TEMU: How to Face One of the Biggest Challenges in Online Retail

“Temu is committed to offering the most affordable quality products, enabling consumers and partners in the goods sector to fulfill their dreams in an inclusive environment.”

— Temu.com

What’s Behind the Low Prices?

Products are manufactured in factories, distributed, and then delivered to customers with a markup. Several factors contribute to the unbeatable low prices:

• Mass production,
• Use of cheap labor,
• Use of low-quality materials and craftsmanship,
• Minimization of costs associated with product certification and safety.

This shopping model is often criticized for its potential environmental impact and worker exploitation. Independent tests have also revealed short product lifespans and harmful chemicals exceeding regulatory limits.

Temu’s Strength in the World of Marketing

• Discounts, Discounts, and More Discounts

The obvious reasons for shopping on Temu are low prices, free shipping, and discounts. Temu offers even more discounts and lower prices than Shein, with special deals where items can be sold for as little as a single unit of local currency.

• The Combination of Shopping and Entertainment

According to data from GWS, users spend twice as much time on Temu compared to other popular shopping apps like Shein and Amazon. This is due not only to the wide variety of products but also to the gamified shopping experience. This feature encourages customers to try their luck in contests and win discounts, which extends the time spent on the site or app.

• Affiliate Programs

Temu sends free items to a large number of influencers and micro-influencers to promote them, especially on platforms like YouTube and TikTok. Their customer base of users under 35 is particularly attractive to Temu, as younger users tend to be less willing to pay high prices for products.

• Strong Advertising

Temu primarily targets its advertising online. Last year, they spent 69 billion CZK on advertising. In a short time, they managed to secure top positions on Google and push out competitors. Their ads particularly impact sellers without a strong brand but also challenge major players like Allegro and Alza. Their aggressive strategy is drawing attention, forcing more sellers to rethink their approaches.

Temu advertises not only online but also through traditional media. Temu ads were even seen during the Super Bowl halftime break, which is notoriously expensive. For context, a 30-second Super Bowl ad costs $7 million, and Temu aired several ads during the game.

This combination of online and traditional advertising helps Temu reach a wide range of customers and strengthen its position in the market.

• Unfair Practices

Targeting specific brands through Google ads is no problem, and Temu decided to take advantage of this in 2023. They began targeting a large number of other brands. However, it’s likely that this aggressive brand-targeting campaign did not achieve the expected success, as Temu eventually abandoned this tactic.

Temu may have underestimated consumers’ reactions to such aggressive targeting of competing brands. Customers could have perceived this strategy as hostile or unethical, potentially damaging Temu’s reputation. Another possibility is that the company intended this campaign as a short-term test to gauge market reactions and the effectiveness of the approach. The question remains whether this was a strategic mistake or simply a case of market testing.

How to Compete with Temu

Temu’s massive advertising has a significant impact on the entire online environment. This phenomenon not only draws customers away from smaller retailers but also increases competition in ad auctions, driving up advertising costs. Additionally, it pressures sellers to lower their prices, as seen when Amazon started applying strong pressure on its suppliers.

This situation undoubtedly requires an active response and adaptation from other sellers.

• Monitor Competitors

It’s essential to regularly track how Temu affects your ads. Use Auction Insights to get a clear view of how often Temu appears compared to your business and what impact this has on your market share.

• Advertise Across Different Platforms

To avoid direct competition with Temu, try diversifying your advertising channels. Invest in advertising on various platforms and aim to reach your customers through multiple online channels.

• Differentiate Your Product Ads

Competing solely on price isn’t always the best strategy. If Google Shopping is your primary channel, don’t forget to optimize the images of your bestsellers. By editing and enhancing product photos with a supplemental XML feed, you can make your product stand out visually from similar listings.

You can also add product ratings linked to the product’s EAN, or promote sales by striking through the old price, highlighting the new price in green, and adding a “SALE” label.

• Highlight Your Product’s Unique Features

To make your product stand out in a competitive market, emphasize its unique features and benefits. Offer customers extras like gift wrapping, extended warranties, or other perks that convince them that buying from you is the right choice.

• Be Transparent

Collaboration among e-commerce sellers can be key to maintaining competitiveness. Keep an eye on market changes, and be open and transparent with your customers. Trust is the foundation of every successful business.