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You’ve probably already come across it – no matter what you google or what social network you’re on: advertising for the Chinese online shop “Temu” pops up everywhere. That seems to be working: sales are growing rapidly.
This almost penetrating advertising. Is this Temu’s recipe for success? Yes, you can say that. The major bank JPMorgan Chase estimates that Temu will invest $3 billion in advertising this year. Temu invests so much that Meta makes 10 percent of advertising sales thanks to the app. This advertising is intended to encourage people to shop wherever they are – on their smartphones. Together with the absolutely low prices, this should entice customers to buy immediately. Even once the app has been downloaded, the advertising remains penetrating: the app constantly pushes you with “special offers” – and the prices are always consistently low.
Legend: The app is full of information about discounts and special offers. Keystone/CHRISTIAN BEUTLER
Does all of this actually lead to sales success? Yes. Temu has over 100 million downloads in the Google Play Store. This is also reflected in the high sales figures. According to estimates by the e-commerce consulting company Carpatia, sales in Switzerland alone were 350 million francs – in the first year. In the USA, Temu has already gained its first percent of market share.
How can Temu offer the goods at such low prices? One reason is that the goods are delivered directly from the factory. Temu does not operate camps. This keeps prices low, but increases delivery times. However, the broker Bernstein in the USA suspects that Temu still loses ten US dollars per product sold. So Temu sells products at a loss just to gain market share. The company can still handle this because the parent company Pinduoduo makes $12 billion in sales every year in its home market of China.
At the moment Temu is actually making a loss in Europe. Can this work in the long term? Of course not. But the company accepts this because it is very difficult to get the first few percent of market share in the USA and Europe. If you have one foot in it, it’s easier to increase market share. At least in the USA this has already been achieved: Temu has broken the 2 percent mark. However, the shop is still a long way from the dominator Amazon with 38 percent market share.
Legend: Amazon is also under pressure because of Chinese suppliers. However, the market dominant’s lead is still large. Keystone/DAVID ZALUBOWSKI
So is Temu serious competition for Zalando, Amazon and Co.? Not yet, because it’s just “Chinese goods” and a range limited to clothes and knick-knacks. But that can all change. Shein, for example, now also offers higher quality clothes. The question is simply whether Temu will be able to move into the high-end segment without people dropping out. Because the parent company Pinduoduo obviously cannot lose money with its European business forever.
Philippe Erath
Business editor, Radio SRF
Open the people box. Close the people box
Philippe Erath is a business editor at Radio SRF. He previously worked in various positions at SRF: as an editor at SRF 2 Kultur, as a program management member at SRF 3 and as a business editor.