The company, along with rival Shein offer heavily discounted items and have seen increased popularity in the US and UK.
Temu’s founder Colin Huang has recently become China’s richest man with a net worth of $48.6bn (€44.50m), according to the Bloomberg Billionaires Index. He replaced bottled-water tycoon Zhong Shanshan, the founder and chairman of beverage company Nongfu Spring, who has held the title since April 2021.
A serial entrepreneur, Huang has previously started a number of other businesses, such as e-commerce platform Oku, online games company Xinyoudi and agricultural platform Pinduoduo.
Huang was also previously an engineer at Google and has worked to expand Google’s services in China as well. As such, Huang belongs to a new generation of Chinese billionaires, who have made their fortunes mostly in tech and are not afraid to take risks by starting multiple online businesses.
The majority of his success and wealth currently comes from Temu, a discount online shopping platform which has taken the world by storm recently. Temu, launched in 2022 by Huang’s PPD Holdings, managed to turnaround the latter’s struggling performance during the tail end of the pandemic.
Temu’s business model depends mainly on individual Chinese vendors shipping directly to clients globally, without any middlemen required. China’s relatively low manufacturing costs compared to most Western countries also make it easier to maintain Temu’s margins. The company also spends heavily on social media marketing.
With the economic slowdown in China following the country’s real estate crisis, Temu’s vast array of products at heavily discounted prices saw soaring demand. The platform also offers an onslaught of continuous offers and rewards, enticing customers to shop more frequently.
As a result, the company has taken advantage of the country’s changing shopping habits, as consumers move away from higher-end luxury products, and want more value for money.
This has also been seen in other countries like the United Kingdom and the United States, where Temu is also very popular.
Neil Saunders, retail analyst at GlobalData Retail said, as reported by Bloomberg, “In this economic environment, obviously people are looking for great value for their money, people are looking for low prices. So this is a time to shine for value retailers like Temu.
“Temu at the moment is all about growth. Attract people to the site, get them shopping. Then if they become more addicted, maybe then they start to be more tolerant if we push prices up a little bit. So I think for Temu, it’s in a land grab era.”
Temu sees rising supplier protests against fines
However, Temu has also been facing a number of issues recently, with the company seeing several supplier protests in places like Guangzhou, China, against the company’s disproportionately high fines for things like poor customer service.
Wrong product descriptions or parcels, as well as late deliveries all attract these late fines, which can be as high as five times the product’s wholesale price.
Temu has also been accused of withholding payment for products sold and there have been allegations that it’s owner PPD Holdings subjects its employees to a punitive work schedule of 11am to 11pm plus overtime.
Furthermore, the EU is reportedly in the process of implementing import taxes on packages from Chinese online discount retailers such as Shein, AliExpress and Temu, which they did not have to pay before.
This move comes as the EU seeks to protect its own businesses against these retailers’ slashed prices, and could potentially make it harder for Temu to sell its goods at their current price level.
