This article by PhD candidate Xiaoling Guo from the Business School at The University of Western Australian and Dr Shasha Wang from Queensland University of Technology initially appeared in The Conversation on 6 September 2023.
If you spend a lot time on-line you’ve most likely seen one in every of Temu’s vibrant adverts – punctuated by its catchy tagline: “shopping like a billionaire”.
Temu specialises in promoting varied on a regular basis gadgets, together with clothes, toys and family items, for very low costs. Shanghai-based firm PDD Holdings launched the net market late final 12 months (initially within the United States) to cater to abroad clients.
Since then, Temu’s attain has skyrocketed. The whole worth of merchandise offered went from US$3 million in September final 12 months, to US$400 million in April. At the time of publishing this text, Temu was the preferred free iPhone app within the US, United Kingdom, Australia and Germany.
Why has Temu been such an enormous success? It’s protected to say the platform has some profitable methods that preserve shoppers coming again. But past that, comparable to different e-commerce platforms, utilizing it isn’t solely risk- or guilt-free. Here are some issues to take into account in the event you’re considering of giving it a shot.
What are Temu’s secrets and techniques to success?
Many Australians would possibly affiliate “made in China” with low-cost worth tags and low high quality. However, Temu’s shoppers are starting to view it as providing inexpensive merchandise that don’t essentially compromise on high quality. In some instances, 10-20 merchandise will solely set you again US$20-30.
Temu claims it can supply these costs because of slicing out the middlemen within the provide chain. While the producers present the product particulars and the merchandise themselves, Temu handles every part else – from customs processing to worldwide transport. This streamlining helps scale back unit prices.
Nonetheless, attaining such worth doesn’t come and not using a value. Concerns are rising that Temu and its suppliers could also be working at a loss. However, it’s frequent for startups to expertise unfavorable money circulation of their preliminary years due to heavy advertising and marketing investments, together with presents of aggressive costs and advertising and marketing campaigns – all of which is accomplished to construct model consciousness and achieve acceptance.
This is very true within the fast-paced e-commerce sector, the place success and failure occur swiftly. Temu and its suppliers, who’re primarily from Temu’s sister e-commerce platform Pinduoduo, are possible conscious of this dynamic.
2. An efficient advertising and marketing technique
Unlike different e-commerce platforms that target purposeful advantages reminiscent of saving cash, Temu caters to shoppers’ emotional wants. It overlays the shopping expertise with the thought of “shopping like a billionaire” – which additionally aligns with its value-based technique.
Temu entered the market at a time when shoppers have been grappling with international inflation, main them to search “worth”. In the primary month after its launch within the US, Temu invested some US$200 million in promoting and deliberate a US$2 billion price range for the 12 months.
Given China’s management in live-streaming influencer advertising and marketing, Temu is now recruiting social media influencers, suggesting it would possibly leverage its Chinese experience to discover a social-commerce technique. Social commerce harnesses a way of “friendship” conveyed by influencers, making the net shopping expertise extra partaking and product suggestions extra convincing. It additionally works particularly nicely with gross sales promotions.
Sales promotion ways
While Temu employs frequent gross sales ways seen on different e-commerce platforms, it makes use of what is arguably the broadest array of those methods. Here are just a few examples:
Gamified experiences. Gamified promoting hinges on two core components: problem and reward. Interacting with Temu’s spinning wheel is a minor problem, however the substantial low cost provided is a serious reward. Such “video games” create the phantasm of getting fortunate, and due to this fact generate optimistic feelings in shoppers – whereas the reward offers them an incentive to have interaction extra critically with their looking, growing the chance of spending.
Lightning offers and limited-time presents. One generally used promotion tactic includes creating the phantasm of shortage by way of supposedly “unique” presents which can be time-sensitive and gained’t come by once more. This can set off a worry of lacking out in shoppers.
Discounts and free transport. Offering easy worth reductions and really inexpensive gross sales is a time-honoured approach of securing a loyal buyer base. In addition, Temu has the attract of providing free transport on orders with a really low minimal spend.
Loyalty program. Consumers can choose in to Temu’s advertising and marketing emails in trade for receiving extra promotional content material, together with email-only promotions. E-commerce corporations typically have entry to your private info (reminiscent of your title, tackle, age and cellphone quantity) and behavioural information (reminiscent of out of your search historical past and on-line periods). With this information, the corporate can construct your consumer profile and goal you with personalised promotions and content material to encourage spending.
Search engine advertising and marketing. Many shoppers will see Temu adverts on the high of their search outcomes on Google (within the type of “sponsored” posts) after they seek for a product.
An AI-powered promotional technique. Temu’s sister firm working in China, Pinduoduo, is famend for its AI-driven suggestion system. It’s possible Temu makes use of comparable AI algorithms, drawing on customers’ looking and buy historical past to present personalised suggestions (a observe Amazon additionally partakes in).
Defending towards manipulation
Temu’s biggest profit to shoppers lies in its supply of worth. It should still have lower-quality gadgets, however this is frequent amongst all e-commerce platforms.
Also, Temu’s enterprise mannequin is constructed round emphasising top-selling merchandise, which helps filter out low-quality merchandise. Its 90-day free return coverage additional acts as a buffer for unsatisfactory purchases.
Nonetheless, Temu’s value-oriented method might not be factor for shoppers on all fronts. Exposed to such a wide selection of selling ways, customers would possibly change into extra inclined to overconsumption – which leads to environmental waste and post-purchase remorse.
It’s price contemplating your precise wants earlier than utilizing an e-commerce platform reminiscent of Temu. You also needs to familiarise your self with the gross sales promotion ways getting used. Research suggests understanding these ways, in addition to advertisers’ intentions, may even empower younger youngsters to be sceptical and type a cognitive defence towards them.
Also, in mild of Temu’s gamified promoting technique, shoppers ought to mood their enthusiasm for rewards. Moving ahead, one helpful method could also be for faculties and governments to introduce academic packages or social advertising and marketing campaigns that train promoting ways, and advocate coping methods.
Temu didn’t reply to The Conversation’s request for remark.
This article is republished from The Conversation underneath a Creative Commons license. Read the unique article.