Temu’s popularity is undeniable, what are the costs?

Social media is abuzz with chatter about Temu, the new Boston-based retail sensation offering mind-boggling deals on items as varied as $5 electric toothbrushes and $2 watermelon slicers. Dubbed a cross between Amazon and Dollar Tree by one Twitter commenter, the app’s fascinating blend of practical and whimsical products is drawing massive attention.

Whether you’re a fan or a skeptic, it’s almost impossible to ignore Temu’s meteoric rise since its debut last summer. The app’s rapid expansion into Europe has set fingers tapping as shoppers flock to their smartphones and industry gurus scramble to decipher the magic behind the mania.

Paula Rosenblum, co-founder of RSR Research, commented on a RetailWire discussion thread, “Everyone I know who has used the website is happy with their purchase, from tools to tchotchkes. One key to Temu’s success is their products look and feel as advertised.”

Temu’s rocket-like popularity stems from its powerful advertising and unbeatable prices on decent-quality merchandise. By eliminating middlemen and their price hikes, and streamlining the supply chain, Temu is able to offer rock-bottom prices that one might get at a wholesaler from bulk orders.

‘White Space’

Wired, a tech publication, suggests that Temu was incurring a loss of $30 per order in an expensive bid to crack the US market, while at the same time squeezing its suppliers to lower prices. Whether it’s one explanation or the other, Temu is illuminating the “white space” in retail, as Michael Felice, associate partner at Kearney, a consulting firm, told CNN. This refers to the “bloated cost passed on for margin” by intermediaries to the consumer.

Felice’s hunch about “white space” may be inferred from Temu’s viral popularity. According to app data compiled by Apptopia, Temu was the most downloaded shopping app worldwide in the six months following its launch in September 2022.

Temu, whose name means “Team Up, Price Down,” has grown from its US roots to now serve 18 markets across North America, Europe and Oceania, including the UK, France, Germany, and Australia. Bloomberg reported that spending on Temu was 20% higher than more established fast-fashion retailer Shein in the US in May, citing an analysis of billions of credit and debit card transactions.

Despite inflation and higher interest rates, US consumers are still splashing the cash. However, retailers report a trend of “trading down,” where wealthier consumers opt for cheaper or unbranded products. “The current economic environment is certainly helping Temu as consumers are looking to get the same things they need for less in order to combat inflation,” Adam Blacker, Apptopia’s director of content and communications, told Bloomberg.

Temu Growing Pains

Temu’s rapid growth hasn’t been without growing pains. Some customers have voiced complaints about late shipments and missing items on review sites and forums, especially when Temu first expands into new markets.

To pacify disgruntled customers, Temu offers credits and in some cases, full refunds. Its 90-day window for free returns is also one of the most generous in the retail industry, where the norm is shifting to charging customers for sending back products.

Compared to Amazon Prime’s two-day shipping, however, Temu’s one-to-two week delivery timeline can feel like an eternity. “The perceived value of a discount is diminished when a shopper must wait weeks to see their impulse purchase in their hands,” Joshua Klapow, a clinical psychologist and behavioral scientist, told NBC News.

However, the ongoing surge in Temu’s user base suggests that many shoppers are happy to trade speed for savings, at least for now. Shopping on Temu is generally cheaper than both Shein and Wish, another e-commerce site, says the UK’s Evening Standard.

What Are the Temu Controversies?

Another oft-cited area of concern is privacy, though it is not unique to Temu. Temu collects data the same way as other e-commerce giants such as Amazon, reported the Mirror, a UK newspaper. Moreover, being based in Boston and Dublin, Temu and its parent company are bound by stringent US and EU data protection regulations.

Other Temu critics have also suggested that the ultra-low prices encourage conspicuous consumption. Though this may be true for some, for others, Temu’s accessible prices provide a welcome lifeline.

In a YouTube comments thread, one user @melissa9734 shared, that Temu was a great choice for getting sun protection sleeves for her psoriasis for “roughly 1-2 dollars a piece.” Another user, @juliairzyk, pointed out that for the disability community, sites like Temu are “meeting a large need, the shipping is free and they can get everything in one place.” Since such equipment can be pricey, Temu is serving a real need in communities such as those with disabilities and chronic health conditions.

Serena Fuschi, who’s been shopping on Temu since about a month after it launched last year, said that consumers who are on a tight budget often do not have the luxury to be picky about where they purchase. “If on Temu you can buy your kid’s whole school wardrobe for $100, that’s kind of where you got to shop,” she told NBC News.

America’s love of bargains

According to Seema Shah, senior director of investor research at Sensor Tower, the wide range of low-priced products on Temu, from clothing to electronics to home decor, has “proven to have mass appeal in the US market.” She told the South China Morning Post that “shopping apps such as Temu offer incredible in-app deals for consumers, which are more relevant than ever as macroeconomic conditions have become increasingly constrained amidst rising inflation.”

Temu’s remarkable growth persists even as some questions linger about its business model. If history is any guide, any service that promises more value, more selection and more convenience to consumers has a fair shot at longevity, especially when it serves a true need in the market.

Shira Ovide, a tech columnist with the Washington Post, hails Temu as a “faster, cheaper, and more whimsical” alternative to Amazon.

“Never,” advised Ovide, “underestimate America’s love of bargains.”

McClatchy newsroom and editorial staff were not involved in the creation of this content.