Pinduoduo Launched Quietly in the US this Month — What to Expect from the Chinese Ecommerce Leader
Pinduoduo, one of China’s leading e-commerce platforms, launched its sister shopping platform, Temu, in the United States. The e-commerce giant did so quietly, making no public announcements on company platforms. While Temu is committed to offering customers a wide product assortment at competitive prices, it has several seasoned competitors in the United States that have captured share of mind and wallet.
Temu Commits to Providing Customers Choices at Ultra-competitive Prices
Pinduoduo’s sister platform Temu launched in the United States in early September. Temu is a global online marketplace that provides customers with a vast product assortment at ultracompetitive prices. The online platform offers merchandise across 15 product categories, including home and garden; beauty and health; electronics and clothing for women, men and children.
To celebrate Temu’s grand opening, the retailer is offering free shipping on all orders, product discounts and free returns within 90 days of purchase throughout the month of September. Temu’s US market entry follows other prominent native competitors such as AliExpress (Alibaba) and Shein – both of whom have been extremely successful in the United States market.
McMillanDoolittle Point of View
- Temu’s strong network of suppliers is a differentiator: Temu shares sourcing capabilities with sister company Pinduoduo. Pinduoduo, one of the largest and fastest growing e-commerce companies in China, worked with over 11 million merchants and fulfilled 61 billion orders in 2021. This network can be a source of competitive advantage to offer a distinctive product assortment to its customers. However, the huge breadth of offerings alone will likely not be enough to entice shoppers to purchase from Temu. Focusing on select categories, where they can best compete against direct competitors with a curated merchandising point of view, may gain better traction against established competitors.
- Consumers expect fast shipping – Temu’s “long” shipping times could be a deterrent: A 2021 survey cited that the maximum delivery time customers are willing to wait for products is 4.5 days on average. Amazon Prime’s quick delivery has conditioned customers to expect products in 1-2 days or less. Temu’s shipping takes approximately 7-15 business days, as most of its products come from overseas. These extended shipping times could be a deterrent to the convenience-minded US consumer. We expect Temu to provide greater shipping choices over time, so customers can choose expedited shipping options, just as other marketplaces have been investing in their fulfillment capabilities.
- Temu’s business model enables ultra-competitive pricing: A business model popularized in the United States by global retailer Shein, Temu’s products are shipped to the customer directly from the manufacturer. This supports Temu’s ultra-competitive pricing strategy – cross-border packages valued at less than $800 are exempt from duty per United States’ recently revised customs regulations.
Temu’s sourcing network and ultracompetitive pricing can provide strong points of differentiation for the online retailer in the broader US e-commerce landscape. However, that alone is likely not enough as a late entrant to the US market. Challenging established leaders like Shein, Amazon, AliExpress and Wish will require Temu to find additional points of differentiation through merchandising and the overall customer experience and invest heavily in marketing to capture customers’ share of wallet.