Why is Temu so cheap?

E-commerce has forever changed how we shop. Now and then, a new platform emerges, challenging the online shopping status quo. Enter Temu, the Chinese-owned digital marketplace that has rapidly become a favorite among online shoppers for its low prices. One of the questions asked most about the retailer is, “Why is Temu so cheap?”

Let’s dig into that very question.

Why is Temu so cheap? Here’s one reason

A core aspect of Temu’s business approach is its direct connection between customers and suppliers. Unlike many e-commerce sites, which hold inventories and work with intermediaries, Temu is a facilitator. This model eliminates the additional mark-ups and costs that can increase consumer prices. By ensuring a lean supply chain where buyers can directly access sellers, Temu minimizes costs and offers remarkably low prices.

The Influence of Pinduoduo

It’s essential also to understand the influence of Pinduoduo, the sister e-commerce platform owned by Temu’s parent company, PDD Holdings. Pinduoduo’s success in the Chinese market, with revenues surpassing $18 billion in 2022, has provided Temu with insights and lessons on how to run a digital marketplace efficiently. Leveraging the strategies and operational know-how of a company with a solid track record in the e-commerce space is invaluable.

But there have been significant issues regarding security. Per a CNBC report, “malware in Pinduoduo was found to leverage specific vulnerabilities for Android phones, allowing the app to bypass user security permissions, access private messages, modify settings, view data from other apps and prevent uninstallation.”

Google even called it an “identified malicious app” and asking people to uninstall the app, which is heavy-handed in its asks of security-related privileges—which Temu does not require.

It’s all been enough for the U.S. government to take notice, as evinced by a brief released in April 2023 warning of “the challenges posed by Chinese ‘fast fashion’ platforms, including exploitation of trade loopholes; concerns about production processes, sourcing relationships, product safety, and use of forced labor; and violations of intellectual property rights.”

The de minimis loophole

One of the most significant factors contributing to Temu’s affordable pricing structure is its strategic use of the de minimis provision. This U.S. policy allows imports under $800 to enter the country without duties, taxes, fees, or extensive inspections. By operating under this loophole, Temu can offer products to U.S. consumers at reduced prices. It bypasses many of the fees that other international sellers might incur, giving it a unique advantage in the market.

Product Selection and Quality Control

While Temu boasts a vast range of products, there’s a notable variance in quality. Products can range from excellent value for the money to incredibly cheap and with unsurprisingly lower quality to match. Temu’s product sourcing is diverse, with some items being absolute steals and others more akin to what you might find in a dollar store. This broad spectrum allows for a wide pricing range, but the lowest-priced items might need better quality and should be investigated thoroughly.

However, Temu does offer an extended 90-day return policy for its products, per a USA Today article reviewing the site.

Environmental and ethical Concerns

With prices so low, questions naturally arise about the ethical production of items. While Temu’s Third Party Code of Conduct strictly opposes forced labor, there are concerns about the platform’s ability to ensure all sellers adhere to these guidelines. Critics argue that with affordable products, there are potential compromises in production standards, be it environmental, ethical, or labor practices.

One TikToker, going under the name @thelegalpreneur, alleges that Temu ultimately hurts small businesses.

Data collection and consumer trust

Cheap prices often come at a different kind of cost, as the Daily Dot has reported on in the past. Data collection is a crucial part of Temu’s operations, as it is with many e-commerce platforms. While Temu has policies to protect user data, consumers need to be aware of the types of information they’re sharing and how it’s being used. Trust is a currency in the digital age, and while Temu offers financial savings, users should always prioritize their online security and privacy.

The final verdict

Shopping on Temu offers fantastic deals, but it’s essential to approach it with a discerning eye. Just as with any online platform, there are risks and rewards. The allure of low prices is undoubtedly tempting, but understanding why these prices are so low provides a clearer picture of the trade-offs involved.

As Temu continues its rapid ascent in the e-commerce world, only time will tell if its pricing model is sustainable in the long term or if adjustments will be necessary to maintain its momentum. You might wonder why is Temu so cheap as you’re reviewing prices, but then you also might be reminded of the maxim “You get what you pay for” and the saying “Buyer beware.”