Leading online marketplaces typically take years, or even decades, to develop, establish name recognition, gain customer trust, and work out the efficiencies and logistics required to succeed. Over the last 30 years, e-commerce has changed the face of the retail sector. It has allowed businesses to reach more customers, streamline distribution, and increase the efficiency of getting products from creators to consumers.
Temu (pronounced tee-moo) is among the latest entrant to the growing US e-commerce sector. The company has seen a meteoric rise to become the top-ranking free app on both the Apple and Android stores soon after it launched in September 2022, a position it has held ever since.
Temu’s name is an abbreviation of “Team up, Price down,” a reference to the company’s operating principle of using economies of scale to drive down costs for consumers. This can be achieved because Temu does not own or have any financial interest in any brands and so its interests are aligned with both consumers and sellers. Temu also enjoys strong backing from its parent, PDD Holdings, whose experience and resources in commerce and logistics meant it could launch Temu straight to the top tiers of the e-commerce market from day one.
Who is PDD Holdings and how does it benefit consumers?
PDD Holdings is a multinational commerce group listed on the Nasdaq (Nasdaq: PDD) with a market cap of over US$100 billion. With over a decade of commercial experience, the Group has built a global network of over 11 million suppliers and brands.
Building this network also led to the development of advanced fulfillment and logistics capabilities. PDD Holdings serves over 900 million people worldwide and deals with 200 million parcels a day. In 2021 alone, it fulfilled a staggering 61 billion orders. This success has proved profitable, with the company making US$17 billion in revenue and generating US$4.6 billion net cash in the 12 months leading to September 2022.
PDD Holding’s resources, experience, vast network, economies of scale, and logistical know-how make it the perfect parent company for new enterprises in similar fields. The Group already owns and operates a portfolio of businesses.
Having such a significant heavy hitter as a parent corporation has given Temu the resources to enter the market at the top.
Although it was only founded in September 2022, Temu was able to establish headquarters in the prestigious Back Bay area of Boston, Massachusetts, and immediately get down to business.
Temu’s success comes from its fresh approach
In addition to the considerable support it received, Temu has differentiated itself from the competition with a new approach to online retail. The company describes itself as a “pure” e-commerce platform that focuses on individual needs and just-in-time manufacturing. The platform doesn’t sell its own brands to customers, nor does it have a financial interest in other brands. Instead, it has grown an ecosystem of merchants, logistics partners, and customers.
In this way, Temu does not compete against the vendors that it hosts on its own platform. Freed from this inherent conflict of interest, Temu’s interests are aligned with those of its sellers and consumers.
Temu has also sought to make e-commerce more responsive to the changing needs of consumers through its Consumer-to-Manufacturing, or C2M, model, pioneered by PDD Holdings. With C2M, Temu connects manufacturers directly with consumers and provides producers with feedback and information about consumer preferences and needs. This allows manufacturers to make more informed decisions about design, production, inventory, and branding, ultimately resulting in products that better match consumer demand.
For consumers, this means they have more say in the products that are being produced and can potentially lead to more tailored products that better meet their needs. Additionally, C2M can lead to more efficient production processes, which can result in lower costs for consumers. The model removes intermediaries, allowing consumers to buy products at lower prices.
Temu’s commitment to creating long-term value
Using this approach, Temu’s parent company PDD Holdings has helped merchants and manufacturers to incubate nearly 1,000 brands since 2015, enabling manufacturers to respond quickly to market shifts and tailor their products to consumer tastes.
Temu’s commitment to understanding the culture and markets it works in has been key to its success. It has improved the effectiveness of the C2M model and helped to grow and support its ecosystem. Connecting customers more directly to merchants not only means lower prices but also creates a deeper understanding of individual needs.
PDD Holdings Chairman and CEO Lei Chen says, “We fully respect that there are many differences across different markets. And we also understand the need to constantly experiment, and we expect that the process will be full of challenges. So we will be patient and work together with our partners to create long-term value for consumers.”
To achieve these aims, Temu is guided by four core values that influence every aspect of the business, from marketing to governance. These are empowerment, diversity and inclusion, integrity, and social responsibility. These values shape how the company operates and underpin its approach to e-commerce.
“We will not just simply repeat what others have done in this field. What is important to us is that we start from the needs of consumers and strive to create our own unique value,” he said.
Although Temu has only been around for a matter of months, its rapid rise to prominence is impressive but not unexpected. With the support of PDD Holding’s vast network, and the ability to cut out intermediaries and consequently lower prices, consumers have been flocking to the platform. It will be interesting to see what they can achieve in a year.
McClatchy newsroom and editorial staff were not involved in the creation of this content.
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