Gamified shopping and £1 deals: the unstoppable rise of 'Chinese Amazon' Temu

 (ES Composite)
(ES Composite)

Camilla, from Brentford, first stumbled across Temu when she was shopping online ahead of a family holiday. “I was looking around for beach shoes for the kids and I was on the verge of buying a pair for £16 off Amazon, but I thought I’d check prices elsewhere,” she tells me. “I found an identical pair on Temu and, I kid you not, it was £1.99. I don’t know how they do it.”

Camilla has since become a regular on the site, buying everything from vases to party decorations. “It’s like fast-fashion – if something’s trending, whether it’s clothes or a household product, you can get it for a fraction of the price,” she says.

She's not the only one. In the space of a year, Temu – a gamified, Gen-Z-friendly 'Chinese Amazon' whose founder has been called the next Jeff Bezos – has gone from a virtually unheard-of cut-price brand to a household name, as shoppers on squeezed incomes flock to the site, coaxed by the promise of colourful roulette-wheel-style games and ultra-low prices amid soaring inflation.

Key chain (Temu)
Key chain (Temu)

The Shanghai-based firm racked up a whopping 15.2 million monthly active users in the UK in October, according to data from GWS, and its results posted yesterday show a near-doubling of revenue for parent company PDD in the past three months compared to a year ago, sending its US-listed shares rocketing by almost 20 per cent.

On a global level, Temu is proving a genuine threat to Amazon, propelling the China-based business into the spotlight and fuelling the wealth of its founder Colin Huang, who is now worth more than $50 billion, making him the 25th richest man on the planet, according to Forbes.

Huang, 43, was born in Zhejiang, China, holds a degree in computer science from the university of Wisconsin and spent his early career working at Google as a software engineer. After selling a small e-commerce business in 2010, he founded Temu parent Pinduoduo (PDD) in 2015 and now looks on course to become the world’s next Jeff Bezos, even managing to attract the praise of his billionaire rival, Alibaba founder Jack Ma, who congratulated the company for pushing the boundaries of e-commerce.

There are various long-term sustainability issues with this model

Josh Holmes

Little is known about the mysterious Huang, who likes to keep his private life away from the public eye, going as far as to appoint an old lady in a rural village as a stand-in shareholder at PDD, according to the FT. But Huang is believed to have a penchant for video games, being part of a team that developed Girls X Battle, in which players build a legion of girlfriends to fight each other.

Since the start of the pandemic, PDD’s sales have surged a staggering eight-fold and its share price has more-than quadrupled to give it a market cap of over $180 billion; Amazon’s sales have barely doubled over the same period. The average Amazon user spends 8.7 minutes per month on its site, according to GWS data, while Temu users spent well over two times as much at 22.4 minutes, engaging in its weird shopping roulette wheels, fruit-machine style games and other experiences few other e-commerce platforms offer.

“We've made a name for ourselves by hitting that sweet spot of offering practical stuff without the hefty price tag,” says a Temu spokesperson. “By cutting out the middlemen and reducing hefty delivery and storage costs, we are able to pass on those savings to consumers. We're all about making sure you get more bang for your buck.”

Colin Huang (Visual China Group via Getty Ima)
Colin Huang (Visual China Group via Getty Ima)

Temu’s rivals are looking in awe – and with fury – at its ability to lure customers to its site with rock-bottom prices.

So how does it do it? As is so often the case, it seems to be all in the numbers. “It’s a volume-based approach: they are willing to sacrifice margin in exchange for growth,” says Josh Holmes, senior consultant at Retail Economics. “With the backing of their owners and the success they’ve had in China, profitability isn’t first and foremost on their agenda. Their promotional strategy is focused on social media, focused on gamification, they offer prizes. They’re tapping into the social element to get users on board and that aligns with a younger demographic like millennials and Gen Z. But there are various long-term sustainability issues with this model.”

Temu says the whole idea is to make life a bit easier for people, "helping them get what they need or want without stretching their budget too thin". “By engaging with these interactive elements and unlocking discounts, users can purchase products at lower prices than they might find elsewhere," it explains. "This approach is particularly appealing for those who are mindful of their spending.”

Temu sells a wide range of products at ultra-low prices. (REUTERS)
Temu sells a wide range of products at ultra-low prices. (REUTERS)

Whatever Temu’s strategy is, it’s working – but is there a catch to offering such fiendishly-low prices? Customers say delivery times are a bit slower compared to Amazon’s lightning-fast next-day service, and the quality isn’t always on a par with what you might expect from a retailer like John Lewis.

Camilla, a teacher and mother of two, says she bought buggy fans for her kids before going on holiday and “they just fell apart the minute we got them out the box.” She also complains of being “hounded by emails” from the firm, bombarding her with endless discounts and recommendations.

Increased regulatory attention could yet prove a major stumbling block to Temu’s success. The firm attracted controversy after a report published earlier this year by US lawmakers warned: "American consumers should know that there is an extremely high risk that Temu's supply chains are contaminated with forced labor." In addition, Google recently removed sister firm PDD's app from the Play Store over “security concerns” after malware was discovered on some versions of the platform.

A Temu spokesperson disputes many of these concerns, saying: “Regarding the compliance issue of products related to forced labor, we attach great importance to it. Our current standards and practices are no different from those of major U.S. e-commerce platforms, such as Amazon, eBay, and Etsy. The allegations in this regard are completely ungrounded.”

But that hasn't stopped the complaints coming. Earlier this month an investigation by Which? suggested that knives and axes that ought to be age-restricted, along with what appear to be illegal weapons, are being sold on Temu in the UK, some of which were available for under a fiver. “Retailers are under pressure to have ethical supply chains and there’s a question of how that fits with Temu’s low cost approach,” says Holmes. “Companies like Boohoo have been impacted after they faced similar accusations of not paying staff enough.”

There is also the small matter of whether the business will ever make a profit. Temu expects to report an eye-watering loss of more than $3 billion in 2023, as it burns through hundreds of millions of shareholder cash to keep prices low and build market share.

Temu is the number-one free app in the Apple store. (REUTERS)
Temu is the number-one free app in the Apple store. (REUTERS)

At this rate, the more the company grows, the bigger losses it will make and the more Wonga it will need to stay afloat – not something it can rely on indefinitely. But its defenders point out that Amazon has gone for years without turning a profit, and it’s now one of the biggest companies on the planet.

A Temu spokesperson says: “Safeguarding privacy and being upfront about our data handling are top priorities. We operate under rigorous regulatory scrutiny…we gather information solely to deliver our service and to improve our offerings for our users.”

But these issues may seem peripheral to many, when you can spin an online roulette wheel to find out which colour pair of socks you can buy for 50p, or which size chopping board you can get for a pound. Ahead of the crucial Christmas trading period, Temu seems to have gained a firm foothold in the psyche of the British shopper. Whether it can yet race past Amazon remains to be seen.