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Chinese online discounter Pinduoduo Inc on Thursday launched the beta version of Temu, a cross-border e-commerce platform targeting the US market, the company’s first overseas destination.
The test version of Temu will run till Sept 15. Eventually, it will help Pinduoduo to expand sources of its revenue and hedge against the negative impacts of the COVID-19 pandemic, industry experts said.
The products sold on Temu cover a wide range of categories, including apparel, consumer electronics, jewelry, shoes, bags, cosmetics, baby products and pet supplies.
The company did not disclose whether Temu will expand to other overseas markets in the future. Temu will focus on US consumers who are inclined to buy cost-effective commodities. For instance, most accessories and daily necessities are priced at less than $10.
To attract merchants, Temu is offering a series of preferential policies like exemption of registration and commission fees at the initial stage.
Merchants who have registered with Temu are required to send the listed goods to the warehouses of Pinduoduo in Guangzhou, capital of Guangdong province, in advance, while the platform will be responsible for e-commerce operations, logistics and sales.
Pinduoduo’s Temu venture coincides with the trend of Chinese vendors selling their products globally through crossborder e-commerce platforms amid the COVID-19 pandemic.
To cater to the American market, where many people are still accustomed to browsing websites, the company launched both a mobile app and a website version for Temu. In China, Pinduoduo is available exclusively via mobile app.
Rather than serving as an intermediary between sellers and buyers, Temu takes on the role of a retailer in its own right, similar to Shein, by selecting products from suppliers and then selling them to consumers. . By taking this strategy, the platform is better able to manage supply, logistics, fulfillment, and provide superior after-sales service and customer support—all of which contribute to winning clients’ trust.
Although seen as Shein’s “apprentice”, Temu is more scrappy and ambitious. From day one, it has offered customers a wide range of categories including womenswear, menswear, pet supplies, accessories, homewares, cosmetics, and more. In contrast, Shein gradually extended its tentacles to other categories after gaining a foothold in the women’s apparel area.
When it comes to pricing, Temu can go even lower than Shein – $11.77 for a wool coat, $0.95 for a necklace, $1.92 for sunglasses, $4.07 for a fanny pack, $0.38 for a pet comb, $2 for an eyeshadow palette, and more.
Thanks to the affluent resources and edges that its parent company has accumulated in the supply chain, Temu is able to offer jaw-droppingly low prices.
Founded in 2015 by former Googler Colin Huang, Pinduoduo is one of the fastest-growing internet companies in China. It carved out its niche in the e-commerce market dominated by Alibaba and JD.com and went public on the Nasdaq in 2018.
Unlike Alibaba’s Taobao and JD.com, Pinduoduo, the latecomer, focuses more on bridging manufacturers, particularly those in the small and medium-sized range, with consumers, thus cutting out the middlemen and decreasing overhead in storage, transportation, distribution, and more.
What brings it closer to manufacturers is the Consumer-to-Manufacturer (C2M) initiative. Developed in collaboration with factories, the initiative allows Pinduoduo to offer producers market insight and changes in consumer demand to better optimize and customize products and boost supply chain effectiveness.
The initiative reduces the time it takes to bring a new product to market by 50% and better meets consumer needs, according to Pinduoduo.
It’s also a pioneer of the “group buying” approach, which enables consumers to either make a purchase directly or to recruit their friends or family members to buy in bulk from the manufacturer to keep costs down.
Pinduoduo gained traction in China’s lower-tier cities, where shoppers are more price-conscious, before expanding to second- and first-tier cities.
In the first half of this year, the COVID-19 resurgence in China dragged down the economy and consumer spending, while, Pinduoduo witnessed solid growth. For the second quarter, the company reported better-than-expected revenue of 31.44 billion yuan ($4.69 billion), up 36% from last year.
Consumers are tightening their belts and looking for ways to save money, as evidenced by the satisfying growth of Pinduoduo, an online marketplace for low-priced consumer items and household basics. According to the company, sales of agricultural products, fast-moving consumer goods, consumer electronics, and beauty products outperformed.
Comparatively, during the same period, JD.com’s retail revenue was 241.557 billion yuan, a year-on-year increase of 3.9%, while Alibaba’s domestic retail revenue fell 2% year-on-year to 136.977 billion yuan.
With Pinduoduo’s record of rapid expansion in China, strong connections with the supply chain, and Shein-like approaches, many suppliers believe that Temu has the potential for steady growth and have applied to join. “Even though such a low price means a limited profit margin for me, I decided to give it a shot. Maybe the order volume will increase rapidly in the future,” one vendor said on Weibo, Chinese equivalent of Twitter.
Narrowing the gap with Shein will need more than just reliable supply chain management, though. To top it all off, Temu needs time to figure out how to address the challenges of international logistics, adapt swiftly to shifting consumer tastes, develop an efficient marketing strategy, and more.