PDD-owned Temu made a quiet debut in the Philippines this past weekend, its first Southeast Asia destination, bringing the budget shopping app into head-to-head competition with Chinese counterparts Lazada and TikTok Shop.
Why it matters: Temu’s expansion into Southeast Asia is expected to ignite an already heated e-commerce sector in the region with its aggressive marketing strategies, even as major players already in place have secured enviable market shares.
Details: Since its launch in the US last September, Temu has reached consumers in 38 countries across six continents with its China-produced goods.
- Aligned with its advertising slogan, “shop like a billionaire,” Temu has entered the Philippines with significant discounts and free shipping, and has priced most items on the local site between PhP 50 and PhP 1,500 (under $0.88 to $27).
- Boston-headquartered Temu works with different third-party logistics providers for local delivery. In the case of the Philippines, Chinese media outlet Jiemian reported that Indonesia-founded J&T Express would oversee its last-mile logistics.
- Similar to its main competitor Shein, Temu leverages China’s supply chain network to offer international customers ultra-low-cost products.
- An earlier report by local media outlet 36Kr quoted several sources as noting that Temu’s overall loss rate stands at around 60%, in contrast to Shein’s profitability over four consecutive years.
Context: The comparatively lower e-commerce penetration rate in Southeast Asia makes the region highly attractive to Chinese e-commerce companies, especially as they face a slowdown in domestic growth.
- Lazada, an online shopping platform that received over $1.1 billion in investment from its parent company Alibaba this year, saw double-digit order growth in Southeast Asia in the quarter to June. Alibaba’s International Digital Commerce Group, to which the business belongs, experienced a 41% year-on-year revenue growth during this period, making it one of the Chinese tech giant’s best performing segments.
- TikTok plans to invest “billions of dollars” in Southeast Asia over the next few years, the company’s CEO Shou Zi Chew said in June, as the ByteDance-owned short video app faced increased scrutiny in the US. Recent research by venture capital firm Momentum Works predicts that TikTok Shop will seize a 13.2% stake in the Southeast Asian e-commerce market this year, suggesting a narrowing gap with Lazada, which is projected to hold a 17.7% market share in the region in 2023.