Topic of the Week - Temu Struggles to Find Footing in US eCommerce Market
Temu, a Chinese online retail platform, is facing significant challenges in rebuilding its business in the US market. Despite efforts to find US suppliers, the company has been told by American companies and sellers that it cannot offer cheaper prices on branded products than those offered on Amazon. According to sources familiar with recent meetings, US suppliers have informed Temu that it cannot undercut Amazon's prices on branded products because Amazon's scale and network allow it to swallow losses for a period of time to maintain low prices, something smaller rivals like Temu struggle to do.
As a result, Temu's business has stalled since the Trump administration removed the de minimis exemption, which allowed it to import cheap goods directly from China without paying customs duties. The company's monthly active users on its US app have plummeted 54% to 37 million between March and mid-July. The decline in users is attributed to Temu's decision to turn off advertising spending in the US, leading to a sharp decline in engagement. The company has since resumed advertising, but the damage has already been done.
To compete with Amazon, Temu may need to focus on selling non-branded products or offering bulk discounts. The company has also been exploring the option of selling returns and discounted goods similar to those found in retailers like Nordstrom Rack and TJ Maxx. This strategy could help Temu differentiate itself from Amazon and attract price-conscious consumers who are looking for deals on gently used or overstocked products. The rise of non-branded products and bulk discounts may become a trend in the ecommerce market, as retailers look for ways to compete with Amazon's pricing power.
The decline in Temu's user base and revenue may have a ripple effect on the broader ecommerce market, as smaller retailers may struggle to compete with Amazon's dominance. The shift towards selling returns and discounted goods could also lead to an increase in demand for second-hand and overstocked products, creating new opportunities for retailers and consumers alike. As the ecommerce market continues to evolve, it will be interesting to see how Temu and other retailers adapt to the changing landscape and find ways to compete with Amazon's pricing power.
In conclusion, Temu's struggles to rebuild its business in the US market highlight the challenges of competing with Amazon's massive scale and pricing power. The company may need to focus on selling non-branded products or offering bulk discounts to compete with Amazon, and may also explore the option of selling returns and discounted goods. The decline in Temu's user base and revenue may have a ripple effect on the broader ecommerce market, as smaller retailers may struggle to compete with Amazon's dominance.
eCommerce Market Stats
See some statistics relating to this week’s topics in the eCommerce market below.
Temu vs Amazon eCommerce stats
- Temu's monthly active users on its US app declined to 21 million in mid-July 2024, down from a peak of around 45 million in January 2024.
- Temu has a market share of around 18% in the US ecommerce market.
- Amazon has a market share of around 42% in the US ecommerce market.
- Amazon generated 420 billion in sales in 2023.
- Temu generated 16.5 billion in sales in 2023.
- Temu has over 1,200 sellers on its platform.
That’s all for this week…
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