Temu is Redefining E-Commerce with its Next-Gen Manufacturing Model

As consumers flock to Temu for its discount offerings, the secret behind the low prices surfaces — an innovative approach to the retail supply chain.

Shoppers across North America, Europe, and Oceania are buzzing about a Boston-based platform that’s taken online shopping by storm. Enter Temu, the online superstore, turning heads with its ultra-low prices and an impressive variety of products.

What Is Temu?

Imagine bagging a 16-piece dinnerware set for a mere $23.98, or a top-tier Bluetooth speaker for just $15.50. These are the kind of deals that have consumers flocking to Temu, an online shopping app that just launched out of Boston last year. Now available in 17 countries, Temu is the most downloaded shopping app in the app store.

From electronics and kitchenware to pet supplies and baby clothing, Temu presents customers with an array of unique products and daily shopping deals that make the already affordable prices seem even more unbelievable. Although prices are, in part, due to lower labor costs in non-US markets, this can only be a piece of the picture since most products we use every day have also been manufactured abroad. Yet, we have not paid the budget-friendly prices that we are seeing on Temu until now.

What most shoppers don’t know is that Temu has technologically innovated on the traditional supply chain with what it calls its Next-Gen Manufacturing (NGM) model.

How Does Temu’s NGM Model Work?

The underlying principle driving the Next-Gen Manufacturing model is pretty straightforward — let sellers know exactly what consumers want so that they can produce, manage, and sell their products more efficiently. This results in multiple levels of cost savings for the seller, which are passed on directly to customers. Here’s how it works.

Like Google leverages users’ search and browsing behavior to deliver the best search results, Temu’s technology shares valuable consumer market insights with its manufacturers and merchants so they can deliver the best products. The platform’s data-driven approach aids in designing and producing products to meet consumer needs, eliminating the need for expensive consumer surveys and market research.

Not only does this provide better products, but it also helps suppliers better predict sales, plan production quantity, and manage inventory. Since products are manufactured just in quantities that align with sales projections, Temu and its sellers can bypass expensive warehousing costs. This efficient process reduces waste and costs while maintaining delivery speed and reliability. It also contributes to better environmental sustainability, a major topic of concern within the e-commerce industry.

Adding Up the Savings: How Temu Is So Cheap

So, how do these savings translate into such unbeatable prices for the consumer?

The data-driven approach cuts traditional marketing costs by 20%.

More efficient inventory management results in an additional 10%.

Forgoing expensive product market research saves another 10%.

Improved sales predictions further decrease costs by an estimated 5%, and the streamlined delivery process saves another 5%.

In total, these NGM-driven efficiencies result in a minimum 50% cost reduction. When coupled with higher expected sales volumes, sellers are able to drop prices significantly.

And this is why shoppers are racing to Temu, a welcome relief in today’s inflationary market. Serena Fuschi, an ardent Temu shopper and top earner in the app’s affiliate program told NBC, “If on Temu you can buy your kid’s whole school wardrobe for $100, that’s kind of where you got to shop.”

Are Temu Products Good Quality?

Although it is sometimes true that you get what you pay for, many consumers have been surprised that Temu products are better quality than what they expect. In one Temu blog site review, the advice given is “I will say, you get what you pay for but in some instances, you will be genuinely surprised at how good the quality is.”

Be careful to read the product details and dimensions in the item descriptions so that you know what to expect since some reviewers have also complained that items they received were much smaller than what appeared in online photos. Luckily, Temu does offer full refunds if items do not match their item description or photos.

In a ZDNet article, associate editor Jada Jones recommends spending a little more money on branded electronics on Temu to get the best value electronics.

Is Temu the Same as Shein, Wish, or AliExpress?

While Temu also offers troves of affordable products like Shein, Wish, and AliExpress, Temu is not the same. Temu is a subsidiary company of Nasdaq-listed multibusiness group PDD Holdings.

Since its launch, Temu has functioned like an online superstore selling products in over 250 product categories while Shein primarily focuses on women’s fashion, clothing, accessories, and its tangential product areas. Also unlike Shein, Temu is a pure third-party marketplace that does not own or sell its own branded goods. Instead, Temu solely supports the businesses on its platform to sell their products to consumers.

What sets Shein apart from others is its unique contract manufacturing model, which enables Shein to work directly with manufacturers to sell Shein’s own branded products. This contract manufacturing model is the secret to how Shein is able to significantly shorten the fashion design and distribution cycle and more efficiently manage inventory to bring consumers affordable fashion. Thus, Temu and Shein are and were entirely different from the start.

Temu is also not the same as Wish or AliExpress. While all three platforms are third-party marketplaces, Temu is the only one that works closely with its merchants to connect them directly to consumers. That’s why Temu has invested heavily in its Next-Gen Manufacturing technology to equip them to develop products that better fulfill personalized consumer preferences and streamline their supply chains from end-to-end. Wish and AliExpress do not have this technology to supercharge their e-commerce models and primarily leverage their relationships with unbranded wholesale suppliers to offer low prices.

Also unlike Wish or AliExpress, Temu does not support dropshipping on its platform.

In fact, one Twitter commenter describes Temu as “if Amazon and Dollar Tree had a baby it would be Temu,” which may be a more apt comparison.

The Future of E-Commerce

By streamlining the entire e-commerce process from design to delivery, Temu has positioned itself as an emerging industry leader. Rather than pocketing the savings from its NGM model, Temu and its sellers pass them onto consumers, offering the same or similar products as other retailers at much lower prices.

Temu’s model is clearly gaining traction. In another statement to NBC, Nkiruka Okocha, a Toronto-based fashion creator, shared, “Instead of going on Amazon, which is what I would usually do, I go on Temu and I get it for a cheaper price. The shipping takes a little bit longer than Amazon but it’s still more convenient and cheaper to shop on Temu.”

In a world of instant gratification, Temu’s approach offers a refreshing and valuable alternative that saves consumers money and reduces environmental impact.

How this model evolves and what it means for the future of e-commerce is something we will definitely be watching.

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