#Break even point in dollars free#

“If you are not willing to lower the price, they are likely to remove your product from their listings.” Temu will often ask him to lower his prices and, if he agrees, the platform will decide what that lower price is. He joined the platform, but soon found that he had little control over pricing. He says he was approached by Temu when it launched in 2022. Tai Shi, who asked to be identified by his nickname to prevent reprisals from Temu, has sold small household items on Pinduoduo for years. Sellers say they saw this as an opportunity to clear out their inventory, and to get another shot at the US market.īut once inside Temu’s supply chain, sellers find it hard to make a profit.

Since Pinduoduo was already working with a large number of manufacturers, it approached them as it was preparing to launch Temu. That means that many have a large amount of leftover inventory that they need to get rid of quickly, Si says. These small manufacturers are now struggling to access overseas markets while facing a slowdown in the domestic retail market, driven by strict Covid-19 controls. In September 2021, Amazon announced that between late April and early September it had banned over 600 Chinese brands across 3,000 different seller accounts for violating its policies. But the gimmicks that they have habitually used to attract buyers on Chinese platforms-such as offering discounts or freebies in exchange for positive reviews-violated Amazon’s rules and regulations. Many of these manufacturers have tried to go direct to the US market using Amazon, says Jeff Li, a tech analyst and former director at consultancy Accenture China. That has proved invaluable to fast fashion companies like Shein, or companies like Temu that want to jump on a trend and bring a product to market. Groups of connected companies run self-contained micro supply chains, rapidly designing products, sourcing materials, and manufacturing them, often with short turnaround times. The country’s ecommerce industry rests on highly efficient manufacturing clusters, which have sprung up in places like Guangzhou. To keep its costs down, Temu is putting the squeeze on its suppliers back in China. According to Apptopia, a data analysis company, Temu has paid for more than 900 app store search terms to get to the top of listings. In February 2023, Temu paid a reported $14 million for two 30-second slots during Super Bowl LVII. Temu sees flooding the market with ads to gain brand exposure as its only option to expand that demographic, and plans to spend $1.4 billion on advertising campaigns in the US this year, and $4.3 billion next year, the insider says. Temu’s customers in the US are mainly Asian, or lower-income buyers with less than $30,000 annual household income. It’s a tough target to reach, and the insider says that the company has struggled to gain traction against Amazon. 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. 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. 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. In just seven months, Temu’s app has been downloaded 50 million times.īut the reason that prices on Temu seem impossibly low is that they are. 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.

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.

#Break even point in dollars free#

Eight makeup brushes for less than a dollar, with free international shipping, is surely too good to be true.