Temu is so cheap primarily because it employs several strategic factors: it offers extreme welcome deals, sources products directly from manufacturers, benefits from economies of scale, and has lower labor and shipping costs. Temu cuts out middlemen by connecting buyers straight with manufacturers, which significantly reduces markups common in traditional retail. It also leverages a digital-first approach, operating almost entirely online without physical stores, eliminating many overhead expenses. Additionally, Temu gains discounted international shipping rates through agreements like the Universal Postal Union, allowing it to ship products worldwide at very low costs. The platform prioritizes growth, occasionally taking losses on initial orders to build long-term customers. Other elements include less stringent regulations, lower customer service focus, and aggressive use of data and marketing techniques. However, these low prices may come with trade-offs such as slower shipping times and variable product quality.
Key Reasons Temu Is So Cheap
- Direct Sourcing: Directly from manufacturers, bypassing wholesalers and distributors to reduce price markups.
- Economies of Scale: High volume orders allow lower per-unit costs in production, shipping, and marketing.
- Digital-First Model: No physical store costs, and lower operational overhead.
- Shipping Costs: Leveraging international postal agreements to ship inexpensively worldwide.
- Promotional Pricing: Aggressive welcome deals and loss-leading pricing strategies to attract customers.
- Regulatory Environment: Manufacturing and labor cost advantages due to less stringent regulations in China.
- Data-Driven Operations: Uses customer data to optimize inventory and pricing, minimizing excess stock and waste.
These combined strategies enable Temu to maintain extremely low prices on a vast range of products, making it highly competitive but also potentially impacting service and quality aspects.
