Logos courtesy of Amazon, Temu, & Dollar General
Will Temu Topple Both Amazon and Dollar Stores?
According to The Washington Post, “Retail industry watchers are saying that Amazon.com Inc. has met its match with the viral popularity of online shopping app Temu.” One of Temu’s most famous slogans is “shop like a billionaire.” It’s been paraded at the Super Bowl as well as on ads all over Facebook, Google, and more.
CNN reported that this “new online shopping platform linked to one of China’s top retailers has quickly become the most downloaded app in the United States, surpassing Amazon and Walmart.” Under the umbrella of China’s PDD Holdings Inc., Temu is increasingly gaining the reputation of being a formidable competitor to platforms like Amazon, given its expansive inventory where items can be acquired for as low as 14 cents.
This pricing strategy has led many to liken Temu to SHEIN, a Chinese fast-fashion giant known for its affordable assortment of apparel and home items, which has successfully penetrated markets like the United States. Coresight Research pointed out that besides SHEIN, Temu also competes with Wish and Alibaba’s AliExpress.
Though Temu might seem like an “Amazon killer” to some, recent data from Earnest Analytics, a consumer data research company, indicates that Temu’s successful rise has actually had the biggest impact on Dollar General Corp. and Dollar Tree Inc. According to the firm’s in-depth study, which focused on existing brand customers and their spending habits across competitive brands, Temu’s slice in the discount market soared from 0% to a whopping 14% within the year ending in September.
Concurrently, major discount brands such as Dollar General and Dollar Tree, the latter of which also owns Family Dollar, witnessed a decline of 8% and 4%, respectively, in their market share. Similarly, brands like Five Below Inc. and Ollie’s Bargain Outlet Holdings Inc. experienced about a 1% dip.
This trend signifies Temu’s potential to disrupt the market grip that dollar stores have had on budget-conscious and discount-driven consumers for years.
With its unbeatably low prices, Temu is changing the game. While dollar stores offer value, Temu undercuts even their most competitive prices. Interestingly, Amazon has distanced itself from Temu, omitting it from its price-match guarantee in June.
Data from Numerator reveals that nearly half of Amazon’s clientele belong to the higher-income bracket. These shoppers have the inclination to splurge on premium services like Amazon Prime for quicker deliveries. In contrast, Temu’s free shipping takes notably longer, spanning between nine and 20 days. Furthermore, compared to Amazon Prime’s more forgiving return policy, Temu’s stricter returns could deter those who are willing to pay extra for flexibility.
According to Jungle Scout, Temu offers three main advantages over its competitors:
- Users can group together to buy products at a discounted price.
- Users can refer others to the platform and earn credits.
- Temu combines with gamification to urge users to shop on the platform while offering prizes for completing certain objectives.
ZDNET explained that Temu is a good option if you’re interested in buying cheap tech accessories like phone cases, if you can wait a few weeks for your items, and if you want to experiment with “dupes” or copycat products that are generally lower quality. ZDNET also discussed four brand-name tech items that seemed fine overall. However, when the author reached out to HP about a brand-name mouse they bought, a representative told her that “the company has no way of guaranteeing that the products sold on Temu in the U.S. are ‘from an authorized reseller or are authentic HP devices’ because HP does not operate a direct store on Temu in the U.S.”
Discussion Questions
If Temu were to match Amazon’s shipping services, do you think the company could make most dollar stores obsolete? Do you think Temu can be more successful by offering products/dupes of higher quality to take on Amazon (after matching Amazon’s shipping)?
Poll
Loading …BrainTrust
Mark Ryski
Founder, CEO & Author, HeadCount Corporation
Dick Seesel
Principal, Retailing In Focus LLC
The popularity of Temu is undeniable, and so is its impact on the super low end of the market. But while offering a “sugar high” of super cheap, often lower quality goods will always be attractive to some consumers, it’s not for everyone. It’s taken Amazon decades to refine their shipping services to transform them into the delivery powerhouse that they are today. If Temu evolves their low-cost/low-quality offering and improves product quality with faster, more reliable shipping, they will pose a greater threat to competitors. However, it’s been reported that Temu loses money on every order and is racking up billions in losses annually – hardly the makings of a sustainable business and improving shipping and product quality will exacerbate the profitability challenges.
Great points Mark! Temu isn’t for everyone. I doubt that I will ever shop there, unless they improve the quality of their products or offer more brands I trust. Even the dollar stores offer brand name products that consumers know and trust. It will be interesting to see if Temu continues to grow and/or becomes profitable.
If I’m in the market for super cheap, low-quality, disposable tchotchkes, Temu might come to mind, but I will not use it. It is popular for now; however, as Mark Ryski has pointed out, their business model isn’t sustainable. Amazon and the dollar stores all have different delivery modes that will take Temu years to come close to being able to match.
There is also a massive elephant in the room regarding Temu. Sustainability advocates have criticized the company for exploiting loopholes to exploit cheap labor and bypass sourcing laws. The app itself has been in the news a lot lately. Temu has been found putting malware on their user’s devices that manipulate security settings without consent to capture personal data, contacts data, location, usage patterns, etc. The average consumer may miss this or even not care about it. Still, I do think the government will, and I expect we’ll see Temu, Shine, and others under increased scrutiny for privacy and security violations in the future.
Temu ads are everywhere, you can’t get away from them online and it drives me crazy. I have not purchased from them and do not plan to anytime soon. If ever.
For all the talk about sustainability, fast fashion, tracking apps, and the like from consumers, where is the outrage over Temu and its cheap goods and cheap labor? I don’t think it will make dollar stores obsolete in the long run.
Well said Georganne
I bought some things from Temu because I was hearing really good things about shipping time, product quality (if you can call such ‘cheap stuff’ quality) and good return policies. I did not install the app because of warnings that I’m not even sure are real….about it crawling your phone, etc. etc.
Temu gives the customer exactly what she wants for short money. I don’t really see this as a threat to the more “upscale” Amazon, but I sure do see it as a threat to dollar stores. This is really the epitome of “decent stuff cheap.” (apologies to the old Building 19 in Boston).
A friend of mine did a comparison between tools he bought from Temu and tools he bought from the well-known low-priced tool company in the US. He said the quality was comparable and the price was half.
I don’t know if Temu can do all this and be profitable, but if we’re honest, Amazon’s retail operations aren’t particularly profitable either. They also likely have room to tweak prices up a bit – I’m not sure if Dollar Tree’s prices are still at the higher $1.25 mark, but people accept necessity.
Amazon’s shipping services are kind of over the top. I truly don’t need what I ordered to show up at 5am the next morning. A day or two is fine. And Temu has done surprisingly well.
This may be more about taking share away from the dollar stores where getting to them in rural areas is not always convenient. The question will be will the shipping costs over the long term be sustainable for Temu? I also agree with other comments that Temu is not for everyone and not for every type of item. Also, do we really want to give China even more leverage?
Temu, like Shein, is nibbling at Amazon – it is not currently taking big bites out of the business. The main reason is that it cannot match Amazon’s logistics – delivery speed is important for many consumers – nor its broad and balanced range which includes a lot of brands and higher end items. This isn’t to say Temu won’t become more of a threat over time, but its current status needs to be placed into perspective. Dollar Stores are somewhat more at risk in non-consumable categories. But, again, at present the share erosion is only modest. Stores like Dollar General drive a lot of traffic and sales off the back of consumables – a category Temu does not play in.
Dollar stores are all about convenience and familiarity (I’m a Dollar Tree addict) and they open over a thousand stores a year. It’s hard to believe that Temu can overtake these juggernauts.
Matching Amazon’s shipping services is a pretty big “if”.
So, no.
If Temu added fast, free shipping to its bargains, it would disrupt dollar stores but not eliminate them. Dollar stores still offer immediacy, relative quality and multisensory input to ensure product fit.
Poor quality erodes brand trust. Improving assortment quality would make Temu more competitive.
I haven’t studied Temu like I have Amazon, but from what I’ve learned, they are a formidable competitor. And so is Target, Walmart, and other major retailers that have moved into the online space to compete with Amazon. Will Temu “topple” Amazon? I highly doubt it, but what I can predict with almost 100% certainty is that Amazon will continue to have competition and, over time, will lose some market share to competition. They have been on top for a long time – and with a large gap (that is shrinking) between them and their closest rivals And Amazon has one of the smartest group of leaders on the planet. Their diverse business model, including revenue that has nothing to do with retail, will keep them strong for many years.
It’s all about prioritization. Everyone has thresholds. Item quality, delivery timing, functionality, etc. Often, these thresholds can be “good enough” if the price is exceedingly low, depending on the type of item. While I haven’t purchased anything from Temu, I know others who have and have been impressed by the level of quality for the price, which has resulted in further purchases. I don’t believe they need to have faster shipping or higher quality, they have found that balance between price and good enough that consumers will continue to shop there. If they continue on this path momentum will continue to grow.
Will Temu take some market share away from Amazon and others? Sure, it’s inevitable. But selling moderate quality goods at cheap prices works and a long-term strategy if you’re profitable. It’s not clear if Temu meets that mark. And if Temu could match Amazon’s shipping and logistics capability? Yes, that could change things, but let’s remember how many years f investment Amazon has into that logistics network. It’s not a given that Temu can replicate it.If anything, Temu proves that nothing is permanent in retail – there is always a new upstart that can topple your market share if you stand still and watch it happen to you. Competition works wonders in retail!
While I do not want to dis or even minimize Temu’s results to date. The convenience, logistics & product guarantee issues are barriers to growth beyond some of the extreme value retailers, i. e, dollar stores.
Temu (or another competitor) can always beat Amazon or the dollar stores on “lowest price,” but it takes much more to topple Amazon in particular. Its business model is built not only on competitive prices but also on breadth of assortment — and most of all on its delivery model. Amazon’s massive investment in infrastructure is not easily duplicated.
Obsolete ?? Uhm…no. They’re a competitor, like any other – well, OK, maybe a little more important than others – and dollar stores aren’t going anywhere. As for Amazon , and the premise the question was based on: “if”…we’re a long way from that happening.
Clear-thinking patriotic Americans who discover Temp’s linkage to China will not become shoppers.
The rise of Temu is a good indicator that a solid ecommerce platform can open just about any doors in today’s digitally-connected, global economy. However, just how long Temu’s star will continue to rise remains to be seen. Dollar Stores may be feeling a temporary squeeze but many Dollar Stores are the primary shopping outlet in some communities, Temu cannot replace that. Besides, there are only so many times consumers will wait a month to get a bargin-basement priced item that may not last a week.
I agree with this take, Rachelle. Will Temu take some market share away from dollar stores and Amazon? Yes. Is it a threat to either business in the long run? No. Even if Temu has longevity in the market, it would be a competitor to these other businesses rather than a replacement. For low-cost goods, physical retail locations like Dollar General are still a fixture in many communities.