With the booming development of e-commerce, the Temu platform has emerged and attracted a large number of users with its unique business model and market positioning. In this article, we will conduct an in-depth analysis of Temu’s business model to explore its success as well as the challenges and opportunities it may face.
1. Overview of Temu’s business model.
The business model of the Temu platform is based on the final pricing power of goods. Its main income comes from the sale of goods, while the cost of goods includes the purchase cost, fulfillment costs (express logistics), and marketing expenses (advertising and platform subsidies). This model adopts a self-operated model of merchant supply, which means that the merchant is only responsible for supply, while the platform is responsible for pricing, sales, fulfillment and after-sales service. The core positioning of the Temu platform is to provide extremely cost-effective goods, focusing on the two major categories of clothing and daily necessities, benchmarking SHEIN and Amazon respectively, and attracting consumers with obvious price advantages.
2. Operation model.
Temu’s operation model is similar to the “hosting” model, and the platform has core power, including product selection, pricing and sales. Sellers have their own stores on the platform, but they are actually just suppliers of products. The operation process includes seller quotation, sample review, seller supply, platform sales and signing and payment. The platform will review the goods provided by the seller and is responsible for sales and delivery. If a certain product has no sales within 15 days, it will be returned to the seller. The advantage of this model is that it can ensure the quality of the goods and the efficiency of the supply chain.
3. Core positioning.
Temu’s core positioning is to provide goods with the ultimate cost-effectiveness. It focuses on cost-effectiveness, takes women’s clothing as the main category, and draws on the experience of SHEIN, a fast fashion women’s cross-border e-commerce platform, to further highlight its price advantage. Compared with SHEIN, Temu’s product prices are generally 30% to 50% lower. This positioning attracts price-sensitive consumers, especially in the highly competitive e-commerce market.
4. Marketing and customer acquisition.
Temu adopts a multi-channel marketing and promotion strategy, including social media, content promotion and affiliate marketing. In the cold start stage, the platform displayed products through social media platforms such as Facebook, Instagram, and TikTok, and conducted unboxing reviews to attract users. In addition, Temu also cooperates with alliance customers to assist in promotion through multiple channels and provide rebate commissions. However, it is worth noting that in the US market, the group purchase model is relatively ineffective because American users pay more attention to personal privacy.
5. Fulfillment logistics.
In terms of fulfillment and logistics, Temu adopts the model of domestic unified warehousing and distribution and overseas cross-border direct mail. Domestic transportation adopts a unified warehousing and distribution model. Merchants transport the goods to Temu Guangzhou warehouse in advance, and then the platform uniformly airfreights them overseas. In addition, the platform also supports merchants to choose an instant delivery model, allowing extremely fast delivery based on actual sales orders. In terms of cross-border transportation, Temu cooperates with domestic third-party express service providers such as Jitu and Yuntu. However, it should be noted that Temu has not yet established an overseas warehouse, and the final delivery link is completed by the US Postal Service or DHL. The platform supports two delivery modes, including postal parcels and commercial express delivery.
6. Challenges and opportunities.
Although Temu has achieved certain success in its business model, it still faces some challenges and opportunities. First, Temu needs to continuously improve the quality of goods and the stability of the supply chain to ensure consumer satisfaction. Secondly, as market competition intensifies, Temu needs to continue to innovate to maintain its price advantage and attract more users. In addition, Temu can also consider setting up overseas warehouses in the future to improve the efficiency of the final delivery link.
Overall, Temu’s business model is unique in the e-commerce market and has attracted many users. However, to continue to succeed, the platform needs to continue to improve and adapt to market changes to meet consumer needs. Through robust operations and innovation, Temu is expected to continue to thrive in the highly competitive e-commerce field.