Sellers who have just entered the market may be able to get bonuses in price and traffic, but it will be a different story after sales stabilize. Price cuts, fines, data opacity... Temu has used many means, and sellers have lost money instead of making money, so that more and more sellers have run away from Temu.

Even though Temu has many shortcomings, many sellers still choose to stick with Temu . When newcomers enter the cross-border e-commerce market, Temu is definitely on their candidate list; some old sellers choose to move their companies to Yiwu, which has a more advantageous geographical location, in order to vigorously develop Temu. Temu seems to be demonstrating the "really good" theorem.

Some sellers are optimistic about Temu, and it is not without reason. A few days ago, Temu was exposed to be about to open a Japanese site. After the site went online, Temu has opened 17 sites in total, and it took less than a year. In contrast, Amazon has been established for more than 20 years, but it has only 18 markets overseas. Temu has been aggressively attacking and seizing land, and it seems to have the momentum to erode Amazon's territory. In order to resist Temu's encroachment, Amazon has also offered a "10 billion subsidy". Industry insiders believe that Amazon and Temu will inevitably fight in the sinking market.

Behind the Temu surge, a group of sellers are fleeing

In the first quarter of 2023, Temu and SHEIN took the top two spots in terms of e-commerce app downloads in the US market. According to Bloomberg Second Measure data, Temu's sales in the US in May were 20% higher than SHEIN's. In the US market, Temu is on a tear, but it also has another side.

"Temu implements the policy of killing the donkey after it has done its job," one seller admitted. When they first joined the platform, the traffic was very good, with more than a dozen orders a day, and later it reached hundreds of orders, with very impressive sales. After stabilization, the platform kept urging sellers to increase their stock. The sellers prepared tens of thousands of sets of goods in one go, but at this time the platform withdrew its promotion efforts.

The sales of products without traffic promotion also dropped sharply, resulting in a large number of sellers' inventory gathering dust in the warehouse, and the capital chain was also greatly affected. The same situation happened to many sellers. In their view, the platform's traffic often tends to those newly settled sellers. After the sellers' sales have stabilized for a period of time, the platform will withdraw its promotion efforts and gather traffic to the new sellers' stores. Now, they all hope to leave Temu after clearing out their inventory.

The news of sellers quitting Temu resonated with a large number of sellers: "I decided to give up last month and am now clearing out my inventory", "Temu is so bad, I gave up in October last year."

A seller initiated a survey on a social platform and found that 50% of Temu sellers are currently clearing out their inventory at a loss. The inventory on Temu ranges from tens of thousands to millions. They now have a very clear goal: to exit Temu after clearing out the inventory at a low price.

However, the withdrawal of promotion by the platform is only one of the reasons why many sellers quit Temu. Another important reason is the price-cutting policy of the platform. According to a seller, he originally sold goods worth 1 million yuan on Temu, but when he finally calculated the profit, he found that he had lost nearly 80,000 yuan.

Many people call Temu "Somalia", and it really lives up to its reputation. How ruthless can Temu be in lowering prices to sellers? In a nutshell, there is no lowest price, only lower. The cost price is 15, quoted at 21, and after delivery it is lowered to 19; if sales are not good, the price is lowered to 17; after a while, there is another bidding, and the product price drops to 14, which is completely a loss.

For similar products, whoever has the lowest price will be the winner, which is the model that Temu has always followed. If there are complaints from customers due to sellers' problems, the platform will use the penalty policy to cover the bottom line. With low prices and fines, Temu can be said to have squeezed the sellers' profits to the extreme.

"Our prices are already lower than other platforms, and we are still being forced to lower them on top of the lowest prices. Do we still have a way out?" one seller complained about Temu's new round of price cuts. If sellers want to make a profit, they can only win by volume, but under the self-operated model, the platform manages the entire process of stocking, so the sellers have very limited room for maneuver. Some sellers cannot tolerate the platform's repeated price cuts and still choose to withdraw from the store.

You can only understand how deep the water in Temu is by going in.

I once saw a very interesting picture in the circle. "How much does a product with a purchase price of 8 yuan on Temu usually sell for?" A seller asked, and the old seller laughed and said "7.5 yuan". The seemingly ridiculous words are actually the reality of Temu sellers. It is almost impossible to make money on every order, unless you sell a lot and win by volume. This is also one of the reasons why many sellers recommend factory sellers to settle in Temu.

In the view of some Temu sellers, compared with Amazon, Temu is the real winner.

As more and more merchants enter the market, the sellers' cost prices are being pushed down again and again. The sellers who could offer 30 yuan before can only offer 18-20 yuan now. The lowest price of old and new products cannot differ too much, otherwise the platform will lower the price. If the price is not reduced, the inventory will be returned or even not promoted.

In terms of inventory, the delivery of inventory for inspection is entirely a matter of luck. A slight difference in screws may result in the return of the product, which results in high warehouse costs for the seller. The warehouse management is extremely chaotic, and some orders will be deducted for shipping fees, which can be several thousand yuan, and the reasons are not clear.

The review process for listing products is getting slower and slower. Some sellers have complained directly: “The listing process is very slow. At the beginning, more than 40 products were listed at once. Half a month has passed, and half of them have not been reviewed, and half are still being priced.” Only 5 products can be shipped, not to mention the time it takes to ship them to the warehouse and then join the site.

The penalty system is also a point of complaint for many sellers. Some sellers said that it is normal to be fined tens of thousands of yuan, and some sellers were fined up to five times, and the fine was directly deducted from the payment. In addition, there will be fines for delayed JIT delivery, out-of-stock or late delivery of emergency stock orders.

However, since Temu holds their lifeblood , many sellers can only swallow their anger. It is reported that the data on the Temu platform is not transparent, and there is no data table like Amazon. It basically depends entirely on the promotion rhythm of the platform buyers and promoters. The platform rules are also constantly changing, and the future direction is very uncertain.

Temu has many flaws, but sellers have not retreated from joining the platform. They believe that if they want to cling to the platform, they will inevitably be kicked out.

Amazon is no longer the first choice for newcomers to cross-border e-commerce

"Many college graduates around me want to do cross-border e-commerce. Their first choice is no longer Amazon, but Temu's full hosting," said a seller. In their opinion, there is no need for operation. They can just go to work during normal hours and ship goods after work. Even if they lose money, the risk can be controlled. Once they make money, they will be rich.

There are many novice sellers who want to enter the cross-border e-commerce market. Temu is undoubtedly on the candidate list, but they always hesitate between choosing Amazon or Temu.

In their opinion, Amazon’s knowledge is too vast, and their own learning ability is often limited, and they may not be able to digest it. At the same time, there are many old sellers on Amazon, and as a novice, it is difficult to compete with the big guys as soon as they enter the market.

But Temu is different. It is a new platform, and the starting point for sellers is the same, which is relatively fair. Currently in the overseas market, Temu is in the limelight, with large traffic and rapid growth in orders. New sellers prefer platforms with simple operation and full hosting mode, which do not require too much operating time and energy. A factory seller said frankly that he chose Temu because it saves him trouble. He only needs to focus on developing products and ensuring supply.

Compared with Amazon, they believe that Temu has more significant advantages. After the goods are put into storage, they can be sold online soon. The risk is small and the cycle is short. The threshold is low and the money can be made quickly. It is an excellent choice for an overseas platform. In this regard, the cross-border newbie has a deep understanding of this. "This model has controllable costs. I am a newbie. I sell small items worth a few dollars. Even if I lose money, I won't lose much."

It’s not just new sellers who cling to Temu. Some veteran Amazon sellers also choose to open stores in Temu. Some even move their companies to Yiwu just to be closer to the source of their products.

"Initially, I relied on Temu to clear some of the backlog of inventory, and the effect was quite good," said an old seller. For those unsold inventory, it can be recorded as a loss in financial terms, but the emergence of Temu is a turning point, which is equivalent to exchanging dead inventory for cash. Even if it is a loss to clear the inventory, from a business perspective, it is still a profit.

From the perspective of multi-platform operation, the company decided to move some staff to Yiwu to be responsible for the Temu platform and related product work. According to the seller, some Temu sellers have the intention to move the company to the place closest to the source factory, so as to save costs, increase their own competition and improve their own profits.

Currently, Temu is developing rapidly. Overseas, Temu’s advertisements can be seen everywhere. Some industry insiders even lamented: “How much advertising did Pinduoduo spend on Temu? How much advertising money did it spend? Temu’s advertisements are everywhere when you open any app.”

With overwhelming advertising and ultra-low prices, Temu has a deep understanding of user psychology, which has attracted more consumers, thereby driving a significant increase in the platform's traffic. Some sellers have revealed that many American users are now placing orders on Temu, so that the overall order volume on platforms such as Amazon and Walmart has begun to plummet.

The low-price whirlwind brought by Temu is sweeping North America, and this trend is irreversible . When the platform was first launched, a group of sellers who settled in Temu said that they really felt the traffic dividend and policy benefits of the platform at that time. It was not a dream to have thousands of orders a day, and they did make a small profit, but this only happened when they first settled in.

However, with the opening of the new Temu site, some sellers are looking forward to new opportunities.

Temu launches a new site. Will sellers have a chance to “make money”?

Since Temu went online in September last year , it has been at the top of the list in various data. As of March 2023, Temu has more than 50 million registered users, 20 million active users, and a monthly transaction volume of US$1 billion, ranking first in the US e-commerce download list.

In less than a year, Temu has rapidly penetrated the European, American, and Latin American markets, and has captured 16 sites including the United States and Canada, catching up with the territory that Amazon has spent more than 20 years to build. Now, Temu is about to open a new site.

Industry insiders revealed that Temu may launch its Japanese site on June 22. Currently, Temu is doing a series of preparatory work for the launch of the Japanese site, including purchasing a large amount of Japanese air transport capacity and contacting e-commerce professionals. In terms of logistics, the site will mainly be launched in the early stage of the launch with small packages. Currently, the logistics company contacted by Temu has entered the bidding stage.

However, Temu has not yet made clear its investment plan. It is expected that products will be selected from the existing European and American product library for testing. On Temu's official website, we can find that a variety of Japanese-style products have been launched in categories such as clothing and home furnishings. It seems that Temu's initial focus is on testing the order process and consumer feedback.

But can Temu's development in Japan be as smooth as its previous site opening? Can sellers make money with Temu?

In the past two years, Japan's e-commerce market has maintained a sustained growth trend and is expected to continue growing at a compound annual growth rate of 5.2% in the next four years. By 2026, Japan's e-commerce market size will reach 27.4 trillion yen (about US$237.8 billion).

Judging from the data alone, Japan is indeed a blue ocean for cross-border e-commerce. However, Temu will face considerable challenges in entering the Japanese market.

From the perspective of e-commerce platforms , Japan currently has platforms such as Rakuten, Amazon Japan, and ZOZOTOWN monopolizing the market, which have been rooted for a long time and have a solid market position; the e-commerce share is limited , and the Japanese e-commerce market is different from other regions. Offline physical stores occupy a large market share, which is also a major feature of Japan; product quality requirements are high , and Japanese e-commerce consumers have high requirements for product quality, and inferior and counterfeit goods will be severely punished.

Sellers who are optimistic about it say that if Temu can make a name for itself in such a fiercely competitive environment in North America, it will surely be able to achieve success in Japan. As long as it conquers the discerning Japanese users, Temu will have opened its first stop in conquering Asia, and its subsequent development is immeasurable.

However, if Temu wants to capture Japanese users, it must improve product quality. Can Temu, which has always pursued a low-price strategy, sell products that satisfy Japanese consumers while squeezing the profit margins of merchants? Will consumers pay for it? Or can it improve product quality and continue to squeeze the profit margins of merchants, but will merchants sit idly by?

Some sellers joked: "Temu has always focused on the platform and users, so they will definitely get a piece of the pie. Ordinary merchants are just the firewood at the bottom of the pot. When they are burned out, they will be replaced by another batch." As long as the market is good, there will always be merchants rushing in. Temu does not have to worry about the lack of merchants. It will only try its best to reduce the sellers' profit margins and pave the way for its own development in Japan.

However, every market that Temu has entered is following in Amazon’s footsteps. Recently, Amazon seems to be offering tens of billions of subsidies to cope with Temu’s encroachment.

Temu is eating into Amazon's market share, are the two sides going to face off head-on?

Temu is developing rapidly, and the pressure it has brought to Amazon is gradually becoming apparent. Since the beginning of the year, many sellers have complained about the small number of orders from Amazon, and the serious decline in order volume. Many sellers believe that Temu has taken away Amazon's traffic. After Temu's traffic increased, Amazon's sales, especially the sales of standard product sellers, have declined significantly.

Amazon has also taken action to fight Temu.

Some time ago, many sellers found that their products were marked with a 20% discount code, and Amazon staff explained that this could be understood as the Amazon version of "Pinduoduo" and "10 billion subsidies", and this discount activity would not charge sellers any fees. Sellers believe that this promotion is closely related to Temu's strong performance in North America and other regions. Amazon cannot follow up to the lowest price, so it uses promotions to attract traffic.

However, Amazon's actions did not restore sales for most sellers. "Since the 20% discount appeared on the front desk, I only placed 5 orders that day, the lowest number of orders in history," one seller complained. Before this, the seller's order volume had been stable at more than 20 orders, but since the platform's large-scale discounts appeared, the seller's order volume has fallen to the bottom.

There are many sellers who are in the same situation. One seller said frankly, "Most new products of the same type are sold at low prices with discount coupons, and my order volume is decreasing day by day, which is uncomfortable." Recently, the order volume of many sellers has been like a roller coaster, rising 2 days and falling 5 days a week. Even with full advertising, the order volume cannot be increased.

Even some sellers who received the email announcing the date of Amazon Prime Day were not excited. "Don't expect Prime Day to save the traffic decline. It's just a two-day boost, and it will only get worse later," said one seller.

In the view of some sellers, products with low average order value are no longer suitable for Amazon, as they will basically be snatched up by Temu in the later stage. If sellers want to survive for a long time, they still need to consider making products with high average order value.

However, there are also some factory sellers who try to implement a low-price strategy on Amazon. They treat Amazon as Temu. Not only are their prices half of those of their peers, but their pictures are also terrible. Fortunately, their sales are still good, but this does not apply to ordinary sellers.

Many people believe that Amazon and Temu will inevitably have a battle in the sinking market. However, Amazon does not seem to regard Temu as a qualified competitor. As we all know, Amazon has a price search algorithm that can check whether the products sold on its platform are priced comparable to those of competitors. However, Amazon recently announced that it will exclude Temu, an emerging e-commerce platform launched in September last year, from this algorithm on the grounds that Temu does not meet the strict qualification requirements of Amazon's fair pricing policy.

Amazon said that if the company were to engage in a price war with Temu, a large number of sellers would be penalized or forced to drop to levels where they could not make a profit.

Although Temu is currently gaining popularity, most sellers are not optimistic about it. They think that the current Temu is a bit similar to Wish in the early stage , relying mainly on low-priced and low-value products to attract the market, but how long can it last and can it form buyers' shopping habits? If you want to compete with Amazon, you still need to weigh your own strength.

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