By Nadine Koutsou-Wehling, Data Journalist at ECDB
So far the online marketplace has gained attention for its unique approach: extensive marketing, exceptionally low prices, paired with an element of gamification.
If you don’t live on Mars, you’ve probably heard of Temu, but for all you Martians out here: Temu (pronounced “teh-moo”) is a U.S.-based online marketplace owned by the Shanghai-based company PDD Holdings, a sister company to Pinduoduo. And It’s growing faster than Jeff Bezos’ net worth during Black Friday sales.
Temu’s business model is like other Chinese shopping apps like Shein, Wish, and AliExpress. However, Temu has quickly gained massive attention. Largely due to its exceptionally low prices (raising questions about its current profitability). The popularity also can be attributed in part to Temu’s extensive marketing tactics (Google Ads, social media etc.) designed to effectively target and expand its customer base.
Upon opening the app, users are immediately engaged with interactive features, like a spin-the-wheel welcome bonus. This gamified experience creates a sense of excitement, offering “jackpot” rewards such as free items. To redeem these prizes, users are required to make a minimum purchase. A strategy that not only drives initial sales but also encourages higher cart values.
Temu: GMV Growth Is Set to Continue
The eCommerce data company ECDB recently added Temu.com to its database. In 2022, Temu had a gross merchandise volume (GMV) of $290 million. By 2023, marketplace activity had grown over 4,500 times, reaching $14 billion.
And that is not the end: ECDB projections expect Temu’s growth to continue, resulting in GMV forecasts of US$29.5 billion in 2024 and US$41 billion in 2025. What does this mean in reality? Temu already surpassed Wayfair and Etsy in 2023, with Wayfair generating US$11.5 billion, Etsy US$11.6 billion. Projections for 2024 are bleak for competitors, Wayfair and Etsy are expected to remain stable. How did that happen so fast?
Temu’s App Is Attracting Consumers
One major reason for Temu’s growth is its app. It’s easy to use, convenient, and feels similar to Alibaba’s website, but with a more European style and elements of the Amazon shopping experience.
The app’s popularity took off in early 2023 on Google Play and the App Store. After its launch in September 2022, it reached about 440,000 downloads, and these numbers steadily climbed to 15.3 million by April 2023. In May 2023, downloads suddenly spiked by about 98% month-over-month, likely due to a wave of media coverage, bringing the total to over 30 million downloads.
Though there was a slight dip in June 2023, downloads picked up again, reaching 40.5 million by September 2023. More recently, Temu saw major download spikes in January 2024 with 47.7 million downloads and in March 2024 with 41.3 million, marking the two highest monthly numbers so far. But app downloads are not the only way to measure traffic on Temu. Recent data from Similarweb shows an additional perspective: The number of visits to Temu’s browser site, temu.com.
Number of Visits on temu.com
Compared to app data, the number of visits to temu.com is significantly higher, but this is to be expected since visiting a website in a browser requires less effort than downloading the app on a mobile device.
- The same surge from April to May 2023 occurred on the website, rising by 96.5% from 110.6 million visits in April to 217.3 million in May.
- Similar to app downloads, the heightened global media coverage of Temu is expected to have had a major influence on website traffic.
- While site visits increased steadily to reach 503 million in January 2024, visits dipped temporarily in February 2024, but recovered to 479 million in March 2024.
Growing Consumer Perception
Looks like all the strategy is really paying off. A German research institute (IFH Köln), revealed that more German consumers are now aware of and buying from Temu. While only 11% of consumers reported purchasing from Temu in 2023, this figure rose to 32% in 2024.
So, what makes Temu so interesting? The platform’s product selection draws in shoppers, and its gamified shopping experience encourages them to spend more time browsing and trying their luck with various offers.
This strategy seems effective, as app engagement data from GWS shows that Temu keeps users’ attention longer than other popular shopping apps. From September 2022 to September 2023, GWS tracked consumer behavior on Android smartphones continuously to gather these insights. On average, users are spending double the amount of time per day on Temu (22 minutes) than on Amazon (11 minutes).
Users spend more time on Temu than they do on Shein or Amazon. On average, Shein users spend 12 minutes per day on the app, which is only one minute more than Amazon users. However, both are outpaced by the time users spend on Temu.
It looks like Temu has figured out how to motivate users to engage with their platform. But what is it exactly that Temu does differently?
Temu: The Five Core Strategies
Here are five main strategies Temu uses to attract and retain customers:
- Low Prices & Discounts
Temu is all about low prices, free shipping, and big discounts. Like Shein, Wish, and Alibaba, Temu focuses on offering items at prices far below what people usually pay. But Temu stands out by providing free shipping and returns, thanks to PDD Holdings’ large network of suppliers and shipping partners. A strong logistics network is key to avoiding problems like delayed packages and poor customer service, which hurt Alibaba and Wish when they tried to enter the Western market. Temu even offers special deals with items priced as low as one cent. - Mixing Shopping with Entertainment
Temu combines shopping with games to make the experience more fun. Since many U.S. shoppers miss the excitement of in-store shopping, Temu brings this thrill online. Games like Coin Spin, and Card Flip offer rewards, giving customers a sense of winning while they shop. These games are also a great way to keep people on the app longer. To get more players, Temu uses referrals as a core strategy, rewarding users who invite others to join. - Group Shopping
Temu introduces group buying, a popular concept in Asia, to its Western users. This lets customers team up to get bulk discounts. Group buying also ties into Temu’s referral program, which rewards shoppers for bringing new users to the app and allows them to enjoy a shared shopping experience with friends. - Influencer Marketing and Targeted Ads
Like Shein, Temu sends free items to influencers to promote its products on platforms like TikTok and YouTube. This approach appeals to younger customers who usually prefer lower prices. Data shows that Temu’s largest age group is 25-34-year-olds, with 21% of users, followed by 35-44-year-olds at 20%. Although younger shoppers are highly engaged through social media, Temu’s low prices and fun features also appeal to older customers. - Real-Time Inventory and Cost Efficiency
Temu’s most innovative strategy is real-time inventory control. Using a reverse-manufacturing model, Temu directly connects customer feedback to manufacturers. Products that sell well are reordered, while others are replaced, allowing Temu to stock items that meet current demand. This reduces waste and allows for a wider range of products compared to traditional stores. This same strategy helped Shein add 150,000 new items in 2020, outpacing its competitors. Now, Temu is gaining attention for using a similar approach—along with some of the same criticisms.
Consumer Responses to Temu
Will new brands like Temu and Shein surpass existing leaders like Amazon and Zalando? Only time will tell. Right now German consumers express reservations about the potential competition between Amazon and Temu. A recent survey revealed that about 25% are cautious about its deep discounts, while 51% feel the site’s advertising approach is quite assertive. It shows that encouraging consumers to embrace these e-commerce newcomers might take a bit more time and effort.
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