Chinese online shopping site 'Temu', which is chasing Amazon, is shifting to a business model that cuts off Chinese merchants
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Temu, a Chinese e-commerce site that has been growing its business by delivering affordable Chinese products directly to overseas consumers, is strengthening its efforts to hire local sellers to deliver products more quickly, the Financial Times reported. Suppliers are protesting against the change in policy, which seems to cut off Chinese sellers.
Chinese online store Temu faces supplier backlash over business model shift
https://www.ft.com/content/5a562326-df49-433d-8e8b-d015a55c46bb
Temu, which launched in September 2022, is an online shopping site that has risen to prominence with its aggressive advertising strategy and business model of selling cheap products air-shipped from Chinese warehouses directly to shoppers in the US and Europe. According to the Financial Times, this method imitates SHEIN, a fast fashion online shopping site also from China.
The Financial Times reported, citing multiple suppliers contacted by Temu, that Temu is actively recruiting Amazon merchants with warehouses in the US and EU from mid-2024.
This move is believed to have two main aims. The first is to respond to the tax reform in the United States. In the United States, the tax-free threshold called 'De Minimis,' which exempts small amounts of imported goods from customs duties, is seen as a problem as it encourages the distribution of drugs and illegal goods, and discussions are underway to revise the tax system.
Temu has gained popularity by delivering Chinese products to Western consumers at low prices through small-scale imports, but it may be exploring ways to source goods from local suppliers in case tax loopholes are closed.
Second, by storing products closer to shoppers, Temu can reduce delivery times, allowing it to better sell bulky, high-margin products like furniture and appliances.
Hiring local suppliers also means Temu is moving from a 'fully managed' to a 'semi-managed' model. In the fully managed model, which Temu has had success with so far, sellers focus on sourcing the goods, while the platform handles sales and distribution. In the semi-managed model, marketplace sellers are responsible for the costs of transportation, warehousing, and last-mile delivery that were previously handled by the platform.
The change in policy has sparked resistance from Chinese suppliers. 'We feel Temu's treatment of our suppliers is unsustainable. We don't see it continuing for much longer,' a Shanghai-based leggings manufacturer told the Financial Times.
Another complaint many suppliers have about Temu is its insistence on heavy discounts on goods. One merchant in Guangzhou said that when Temu first launched, he received between 30,000 and 50,000 orders a day, but that number had fallen to 3,000 at press time. The Financial Times said that this was because Temu was signing up more suppliers and trying to lower prices.
Interestingly, Amazon, which is increasingly concerned by the rise of Temu, imitated the methods of Temu and SHEIN by announcing a policy in June 2024 to ship products directly from Chinese vendors without going through Amazon warehouses. This is the opposite of Temu's attempt to shift to a business model similar to Amazon's.
Amazon is preparing a low-price store similar to Temu and SHEIN, shipping directly from Chinese vendors without going through Amazon warehouses - GIGAZINE
One seller who transacts on all the major platforms told the Financial Times: 'Amazon acted too late and now all the platforms are trying to copy each other. We have an industry joke: they're all pirates who steal from each other.'
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