Source: Temu
Do Dollar Stores Need to Look Out For Temu?
With inflation and a precarious economy driving people to look for deals, more U.S. customers are visiting dollar stores. The U.S. dollar store vertical, however, may be looking at competition from an even cheaper offering as value retail app Temu continues making inroads in the U.S. market.
The China-based, U.S. headquartered business has become the most downloaded app from both Google Play and Apple, and some customers have taken to calling it “the new dollar store” according to Business Insider. The app, which lets customers buy direct from sellers mostly in China, has experienced viral success among social media users and influencers, who post “haul videos” on websites like YouTube showcasing the low-priced products they were able to purchase from the app.
Temu has caught on quickly with U.S. consumers since its September 2022 launch. Part of the application’s ability to scale its audience so quickly may result from its model for getting new sign-ups. The company launched a social media campaign allowing users to earn credits by convincing others to sign up to the service, and those credits can be used to purchase goods from the app, allowing successful “recruiters” to get product for free.
Temu has also spared no expense on stateside advertising. The platform ran ad spots in the first and third quarters of the Super Bowl earlier this year. The advertisements made it the most-seen brand during and immediately after the Super Bowl, cross-platform TV measurement service iSpot.tv told RetailWire at the time.
Deep discount websites and apps are not a new phenomenon. U.S. niche daily deal website Woot launched in 2004 and was acquired by Amazon.com in 2010. In recent years, companies such as Wish and AliExpress (the discount e-commerce platform owned by Alibaba) have appeared and given customers access to cheap, factory-direct products from China. The unpredictability in product quality and experience with both platforms has prompted users and journalists to urge customers to proceed with caution when shopping them.
Temu recently faced similarly serious criticisms in a Time article, which reported it was developing a reputation for “undelivered packages, mysterious charges, incorrect orders, and unresponsive customer service.”
Discussion Questions
DISCUSSION QUESTIONS: Do you see Temu becoming an alternative to U.S. dollar stores? Do dollar stores need to improve their online presences to maintain their share of market against platforms like Temu’s?
Poll
Loading …BrainTrust
Cathy Hotka
Principal, Cathy Hotka & Associates
Neil Saunders
Managing Director, GlobalData
You get what you pay for. Consumers will chase after low price goods, especially during these inflationary times. But the cost is not only for the product itself – it includes everything else that goes into the shopper/buying experience. Poor service, inconvenience of returns, etc. are costs to the consumer. Dollar stores in general could use additional focus to improve their online presence to create additional barriers to new entrants like Temu.
The sale of consumables will not be affected by Temu; and, for a store like Dollar General, consumables is around 80% of the business. Discretionary items are under greater threat but, even here, I am not sure the impact will be dramatic. Two reasons. First, the core non-consumables customer at dollar stores under indexes on buying online. Second, a lot of non-consumables are bought on impulse by people coming in for other things and immediacy is the order of the day. So, Temu is a bit of a threat but it won’t significantly disrupt dollar stores.
with the caveat that anything that can take a share of consumer wallet has impact, the dollar store experience, particularly for consumables, is walk in, shop and check out for immediate needs. Delivery times from Temu put it in a different category, and while the prices are attractive, purchasing requires planning and the ability to wait for delivery.
There are over 35,000 dollar stores in the U.S. for a reason. Especially in food deserts (unfortunately), they are essentially the only place besides C-stores that people buy food items. Perishables are staples in those locations. And in strip malls everywhere, shoppers pop in to dollar stores for specific items and come out with many dollars’ worth of stuff. The supply chain is fraught with potential problems with Temu, so the mantra with this platform is “let the buyer beware.” Yes, Temu will eat into their online sales, but it is, for now, not presenting any store-based threat.
The question here is whether consumers are OK with the shipping delays that are an inherent part of ordering products from China. I have to think that the siren call of immediate gratification from a dollar store will win.
Believe it or not, delivery times have not been an issue. I don’t know how they do it, but it gets here within 3 days
Consumers will quickly tire of crummy products that take eight weeks to arrive from China. For Dollars stores, the real value prop for their customers, especially in rural markets, is access to products. And, given how much of their assortments are consumables, household products, and things people typically need quickly, I don’t think that Temu will be much of a threat. Even the impulse items like cheap toys and butterfly nets, the impulse loses its appeal when you have to order supplies for your summer beach trip a season ahead of time.
Side note, I believe that there is a real chance that Temu will run into some of the same problems with the Feds that TikTok and Shine have been dealing with. Their sister app Pinduoduo has been banned from the Google Play Store for placing malware that bypasses users’ privacy and security settings on their phones.
The spyware / malware aspect is right where I go to as well. If development and operations are in the People’s Republic, the CPC is making sure there are backdoors.
Temu is a threat to more than Dollar stores. Everyone I know who has used the website is happy with their purchase, from tools (cheaper and better than the low price provider here) to tchotchkes.
One key to Temu’s success is their products look and feel as advertised.
The company isn’t selling food, but those things it does sell are of decent quality for the price. I (and everyone else I know) was quite surprised.
Temu is not an online dollar store. The delivery times for most dollar store-type products are unacceptable.
That being said, dollar stores should be upping their online game. Any dollar store advantage with price is often lost to a shopper’s choice to go to their phone rather than get in a car and drive to the store.
Temu is not a serious threat for dollar stores for a couple of reasons. First, dollar store consumers are shopping for consumables that they need or want today. Secondly, the price point is a little higher than dollar stores. Temu may be a greater threat to stores like Five Below. It will be interesting to see how successful Temu is in the U.S. Personally, after trying Wish.com once and getting my credit card compromised after I waited two months for my discount pants to be delivered, I am skeptical of using my credit card on sites from Chinese retailers.
Temu’s budget-friendly, TikTok-worthy hauls and omnichannel options will attract Gen Z consumers. Its group buying functionality differentiates Temu as social shopping evolves in Western markets.
Temu’s aggressive global expansion targets the booming value sector, including dollar store chains. Launching in Canada, France, Germany, Italy, Netherlands, Spain and the UK suggests Temu wants to take on Amazon and Walmart, too.
Dollar stores can emphasize strengths like brand trust, immediate access to products and easy returns.
Well, now I know what Temu is. I see the name so often, but haven’t been motivated to find out what it stands for. The advantage I see for dollar stores is the exploration and surprise factor. Dollar stores online don’t have the same differentiation factor that they do as a store you can enter and experience. That’s how I got to Five and Below the first time. It was on my path and I stepped in.
I always viewed dollar stores as focused on “need now” versus “want later”. If that’s the case, than I don’t see Temu being much of a threat to dollar stores.
Well, Temu is going to be, and will remain a factor. But Dollar stores planted on street corners, in strip malls and such hold a strong advantage for immediate needed products, along with entertaining new finds. All in all, we are getting used to thinking of these stores as immediate low cost fixes.
The problem with the race to the bottom is you might win. Or worse finish second. The unit economics of what Temu are doing are not even remotely close to sustainable. And they are not going at the core of what drives overall revenue and traffic to dollar stores. Move on, nothing to see here. At least, not yet.
Ordering direct from China…for a dollar store (customer)?? Maybe I’m overthinking this but I’m having trouble picturing the economics of ordering a $1 toy or 83 cent box of baking cups directly.
Temu doesn’t need to put Dollar General, Family Dollar, Dollar Tree or even Five Below out of business to hurt them. They will feel it if it takes even a percent or two of their business, particularly on higher margin general merchandise.
In the sometimes harsh reality of bargain hunting, there is a time-tested adage: you get what you pay for. When consumers come to realize and experience this directly, Dollar Stores will be a welcomed haven.
Temu competes on a different level with delayed shipping, questionable descriptions, and offerings that do not necessarily reflect the American consumer needs yet. They are not ready for prime time, yet, but time will tell….
Temu will not and cannot be a viable alternative to U.S. dollar stores. The core strength of Temu is the direct access to cheap Chinese products, which is also its weakness due to time uncertainty associated with long supply lines and real quality issues. Consumable products are core to dollar stores’ revenues and should be relatively immune to Temu. Non-consumables could be threatened, but more from more traditional online competitors.
The answer to this question is hidden in the “value proposition of dollar stores” – lies in their ability to offer a wide variety of low-cost products to customers. So, if an alternate business model challenges this core advantage, it’s bound to get disrupted. Temu has been able to trump dollar stores in terms of convenience (app-based) and affordability (low prices). Temu and similar businesses’ last frontier remains “accessibility” and “relatively consistent product quality,” whereas dollar stores still have advantages with their extensive network and sorted supply chains. Once this advantage fades away, the dollar store model is bound to face further challenges.