Temu took the world by storm – but has the shopping app lost its thunder?

In February 2023, the budget shopping platform Temu made headlines by becoming one of the youngest ever brands to purchase a Super Bowl advertising spot. The 30-second commercial, which aired twice during the game, boasted that consumers could "shop like a billionaire" with Temu's ultra-low prices. Temu's marketing blitz aimed to introduce American consumers to a marketplace built on low prices, a diverse product range, and a gamified shopping experience.

This investment paid off, with Temu's downloads jumping 45 percent on the day of the Super Bowl campaign compared with the previous day, according to ModernRetail. The platform's rapid rise continued, bringing Chinese-style e-commerce to global markets.

However, three years later, Temu's initial business proposition is being reevaluated due to global regulation and rising customs barriers. The cost of shipping dresses directly from Chinese warehouses to doorsteps in America or Europe is no longer as simple or cheap as it once was. Temu's ability to offer such low prices relied on two main factors: its extensive, efficient Chinese supply chain and a clever distribution strategy that avoided hefty import tariffs.

The supply chain was built on PDD Holdings' years of experience operating China's largest e-commerce platform, Pinduoduo. Temu copied Pinduoduo's model and expanded it globally, leveraging China's well-established network of factories, suppliers, and cross-border merchants.

This supply chain allowed Temu to produce and ship goods at an unmatched scale and cost. China's specialized manufacturing clusters, such as China's Guangdong province, which is known for electronics and toys, and Yiwu, a wholesale market for small products, played a crucial role. Temu's de minimis exemption allowed individual shipments under US$800 to enter the US duty-free, making it cost-effective for the platform to ship low-cost goods directly from China to American doorsteps.

However, this formula is now facing scrutiny due to rising customs barriers and increased regulation, threatening Temu's low-cost advantage.