- Temu is the internet's new discount store with bargain prices that rival dollar chains.
- It's run as a marketplace where merchants mostly based in China sell directly to consumers.
Temu is fast becoming the internet's local dollar store.
This Chinese-owned, but US-headquartered e-commerce platform, is run as a marketplace where sellers – who are predominantly based in China – sell products to customers in the US, Canada, Europe, and Australia. It consists of an app and website and has made waves in the US since its launch in September.
Its splashy marketing campaigns – including two 30-second spots at this year's Superbowl, which were estimated to cost $14 million – set out to convince shoppers that it's possible "to shop like a billionaire" even when you're penny-pinching.
And it seems to be working. Temu's app sped past Amazon, TikTok, and Instagram to reach the top of the download charts on both Apple and Google Pay, and its ultra-low prices have made it a prime target for social media "haul" videos where consumers are dubbing it the US' new version of the dollar store.
'If Amazon and Dollar Tree had a baby it would be Temu'
Almost everything on Temu's website and app is geared toward deals and discounts. There are banners prompting shoppers to browse "lightning deals," and each item has a percentage discount next to it – which is often as much as 80% off. Its unclear what this discount actually refers to, and a spokesperson for Temu did not clarify when contacted by Insider.
Consumers can also search for items under $1, which pulls up a whole host of products across its various categories from fashion and homeware to electronics and pet supplies. Most of these products wouldn't look out of place at a dollar store.
"If Amazon and Dollar Tree had a baby it would be Temu," one Twitter commenter wrote. "Temu is basically an online dollar store," another said.
Though its ambitions are bigger than defeating the US dollar store segment – experts say it wants to become China's first major player in the online shopping space and take on Amazon – its in prime position to fill a void in the discount market by serving a customer that hasn't previously been able to buy such cheap goods online.
In the past, dollar stores had been somewhat sheltered from the rise of e-commerce because they were offering a budget shopping experience that wasn't offered in the same way online. But if Temu has found a way to replicate these prices and make it more convenient for shoppers, where does that leave these dollar chains?
"You can imagine a scenario where a customer is getting their keys to drive to a dollar store and Temu throws off a notification in the app, they buy something immediately, and then they're like: 'Okay, I've spent my money on that, I'm not gonna go to a dollar store,'" Juozas Kaziukėnas, CEO of e-commerce intelligence company Marketplace Pulse, told Insider.
These chains could also be more vulnerable given that discount shoppers aren't always store loyal, as they don't have the luxury to be when cost is the main consideration. This is especially pertinent as stores like Dollar General and Dollar Tree continue to come under inflation-related pressures and raise their prices.
Still, the lack of visibility in Temu's supply chain means that no one really knows whether its prices are sustainable long-term, Michael Felice, associate partner in the communications, media, and technology practice of consulting firm Kearney, told Insider.
A spokesperson for Temu previously told Insider that its "next-gen manufacturing model" – whereby it shares data on what consumers are shopping for and searching for on its site with its third-party sellers – is the key ingredient to its bargain prices. This enables sellers to predict trends, plan production, and therefore reduce the risk of overproducing items that consumers don't want. These cost savings can then be passed on to the consumer, the spokesperson said.
But there are other factors at play. Most sellers of its sellers are based in China – where manufacturing and labor costs are lower – and its manufacturer-to-consumer business model means there's no middleman in the chain to take a slice of profits.
Felice described the recent buzz around Temu as an "elongated test" whereby consumers are asking themselves: "Are these prices too good to be true and is Temu really going to deliver?"
"If Temu can prove sustainability in its business model, I believe this is the white space that remains in US e-commerce," he said.
"We will have to wait to see how many of these users return," he added. "You're unlikely to find the things you really need on Temu, you're much more likely to find throwaway items, which you won't perhaps always need.
"And, you don't miss them when you don't have them," he said.