Pinduoduo’s overseas e-commerce platform Temu has surpassed $1.5 million in average daily gross merchandise value (GMV) after its launching in September, Chinese media outlet 36Kr reported on Thursday. Although the figure fell slightly short of internal expectations, the company remains confident of catching up with or even overtaking rival Shein in the next five years, the report said.
Why it matters: Temu’s goal of reaching total sales of $30 billion in five years highlights its ambition to challenge Chinese overseas fashion retailer Shein. Shein took 14 years to achieve the sales number.
Details: Temu aims to reach $300-500 million in GMV by year-end, according to 36Kr, citing sources familiar with the matter. The company is also targeting total value of products sold in $3 billion in 2023.
- There are currently around 30,000 merchants on Temu, with 300,000 to 400,000 items being sold in 24 top-level categories. The report cited a Temu employee as saying that the platform is accelerating its attempts to attract more merchants and expanding into more items.
- According to SensorTower, Temu ranked first for downloads in the shopping section of Apple’s App Store in the US on Oct. 17, followed by Amazon Shopping, Shein, Walmart and Fetch Rewards. It currently ranks fifth in the US Apple App Store.
- Instagram and Facebook are Temu’s main customer acquisition channels, with 36Kr reporting that the two platforms both account for 30% of Temu’s traffic. Shein’s cost of customer acquisition on Facebook was around $35 in the first half of 2022, while Temu’s cost was 30% to 40% higher, 36Kr stated.
Context: Pinduoduo’s Temu is regarded as a competitor to Shein, which created a successful business model by selling fast fashion clothing at ultra-low prices through a flexible supply chain.
- Temu offered substantial discounts to attract new users upon its launch, including 30% off on customers’ first three purchases, free shipping, and even a 40% discount for both people if someone shares a link with a friend. These initiatives have resulted in Temu’s current average loss per order hitting $30, making it difficult to achieve a profit in the short term.
- Temu is also investing heavily in marketing. With an advertising budget of RMB 1 billion ($140 million) in September, Temu’s returns are modest when measured by its average daily GMV. The company has reportedly earmarked more than RMB 7 billion to help push the Temu brand next year.
- While Shein achieved half of its $30 billion annual sales target in the first half of the year, the company’s net profit margin for the period was slightly lower than last year’s 6%. For reference, Uniqlo’s parent company Fast Retailing Co posted a net profit margin of 12.37% in the fiscal year 2022, similar to Zara owner Inditex Group’s figure of 12.1% in the February-July period this year.