Temu, the Chinese discount retailer, is forecast to have a gross merchandise value of $40 billion (£31 billion) as it continues to conquer the Western retail market.
Analysts at Jefferies agreed today that GMV – the total value of goods sold through e-commerce platforms – could double by 2024, rising significantly from the roughly $16-17 billion (£12-13 billion) the online giant recorded last year.
Temu is owned by PDD Holdings, a multi-billion pound company founded by Colin Huang, China’s third richest man.
The online marketplace, which sells everything from dentures to wedding dresses, has reportedly invested millions of dollars in expanding its advertising in the U.S. to compete with Amazon.
According to a note in the Financial Times last month, Temu paid around $1.2 billion (£95 million) for advertising on Meta alone.
The brand, which encourages its customers to “shop like a billionaire,” also paid for a lucrative commercial during the 2024 Super Bowl.
Temu and other Chinese e-commerce platforms like Shein attract customers with constant discounts.
Prices can also remain extremely low because they traditionally employ suppliers who ship directly from China, thus bypassing middlemen who increase costs for customers.
An analyst at Jefferies said: “Temu charges its merchants lower fees than Amazon and when discussing the pricing structure of the two companies, he (an analyst) said that in the event of a price war, it would be difficult for Amazon to compete.”
“Significantly, he spoke to Temu before the Super Bowl ad and said the product was 60 to 70 percent cheaper than Amazon, but consumers might now be willing to buy at a discount of around 50 percent.”
The shortcomings of this strategy have been pointed out by several media outlets, with a report in Wired saying that Temu loses $30 (£23) per order to keep prices as low as possible to attract Western customers.
The company is believed to be spending heavily on huge discounts to gain market share – a strategy that has previously worked for its parent company PDD.
Analysts added: “Temu may aim to generate 30 to 40 percent of its group sales from the US market. In the next phase, Temu will seek to stabilize its selling prices, increase the average order value (AOV) (a ‘price increase pressure test’ was conducted in December) and reduce the cost base in the region.”
“Temu is increasingly directing its efforts and marketing budget outside the United States – to Japan (which currently has the highest global spend), the Middle East, Korea and Europe.”
Temu was asked for comment
