Temu Is Losing Millions of Dollars to Send You Cheap Socks

[riversedge]

Business
I have been seeing a lot of advertising for these products. But I have not ordered anything


May 26, 2023 6:00 AM


Temu Is Losing Millions of Dollars to Send You Cheap Socks

The Chinese shopping app is topping app stores in the US. But it’s burning money and squeezing its suppliers to a breaking point in a bid to take on Amazon.


https://www.wired.com/story/temu-is-losing-millions-of-dollars-to-send-you-cheap-socks/?utm_source=pocket-newtab

Eight makeup brushes for less than a dollar, with free international shipping, is surely too good to be true. But in the lightning deals section of Temu, the prices are all unbelievable—50 hair bands for $1.17, 10 pairs of socks for $3.87, six lip balms for $0.97.

Temu, owned by the Chinese tech giant PDD, has exploded onto the top of US app stores since it launched last September, targeting cash-strapped Americans with cheap unbranded products shipped directly from Guangzhou, China. In just seven months, Temu’s app has been downloaded 50 million times.

But the reason that prices on Temu seem impossibly low is that they are. An analysis of the company’s supply chain costs by WIRED—confirmed by a company insider—shows that Temu is losing an average of $30 per order as it throws money at trying to break into the American market. The financial company China Merchants Securities has calculated that Temu, which is also operating in Canada, Australia, and New Zealand, is losing between RMB 4.15 billion and RMB 6.73 billion ($588 million to $954 million) per year. At the same time, the company is squeezing small manufacturers in China, pressuring them to cut prices to levels that make it almost impossible to turn a profit.

“We are working for Temu for free so that Temu can attract more American customers,” says Sandy, who started selling pet products on the platform soon after it launched, speaking on condition of anonymity to avoid reprisals. Temu did not respond to a request for comment.

Spending big on deep discounts in order to build market share has already worked well for PDD in China. Pinduoduo, PDD’s Chinese flagship company, burst into the local ecommerce market in 2015, differentiating itself from Taobao and JD.com, which dominated the market at the time, by selling cut-price white-labeled or unbranded goods, and targeting people on lower-incomes in rural areas. To bring people onto the platform, it subsidized prices on everything from unbranded homewares to high-end smartphones. “That is how Pinduoduo gained market share in China, they know how to use these strategies really well,” says Veronica Si, a researcher specializing in ecommerce platforms......................

[MutantAndProud]

1. For a nation that's supposedly communist

You would think they would realize the downside of flooding the globe with waste and toxic products while working their citizens like slaves

Modern China is such a disappointment since the Soviets pushed their way in at the end of WW2

With them and the homegrown Nazis going to prom with Trump and Putin it’s like a schizoid stochastic infinite third world war. This is why I hated learning about the subject of the Cold War growing up, it never freaking ended

[Mosby]

10. China is not communist

The economic system is libertarian capitalist, no rules, free for all. The political system is an authoritarian dictatorship. They pollute more than any other country in the world, producing a third of the world's greenhouse gas emissions. They don't care, they like to play a stupid game called "per capita emissions" and claim that most of the carbon output belongs to other countries because they buy their shit. It's an idiotic argument.

Eta - selling below cost can violate ant-trust laws.

https://www.ftc.gov/advice-guidance/competition-guidance/guide-antitrust-laws/single-firm-conduct/predatory-or-below-cost-pricing

[GregariousGroundhog]

11. 40% of China's GDP is generated by state owned enterprises

There certainly is a growing libertarian capitalist ecosystem as you describe, though I suspect its tolerated only to the extent that the participants do not threaten the communist party. Kiss enough ass, and one might be invited to a nice cushy post within a state owned enterprise. There certainly are rules, and some of them are unwritten and unspoken.

[Mosby]

12. Didn't know it was that high. nt.

[viva la]

2. I know Amazon isn't so crappy...

But I remember in the early only-books days, they were sending mugs and hats just as "thanks". I still have the mug somewhere.

[Easterncedar]

3. Thanks. I've been wondering about the flood of ads for weird objects.

Hadn’t seen the socks!

[underpants]

4. Ordered a few things from there. Ridiculously cheap.

I got a light jacket for $14 and razor blades for $6.

[sellitman]

5. I never downloaded the app.

i don't plan too. It seemed fishy to me at first glance. I probably stayed away for the same reason I stayed away from TikTok. I don't trust the software and where it came from.

[WA-03 Democrat]

6. Nothing is free

I feel the same way. They are getting a ton of data while losing their $1b a year. Jack Ma’s Alibaba looks down right benevolent compared to Temu.

[kimbutgar]

7. I've ordered three times from this site and got my deliveries

Not the greatest quality of stuff but the prices are right. This site can really hurt Amazon.

[GenThePerservering]

8. You have to have a minimum order

but this won't last for long.

[Fla Dem]

9. Not rich by any means, but would rather order from an American based supplier

than one propped up by the Chinese government. All merchandise made in China. China could not survive without the American consumer, and squeezing almost every dollar of profit out of their own China based manufacturers just so they can become the #1 App Store in the US. Yet they threaten Taiwan, our military aircraft and partner with Russia.

[FakeNoose]

13. Does anyone here play Microsoft Solitaire?

It's a "free" supplier of daily solitaire card games, but the real reason they exist is to hammer us with their clickable ads. TEMU is a frequent advertiser on Microsoft Solitaire - that's why I recognized the name. I've never ONCE clicked on any ad that accompanies these daily games, but for some reason Microsoft insists on showing them anyway.