$12 smartwatches?  This app promises that you can "shop like a billionaire".  But is there a catch?

$12 smartwatches? This app promises that you can “shop like a billionaire”. But is there a catch?

Headphones for $10. A garlic chopper for $4.90. A smartwatch for $12. With Temu, you can “shop like a billionaire”, promises an advertisement.

Meanwhile, US lawmakers are wary of the Chinese e-commerce company, which has gone from unknown to the country’s most downloaded app in a matter of months.

The U.S.-China Economic and Security Review Commission released a report last month naming Temu and Shein, the popular fast-fashion retailer, as two Chinese companies concerned about issues related to exploiting loopholes. trade, product safety, forced labor, intellectual property rights violations and more.

Shein, which was founded in 2008, has become ubiquitous online as a place to find cheap clothing and accessories, often of questionable quality. Its revenue hit $22.7 billion last year, and consumers don’t seem to care about the controversies surrounding the platform.

Temu seems to be trying to follow in his footsteps.

“Shein has really established a model of how a China-based e-commerce player can take off in the US and gain traction, and most of that is based on price,” said Sky Canaves, principal analyst for retail and e-commerce at Insider Information.

Temu is owned by listed company Pinduoduo, a Chinese online retailer that focuses on the agricultural industry and is based in Shanghai. Temu himself is based in Boston.

Offering a wide range of items including electronics and apparel, Temu has grown exponentially since its launch last September, growing from 5.1 million to 70.1 million unique US visitors in February 2023, according to Insider Intelligence.

For years, Chinese manufacturers have reached American consumers through Amazon. But as the cost of selling on the fast-delivery platform rises and Amazon cracks down on Chinese sellers for fraudulent reviews, more companies are trying to break into the US market on their own.

“[Chinese sellers like Temu] are kind of like middlemen that aim to cut out the middleman helping consumers save money, while at the same time providing some of the trust that a platform can provide,” Canaves said.

How Temu Works

Temu takes a shock and awe approach to attracting first-time visitors. There is no way to enter the website until you spin a wheel offering $20, $50, and $100 coupons. Then a countdown starts, giving you an hour to claim it by scanning a QR code and downloading the Temu app.

Once you enter the site, a timer in the upper left corner counts down the seconds until “free shipping on all orders” is no longer available. A series of flash deals offer a random assortment of products at 73% or 50% off. There’s Mother’s Day: up to 90% off. Prom 2023: up to 90% off. Beach mode on: up to $0.49. Appliances: up to 96% off.

Mimi Lan, a pop-up dinner curator and personal chef based in Jacksonville, Florida, said Temu has been extremely helpful in purchasing catering supplies to run her business.

“It’s really tough when you’re in the business that I do, as a chef, of doing private dinners and food productions. Presentation is important. Kitchen utensils are important,” Lan said. “You constantly have to buy all of these things in order to do your event.”

Although a generic air fryer basket costs $5.45 each on Amazon, it only costs $1.48 on Temu. The difference can add up when buying in bulk, Lan pointed out.

Lan constantly needs things like decorating tools, dumpling boxes, steam liners, parchment paper, and quality disposable plates. She used to source her supplies from AliExpress, another Chinese retailer owned by the Alibaba Group, but now swears by Temu.

“It comes much faster than AliExpress,” Lan said. “It’s cheaper, it’s better packaged, it’s [a] better guarantee.”

By warranty, Lan refers to the ability to get refunds for items she has had issues with. Lan said she would never buy items like clothes or electronics from Temu because of their poor quality, but she swears by their household items.

Leezan Da, a financial adviser in Vancouver, Washington, also primarily buys kitchen-related items such as stove liners, tea bags and vegetable slicers. She doesn’t care about the quality.

“What you get is what you pay (for),” Da said. “Don’t pay much, that’s what you get. I’m not complaining.”

Da avoids electronics after trying a small portable washing machine that didn’t work, but she would still recommend Temu to friends for other items.

Temu has a 2.35 out of 5 star rating with the Better Business Bureau, which received 274 complaints over the past year in April 2023 citing poor quality items, slow delivery and missing items.

Some analysts attribute Temu’s early success to its heavy spending on marketing and efforts to download apps. The company ran a 30-second Super Bowl LVII commercial twice, which reportedly cost around $14 million, according to Statista. Temu saw a 45% increase in downloads and daily active users jumped about 20% on Super Bowl day, compared to the day before, according to data from Sensor Tower. The company also ran thousands of ads on Meta’s platforms.

“It is absolutely impossible for Temu to run a profitable retail business,” said Juozas Kaziukenas, founder of e-commerce research firm Marketplace Pulse. “They are effectively buying market share and hoping that in the years to come that market share will remain.”

The true cost of a transaction

A good deal on consumer items often comes at a higher cost in other ways, and a lot remains unknown about Temu.

“Like Shein, Temu’s success raises flags about its business practices,” political analyst Nicholas Kaufman wrote in the U.S.-China commission report. “Temu’s lack of affiliation with established brands has led to product quality concerns as well as claims of copyright infringement.”

Temu did not respond to a request for comment.

There are also two main concerns from a U.S. regulatory perspective: companies with ties to China having access to large amounts of consumer data, and broader consumer data privacy and security issues, said Canaves.

The question is “whether that data could then be accessed by Chinese authorities or otherwise used to harm US interests,” Canaves said.

Although Temu was not accused of doing either, the US-China commission report cites a recent CNN investigation into the Pinduoduo app for Google Android devices. The investigation found malware that allowed the app to bypass security permissions to view activity on other apps, access private messages, change settings, and make the app difficult to uninstall.

The owner of Hong Kong-based Shein Zoetop, which also owns clothing retailer Romwe, was fined $1.9 million by New York State in 2022 for card mismanagement credit and other personal information after a cyberattack in 2018, the report mentions. The breach exposed user data from 39 million accounts.

With Chinese companies increasingly concerned, Temu is likely to come under greater scrutiny as its popularity grows.

Last month, a bipartisan China Commission wrote a letter asking the US Department of Homeland Security to investigate whether Chinese e-commerce companies such as Shein and Temu were violating a law that banned all imports from the Chinese region. of Xinjiang assuming they were produced by forced labor.

In March, the Treasury Department reportedly gave TikTok’s Chinese parent company, ByteDance, an ultimatum: Sell TikTok or face a ban in the United States. TikTok chief executive Shou Zi Chew has been questioned by lawmakers about China’s influence on the platform.

More than two dozen states have banned TikTok on government-issued devices, and Montana lawmakers last month approved a bill to block TikTok in the state, the first ban of its kind.

However, it is unclear if a nationwide ban is on the horizon. In March, the House Foreign Affairs Committee voted to approve a bill that would give President Biden the power to outright ban the platform, and a similar bill introduced in the Senate has bipartisan support. . None of these bills have moved forward.

Meanwhile, Temu is already aiming beyond American shores. It launched in several European countries last month after launching in Australia, Canada and New Zealand in early March.

“We’ve really seen a meteoric rise of Temu which, to me, seems pretty unprecedented in the adoption and use of a consumer retail app,” Canaves said. “The big question is, how sustainable is this?”

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