(qlmbusinessnews.com . Fri 21th Feb, 2025) London, UK —
This News Story is Temu's Bargain Bonanza: How the Chinese E-Commerce Giant is Undercutting the UK Market
Temu, the rapidly expanding Chinese e-commerce platform, has taken the UK by storm with its astonishingly low prices. In a mere two years, it has become a significant player in the global online marketplace, but concerns are mounting over the methods behind its bargain basement deals. Critics argue that Temu's ultra-competitive pricing relies on questionable practices that could harm British businesses and consumers alike.
Temu's European expansion has been rapid, gathering millions of users, but questions persist about the sustainability and ethics of its pricing strategies. While other retailers have attempted similar strategies, only Temu has seemed to have a chance to outperforming Amazon
Temu's model originates from its parent company, Pinduoduo (PDD Holdings). Temu represents China's ambition to shift from the world's factory floor to the world's online shop window.
Launched in Boston in September 2022, Temu is an international arm of Pinduoduo, The platform employs a “Consumer-to-Manufacturer” (C2M) approach, which relies on reverse auctions. Temu solicits bids from manufacturers, forcing them to undercut each other to secure orders. PDD Holdings sets the final prices and profit margins, while manufacturers bear the burden of storage and unsold stock.
This allows Temu to secure rock-bottom prices from the outset. Pinduoduo’s logistics expertise enables rapid order consolidation, creating economies of scale that smaller manufacturers may struggle to achieve independently.
To boost sales, Temu has been using a “group-buying model” to drive sales through social media. The name Pinduoduo is made to mean “Together, more savings, more fun,” which reflects its core strategy, which is the more buyers in a group purchase, the lower the price.
PDD Holdings generates revenue by charging manufacturers for shipping and marketing services. Unlike Amazon, Pinduoduo does not take commissions on sales.
Temu benefits from favourable customs regulations, which exempt goods valued under a certain threshold from customs duties. It has onboarded many retailers, shipped millions of packages daily from warehouses in China and attracted millions of users worldwide by offering products cheaper than Amazon. Temu is investing heavily in advertising on social media platforms.
Logistical issues are a main concern. Temu is transitioning to a semi-managed one. Under this model, Temu-represented merchants ship products via ocean freight to warehouses for local distribution.
Temu has introduced a traditional model, where sellers set their own prices much like eBay, AliExpress, and Amazon. Already rolled out across several European countries, including the UK, Germany, Spain, and France, the model could challenge Temu’s ability to sustain its ultra-low prices.
Now that Temu is transitioning into a more conventional marketplace, can its aggressive pricing strategy stand the test of time?
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