Why everything on Temu is so cheap from 90% discounts to £4 Louis Vuitton dupes
TEMU exploded onto the scene in late 2022, with people all over social media raving about the low prices.
The company is a Chinese-owned digital marketplace – essentially an online shopping app where people are connected to the retailer directly while the app takes care of the shipping element.
The frenzy over the app is not completely unfounded either as it offers a wide variety of products, including fashion, make-up, electronics and furniture.
And it offers huge discounts, too. You can get up to 90% off as a new customer, for starters. But there are also text alerts that will send you 20% offers, lightning deals, seasonal sales, clearance sales…
You can even win discounts by playing games on the app. Not to mention the coupons you can find online.
It seems everything about Temu – which means Team Up, Price Down – is catered towards you making a saving.
And while it’s got just 3.5 stars from Trustpilot with mixed reviews from over 7,000 customers, it shows no signs of slowing down.
But exactly how does the company afford to sell everything for such low prices? Here, Fabulous takes a deep dive into Temu’s business model…
The tax loophole
According to a report from the US House Select Committee on the Chinese Communist Party, Temu takes advantage of a trade loophole that allows the company to ship duty-free goods directly to the US.
The loophole is called the de minimis exception and it means they can ship goods valued up to $800 (£643) to the US without it being inspected or taxed by US customs.
The low value of the majority of the individual orders means that it also avoids UK custom duties, which only looks into shipments valued above £135.
The loophole also means the company can evade compliance with the Uyghur Forced Labor Prevention Act (UFLPA) and other laws against forced labour in the US.
According to the New York Times, Temu told the House Select Committee it asked its sellers to sign a code of conduct specifying a “zero-tolerance policy” for the use of forced, indentured or penal labour.
Temu’s code of conduct also states that the company reserves the right to inspect factories and warehouses.
But as a result of the possibility of forced labour, the UFLPA has prohibited shipping products into the US that the government believes were made by the Uyghurs.
While the percentage is unknown for how many shipments Temu is responsible for when it comes to the UK, Temu and Shein are responsible for around 30 percent of all packages shipped below the de minimis value in the US every day.
Manufacturing costs
According to Wired, Temu is pressuring small manufacturers in China to cut prices down to such an extent that it makes it nearly impossible to make a profit from their products.
Temu, which is operated by multinational e-commerce group Pinduoduo Holdings, is reportedly spending the majority of its money on trying to break into the US market.
In a bid to be a low budget version of Amazon, the company is even said to have paid a reported $14 million (£11.26m)for two 30-second slots during the Super Bowl LVII in February 2023.
An analysis of the company’s supply chain costs done by Wired found that Temu is losing on average $30 (£24.13) per order.
Meanwhile, China Merchants Securities has also calculated that the company is losing between $588 million (£472.92m) to $954 million (£767.28m) a year.
Losing out on profit with huge discounts gives the company more advantage to break into the market and one up other giant retailers like Shein, Amazon and more.
No middleman
Temu connects customers directly to manufacturers and only manages how the items are sent to customers.
It means Chinese vendors can essentially sell their products directly to customers and ship it without building a network of warehouses across the globe.
By doing this, they cut down on huge costs and ensure the product itself isn’t marked up extra.
Dupes
While many of the products seen on the Temu app are from brands with extensive, original collections, many more are dupes of designer brands.
You can find everything from knockoff AirPod Max headphones to Louis Vuittondupes from £3.98.
Products seen on Temu change often, with new designs appearing all the time depending on customer feedback.
With their large network of manufacturers, they can easily bring out a dupe for anything and everything without much of a hassle.
It means, however, that what is in store today, may not be tomorrow.
With dupes being a big hitter, Temu relies on customers to keep buying to make up for the loss in profit.
Although Temu is a legitimate shop, some customers have complained about the shipping times – with purchases taking weeks to arrive in some cases.
And the quality is not always as good as people hope either as one woman ordered black cropped jeans only for it to turn into a major fail with her whole family laughing at her.
Have you tried Temu? What do you think of it?