The super growth of Temu–the online destination for everyday low prices

You're probably familiar with sticker shock - the feeling of distress when soaring inflation raises the prices of everything from eggs to gasoline.  

Temu, the online marketplace has drawn in millions of consumers with consistently low prices, which some comment are "astonishing" and "jaw-dropping." A banner on Temu’s home page advertised “simple rental hacks” starting from $0.05. That’s right - a nickel. An adjacent banner promised “gifts for grads” for as little as a dime.  

“I am shocked at how inexpensive a lot of this stuff is,” said Gregory Stoller, senior lecturer at Boston University’s Questrom School of Business. 

Temu’s Rapid Growth 

It's easy to see why, as Temu offers items at up to 90% off regular prices. These incredibly low prices have made some shoppers suspicious - at least until the Boston-based platform's distinctive orange packages arrive at their doorsteps.  

Founded in the US in 2022 and headquartered in Boston, Temu has been on a tear. The name is a truncated version of the company’s motto, “Team Up, Price Down,” which speaks to its mission to drive prices lower by getting more people to shop and generate scale. Shortly after its debut in September, the app shot up to top the download rankings for major app stores in the US and has stayed there ever since. The app got another boost after the six-month-old company surprised the industry by airing a commercial – twice – during the Super Bowl with the slogan that everyone can “shop like a billionaire” because its prices are so cheap.  

Temu has expanded beyond its home market in quick succession and is now available in 18 countries, including to consumers in the US, Canada, Australia, New Zealand, the UK, France, Germany, Italy, Spain, and the Netherlands, with a combined population of more than half a billion people. 

Is Temu Legitimate and Reliable? 

Mimi Lan is not one to look a gift horse in the mouth. Lan, a pop-up dinner organizer and personal chef based in Jacksonville, Florida, has managed to reap huge savings by switching from another e-commerce retailer to Temu, where she gets her catering supplies for her business. A generic fryer basket costs $1.48 on Temu, compared with $5.45 each on another e-commerce platform. 

Lan is constantly in need of things such as garnishing tools, dumpling boxes, steamer liners, parchment paper, and quality disposable plates. She now swears by Temu because it delivers much a lot faster, is cheaper, has better packaging, and has a much more generous returns policy. The difference can add up when buying in bulk, Lan pointed out. 

“It’s really hard when you’re in the business that I do, as a chef, to do private dinners, and culinary productions. Presentation is important. Kitchen tools are important,” Lan said. “You constantly have to buy all these things in order to do your event.” 

For small-business owners like Lan and other consumers who often have to do more with less, Temu is a legitimate e-commerce platform that offers more choices of decent quality products at affordable prices. Compared with other e-commerce platforms, Temu appears to be making more effort in ensuring reliable deliveries and maintaining service and quality standards with a comprehensive refunds and returns policy.  

Appealing to Cost-Conscious Consumers 

Temu App Official Big Game Ad | Shop like a Billionaire 

The app’s formula of ultra-low prices and flash sales has proven attractive at a time consumers are tightening their belts, said Abe Yousef, a senior analyst at Sensor Tower, an app-tracking firm. “Temu is well-positioned to continue its aggressive growth strategy among US consumers” given the current challenging macroeconomic environment, he said. 

Echoing his views, Temu’s hometown newspaper, the Boston Globe, wrote that the platform’s low prices have been a welcome surprise for millions of US consumers. Temu is part of a new wave of technology-based platforms that are changing the way businesses work by using advanced tech to quickly adapt to what customers want and match production to demand, according to Harvard Professor John Deighton, who expects the trend to continue.   So how does Temu actually achieve such low prices? Importing manufactured goods from lower-cost countries abroad only partly explains the cheap prices, because retailers of any size have been reselling merchandise from overseas manufacturers with a decent markup for years. 

How Temu Gets Prices So Low 

Temu says it gets very low prices by leveraging economies of scale, working with cost-efficient manufacturers from around the world to deliver a wide selection of merchandise at affordable prices. More importantly, Temu removes the layers of hidden costs due to inefficiencies and waste - such as overproducing unwanted merchandise, racking up warehousing fees to store unsold goods, and layers of markups by middlemen handling the merchandise.  

It does this by enabling these manufacturers to gain more visibility into consumer demand and preferences so that they can design products that are more suited to market needs. The increased transparency also helps manufacturers to better plan their logistics so that products are shipped more efficiently from factory floors to shoppers’ doors. The cost savings from these improvements are passed on to consumers in the form of lower prices, explaining why Temu can price its merchandise so cheaply without compromising on quality. 

A New Era of E-Commerce? 

Temu’s popularity can also be explained by it filling a gap in the market, serving “drastically underserved” suburban price-sensitive consumers who look for bargains at dollar stores or simply haven’t been able to access affordably priced products in the past, according to Michael Felice, a consultant at Kearney.   "(Temu’s) timing is very advantageous," said Felice. “You have extreme pressure on the consumer wallet right now.” The company is “exposing a white space in the market” and reducing the bloat that comes with markups at each stage of the distribution chain, he said.   To be sure, as Temu expands its global footprint, the jury is still out on whether its tech-enabled “cheap yet good” merchandise strategy heralds a new era of e-commerce or is just a flash in the pan. But Temu and other new-generation e-commerce platforms would have done consumers a favor if they succeed in nudging legacy retailers to step up and improve their own efficiency.