Recently, Temu, the overseas version of Pinduoduo, has rapidly risen in the United States by using a large number of marketing strategies and price attractiveness. However, since the Trump administration raised tariffs, especially canceling the "small-value exemption" for packages from China and Hong Kong, Temu's situation has drastically deteriorated.
Jenny Garcia, who runs a chain of beauty salons in Texas, is also a loyal user of Temu. In her beauty salon, everything from sofas and storage shelves to phone stands and handheld fans are all purchased on Temu. However, since May, she found that the variety of products on Temu had significantly decreased. The quantity was only about 20-30% of what it used to be, and the prices were much higher, almost not cheaper than buying on Amazon, she told the reporter. Now, this era of being able to buy a lot of goods for a small amount of money has come to an end.
Trump's Tariff War Affects TEMU
As part of a series of tariff wars starting in April, the Trump administration officially ended the duty-free treatment for small parcels from mainland China and Hong Kong on May 2nd. Before that, parcels with a value below $800 could enjoy tariff exemptions, and platforms like Temu and Shein benefited from this policy, allowing them to enter the U.S. market without paying tariffs. The reduction in product variety and increase in prices on Temu, which Jenny complained about, is due to this policy greatly increasing the costs of these e-commerce platforms.
President Trump also signed an executive order on July 30th, which will completely terminate the $800 minimum exemption on August 29th. From that date onwards, all imported goods transported through means other than international postal networks will be subject to tariffs, not limited to Chinese products. Originally, some Chinese e-commerce companies tried to transfer production to Vietnam, Indonesia, and other places or establish overseas warehouses in Mexico to continue enjoying the exemption policy, but now it seems that there is very little room for platforms like Temu to operate.
Temu has also started to raise prices significantly for almost all product categories since late April this year.
TEMU's Rapid Rise in the United States Through Marketing
Temu's rapid rise in the United States cannot be separated from its extensive marketing and advertising. Jenny first learned about Temu because she saw Temu's advertisement during the 2023 Super Bowl. The ad repeatedly emphasized the advantage of low prices. Not having a wide income, she downloaded the app out of curiosity. Her friends and many of her beauty salon customers also, like her, became curious about the name after repeatedly seeing Temu's ads online or on TV, so they wanted to try it.
According to reports, Temu spent approximately $3 billion on marketing in the United States in 2023. Reports show that Temu spent about $2 billion on Meta ads alone.
In terms of marketing, Temu also adopted the "cut one knife" model from its Chinese parent company Pinduoduo. Consumers can get direct discounts or cash rewards by inviting new users. In terms of after-sales service, Temu implements a 90-day unconditional return policy, and often users do not even need to return the goods. This made the Temu app one of the most downloaded programs in the Apple App Store in 2023, and it remained in the top ten of the Apple App Store until April this year when the tariff war began in the United States.
TEMU Attracts Low-Income Users in the United States
Data shows that the income level of Temu's users is generally lower than that of Amazon. Cheap prices are the biggest attraction for Temu users.
According to data from Tech Buzz China, 55% of app users had a family income below $50,000 in 2023, while the median household income in the United States in 2023 was approximately $80,000.
Jenny is one of the low-income groups. Although her chain of beauty salons is doing well, after deducting various expenses, there isn't much money left for daily expenses.
She told the reporter, "I used to buy furniture on Amazon or in physical stores. Later, I occasionally saw Temu's advertisements and tried it a few times, and found it really cheap. Even though the quality sometimes good and sometimes bad, returning the goods was very convenient."
She spends around $400 to $500 per month on Temu, and receives packages almost every day. "I have bought a $30 sofa chair and a $20 cat tree. I can't find such cheap things in Walmart," she said.
However, poor quality has kept higher-income groups away from Temu. Gregory Orlando, who works in a consulting company and earns tens of thousands of dollars annually, said his shopping experiences on Temu were not pleasant, and he no longer uses the platform.
He complained to the reporter, "If the quality is qualified and usable, of course, I would like to buy cheap products. But I bought a few file cabinets on Temu, and the plastic cracked quickly. I bought a Halloween costume for my daughter, and the sleeves were uneven in length. In this case, I didn't save money, but wasted time."
In the United States, Temu has become a popular term among young people, used to describe items of inferior quality.
Maggie Wu, who has been providing consulting services for US-China cross-border trade companies for many years, told the reporter that because Temu's users have lower incomes, this group is the most price-sensitive and least loyal to the platform. Therefore, once the products on Temu have to be priced higher due to tariffs, this group will also quickly leave.
TEMU Users Have Dropped Significantly After the Tariff War
On May 3rd, Temu announced that it would stop directly selling products imported from China to American customers through the platform. Future sales in the U.S. market will be handled by local sellers. Temu stated that the company is actively recruiting local U.S. sellers to join the platform. Temu has established warehouses in the United States and expanded warehouse coverage to 40 cities, offering various incentives to U.S. sellers. However, in this aspect, Temu is far behind Amazon, which has been deeply rooted in the U.S. market for many years.
Therefore, Temu can only reduce its advertising spending in the United States. According to Tinuiti, a marketing company, on April 5th, Temu purchased 20% of the Google Shopping U.S. region's ad display, and a week later, that number dropped to zero.
Thus, the way to gain new customers has decreased, and long-time customers like Jenny, who are sensitive to prices, have left. As a result, the number of Temu users in the United States has dropped significantly.
Market research firm SimilarWeb data shows that since April, Temu's download volume in the U.S. app store has sharply declined by 62%. The ranking of the Temu app has also dropped to 69th in the app store. According to Reuters, since May this year, Temu's daily online users in the United States have decreased by 58%.
The decline of Temu in the U.S. e-commerce market has been as rapid as its rise in 2022.
Developing the European Market Intensively
Temu has invested the advertising and marketing budget saved from the U.S. into the European market. Starting from April, Temu's advertising expenditure in Europe has increased significantly.
Only in April this year, Temu's advertising expenditure in the UK increased by 20% compared to April last year, and in France, it increased by 115%. France has become a new growth point for Temu in Europe. Sensor Tower data shows that in June this year, the number of users of Temu in France increased by 76% year-on-year.
However, developing in Europe also carries significant political risks. The EU plans to impose a €2 tariff on small packages. At the same time, in February this year, the EU stated that Temu must be responsible for unsafe and dangerous products sold on its platform. On July 28, according to the preliminary results of the EU Commission's investigation, Temu did not do enough to protect European consumers from dangerous products and may not have taken sufficient measures to reduce the risks faced by users. Thus, it may have violated EU laws.
If Temu fails to eliminate these concerns, the EU Commission can formally determine that it violates the Digital Services Act and impose a fine of up to 6% of its global annual turnover.
Sources: DW
Original article: https://www.toutiao.com/article/7536643958919840298/
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