Mục ý kiến chuyên gia The Impact of Temu’s Emergence on Global Sellers

Chinese e-commerce giants are accelerating their expansion into international markets. Temu, Alibaba, and others are rapidly expanding their market share with significantly lower product prices and aggressive marketing strategies. While these companies have the potential to revitalize the global economy, there are also concerns that their business methods threaten the free-market economic order and jeopardize the survival of existing companies. In this article, we'll take a look at how Temu's low prices and massive ad spending are possible, what the ongoing concerns are, how it differs from Amazon, and what the implications are for Amazon sellers. The Pros and Cons of Chinese E-commerce’s Overseas Expansion First, let's look at the positive aspects of Chinese e-commerce companies expanding overseas. New market entrants in any market always energize that market, especially if they're being held in check by existing market players. Temu and Alibaba are no different.

Temu and Alibaba provide more choices for consumers struggling with high prices, and the emergence of new marketplaces provides sellers with more opportunities to sell. In addition, new market entrants are likely to actively advertise to make themselves known to consumers. This will boost the advertising industry, which is good for the logistics industry, as the overall e-commerce market is directly related to their revenue.

The international community has repeatedly pointed out the threat to fair competition, which is the foundation of a free market economic system, and the concern that consumers’ personal information may be flowing into China. First of all, there are suspicions that some of the products sold on Temu are produced by forced labor. To eliminate this suspicion, Temu needs to prove that the goods it sells are not produced by forced labor. If the Chinese government supports the business of foreign companies in the same way it stimulates China's domestic market, it poses a serious threat to fair market competition, a fundamental principle of a free market economy.

Canada's Global News reported on Temu's consumer privacy issues in an interview with privacy expert Professor Rob D'Ovidio of Drexel University in Philadelphia. The danger of Temu is not that it has access to one’s most sensitive data, but that it creates a detailed profile of a user and, over time and with a combination of factors, can even discover their health patterns, tastes, preferences, and habits. Also, Temu's privacy policy states that Temu may share information with its affiliates, but it does not specify which affiliates. ^[1] Current Market Entry Status of Temu Launched in the U.S. in September 2022, Temu is a new cross-border e-commerce platform operated by Chinese IT company PDD Holdings. PDD Holdings previously run the successful online retailer Pinduoduo in China. The Temu app has expanded to 50 countries since its launch in the U.S. in September 2022 and was the most downloaded app on Apple and Google in December 2022, with 19 million installs in January 2023. ^[2][3]

There was no official announcement of Temu's international presence. However, based on media reports and Temu's website, we can summarize the main countries where Temu has a presence as follows:

After its U.S. launch, the Temu app has been rolled out in Canada, Australia, and New Zealand. In April 2023, it began serving the European market too. In July 2023, it entered South Korea and Japan, and in September 2023, it entered Southeast Asia, starting with the Philippines ^[3] Chinese online retailer Temu was the most downloaded shopping app in the world in 2023, with nearly 338 million downloads on the Apple App and Google Play stores, according to a March 4, 2024 announcement by global research firm Statista. ^[3][5] The Driving Force Behind Low Prices: Operational Approach Different from That of Amazon If you follow the process of buying a product on Temu from a consumer perspective, it's not much different from Amazon. You search for a product by using specific product-related keywords or browse through categories to find what you're looking for. Once you find something you like, you can add it to your cart or go straight to checkout to complete your purchase.

Where Temu's operations start to diverge from Amazon's is in the post-purchase product preparation stage. This is where Temu's products are able to sell for significantly lower prices compared to other marketplaces, including Amazon. Direct Shipping from Chinese Warehouses and Factories to U.S. Consumers Let's follow what happens after an order is placed on Amazon and Temu, respectively. When a consumer orders a product from Amazon, Amazon ships it to a US consumer from an Amazon fulfillment center. Amazon's fulfillment center stocks products from brand or general sellers in adequate quantities and then ship them to consumers.

When a consumer places an order on Temu, the order is connected to the manufacturer, who ships the product directly to the Temu consumer from their warehouse and factory in China. This is one of the reasons why Temu is able to price its products so low. Simply put, this approach saves Temu money by not having to pay to open and maintain a warehouse in the U.S., which translates into lower product prices.

Temu's model keeps costs at the lowest level by connecting consumers directly with suppliers and only handling customer deliveries. This, coupled with low operating costs, in addition to taking advantage of China's low manufacturing costs and cheap labor, helps keep product prices very low. ^[4]

The Reason ‘Temu Supplier' Fits Better Than 'Temu Seller' In most e-commerce marketplaces, the seller sets the price of the product. This is also true on Amazon. However, Temu's product prices are set by Temu, and Temu suppliers have no control over product prices. Temu suppliers only supply products based on the product delivery price they negotiated with Temu. This means that it doesn't matter to the Temu supplier whether the product they provide to Temu sells for less or more than the delivery price.

In order for a Chinese manufacturer or factory to supply Temu, they must be able to match the product terms and prices of Temu's offer. In order to support Temu's ultra-low price competitiveness, these suppliers must consistently maintain a decent level of quality and lower delivery costs than their competitors. Maintaining a Business Strategy Where Losses Increase with Each Sale In a report by Epoch Times, Temu Chief Financial Officer David Liu reiterated that Temu's focus is not to make profits, but to develop the market. The company also reported that PDD Holdings used the same strategy in China, which allowed Pinduoduo to first dominate the Chinese market with low prices and then turn a profit six years later. ^[3]

The Wall Street Journal reported in an article titled "The Spending Strategy Behind Temu's Rapid Growth in the U.S. - The China-backed company is blanketing the Internet with ads. U.S. retailers are feeling the pain. " citing a report from Goldman Sachs, which estimates that Temu lost an average of $7 per order in 2023 ^[6] An average loss of $7 per order represents a negative overall sales margin that includes marketing costs. Temu’s Coexistence: Crisis-Stricken Chinese Manufacturers and Chinese Government’s Urgent Need for Economic Stimulus The vast majority of products sold on Temu are unbranded, low-cost items. This is where Temu suppliers are distinctly different from Amazon sellers. Amazon sellers are largely dominated by brand-owner sellers. Amazon itself also encourages and supports sellers to brand themselves. Temu suppliers, on the other hand, are mostly product manufacturers who are able to maintain the quality of their products and low prices, and they are far from branding and marketing.

Temu has saved the lives of countless Chinese manufacturers who are at risk of closing their factories because they can't find a market to sell their products, and these Chinese manufacturers are solid allies of Temu's ultra-low, predatory pricing strategy. Predatory pricing strategy is a strategy in which a company undercuts prices excessively, to enter a market or defeat a competitor in an existing market even at a loss. In the global marketplace, this win-win relationship is likely to continue for a long time as China's export business deteriorates, backed by a Chinese government desperate to stimulate its economy.

If Temu's business strategy continues for years to come - an ecosystem disruptor that is difficult to understand through the mechanisms of a free-market economy - it's time for Amazon sellers to rethink how they should respond. Sellers Need New Strategies Due to Temu Some Amazon sellers make products in their home countries and sell them on Amazon in the U.S., while others make products in countries like China and Vietnam and sell them on Amazon in the U.S. U.S. sellers aren't much different. If you're a seller selling products made in China and selling on Amazon in the U.S., you're in more trouble. You should also review the seller types listed below and make adjustments to your business strategy and execution, if applicable, for the long term.

1) Sellers of Non-Branded Low-cost Products and Consumables
If you're a seller of low-priced products on Amazon that are sourced from Chinese manufacturers, you're probably already seeing an impact on your sales. In some cases, it can be severe. Staying in the market won't provide a quick fix. It's time to make some aggressive changes to your product mix.

Low-cost consumables such as smartphone cases, chargers, and cables, as well as apparel, accessories, and home appliances are common on Temu. This is a testament to the supply from Chinese manufacturers. If you're sourcing and selling products from Chinese manufacturers rather than your own brand, you must be more concerned. This is because it's hard to differentiate your products from similar products on Temu, and the prices are not competitive. Also, if you're selling products with the same features as branded products, Temu's expansion is a threat to you. The risk is even higher if the products are from Chinese manufacturers.

2) Sellers of Chinese Original Design Manufacturing (ODM) Products
If you're a seller of ODM products from a Chinese manufacturer, then you're probably worried about the future. This is true even if you're selling products produced by Chinese manufacturers under your own brand. Even if you're not currently selling products from Chinese manufacturers on Temu, you'll need to revise your business strategy to prepare for an uncertain future. If your ODM products are also being sold on Temu, especially at significantly lower prices, it's probably not worth selling them on Amazon. It's time to make a drastic change. You may need to find a manufacturer in another country to produce the product, change the factory, or remove the product from the mix of products you sell on Amazon altogether.

3) Sellers Offering Relatively Low-Cost Products with Established Brand Awareness
If you're a seller selling products that are in a low-priced category on Amazon and have strong brand recognition, you'll want to monitor Temu for products that look like your brand or are fake. This is because these products are more likely to be targeted as competitors on Temu. For these types of sellers, managing counterfeit products on other marketplaces can be challenging enough without Temu, and the additional budget will be a significant burden for the organization.

It will be essential for Chinese e-commerce companies such as Temu to address the current global market concerns, practice fair competition under the free market economic system, and fulfill their responsibilities as members of the global economy, including respect for human and labor rights and consumer protection. If related sectors, such as the advertising and logistics industries, also make efforts to create a healthy competitive environment and maintain market order, the current concerns will be resolved sooner. Consumers should not only consider low prices, but also think about whether these low prices are the result of someone's sacrifice and unfairness. # Reference [1] Shop on the Temu app? Why class-action lawsuits have been proposed over privacy, Global News
https://globalnews.ca/news/10532082/temu-app-privacy-class-action-lawsuits/
[2] What you need to know about Temu, the online shopping app dominating download charts, CBC
https://www.cbc.ca/news/business/key-things-to-know-about-temu-online-shopping-1.6850217
[3] Chinese Shopping App Temu Faces US Scrutiny Over Data Security, The Epoch Times
https://www.theepochtimes.com/china/chinese-shopping-app-temu-faces-us-scrutiny-over-data-security-5617790
[4] 7 Things To Know About Temu Before You ‘Shop Like A Billionaire’, Forbes
https://www.forbes.com/sites/markfaithfull/2024/02/13/7-things-to-know-about-temu-before-you-shop-like-a-billionaire
[5] Most downloaded marketplace apps worldwide 2023, Statista
https://www.statista.com/statistics/1417955/most-downloaded-marketplace-apps-worldwide
[6] The Spend, Spend, Spend Strategy Behind Temu’s Rapid Ascent in America, Wall Street Journal
https://www.wsj.com/business/retail/the-spend-spend-spend-strategy-behind-temus-rapid-ascent-in-america-d2bdefc3

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