- [Narrator] It took discount
retail app Temu a year to get to 51 million monthly
active users in the US. That's approaching the
67 million user base that Amazon spent decades building. Temu gained ground by
selling cheap goods shipped from China, like this $20 coat or $9 stainless steel water bottle. And its positioning itself to be a bigger player in
the US E-commerce landscape. - Anybody who's not
Amazon is the short answer of who should be worried. - [Narrator] Here's how a 1-year-old brand is keeping the e-commerce
industry on watch and how, just like Amazon, it's redefining what it means to shop online. - You are an internet user,
you'll see Temu everywhere. - [Narrator] In just over a year, the retailer has flooded social feeds with curious consumers. - Is Temu a scam? - She's a serial Temu user. - I guess I'm known as a Temu girl now. - It aired ads at back
to Back Super Bowls. (upbeat music) - [Narrator] And stirred up debate on how to even pronounce the name. They're freaking gaslighting you. The name of the company is Temu, not Temu. - I'm gonna be honest, I don't
think I'll ever say Temu. - [Narrator] For the record, the company confirmed it's now Temu. That confusion hasn't
slowed the company down. It quickly acquired over
161 million monthly app users across the world. - It's pretty extraordinary. It's a speed of adoption we really haven't seen in the past online. - When I first wrote about Temu, we reported that it launched very quietly, and now Temu is the
opposite of being quiet. - [Narrator] That
omnipresence is by design. It spent $1.7 billion
to advertise in 2023, and JP Morgan analysts estimate that Temu could spend
nearly $3 billion in 2024. It can spend that big
thanks to the deep pockets of its parent company, PINDUODUO or PDD, the Chinese e-commerce company, raking in billions annually. - PDD Holdings emerged out of nowhere when China's
e-commerce industry was already dominated by two companies,
Alibaba and JD.com. - [Narrator] So Temu's strategy of selling extremely
cheap goods from China to build market share, isn't entirely new. - They're just hoping to
replicate its strategies that worked very well in China. - Other China founded companies like Shein and TikTok are also making
their mark in US e-commerce. But Temu sets itself apart in how it gamifies shopping online. - You open up the app and
there's like a roulette wheel that you spend and you get a prize. And the prize is usually
here's a whole bunch of dollars to go buy stuff. And then as you're searching
through products, first off, you're amazed at how low the prices are and then you see a ticker
of how much time is left before you know this offer expires or before they're sold
out of that product. - [Narrator] That strategy has paid off. Temu amassed more users in six months than Shein and has in eight years. Research firm Alliance Bernstein estimates that $17 billion worth of goods
were sold on Temu in 2023. That helped boost PDDs market value 74%, allowing it to briefly overtake Alibaba as China's most valuable
e-commerce company. In the US, Temu's growth
is putting e-commerce giants on watch. Temu and Sheins' success tells us that consumers are willing to wait as long as the products are really cheap. - [Narrator] Temu says its
standard shipping takes six to 22 days, while express shipping is four to 11 days. - [Speaker] Temu connects
factories and wholesalers with consumers directly,
cutting the middleman. - [Narrator] Meanwhile, the
biggest e-commerce companies in the US have been betting
big on faster delivery. Amazon's delivery time has
more than halved since 2022 to less than two days on average. Other retailers are catching up, with an average of about
4.6 days in January. As Amazon sets the standard on speed and Temu takes on price. - Expect price to get more competitive. Everybody needs to focus in
the e-commerce space about making sure that they've got a
distinctive value proposition that appeals to a consumer and not just the first time around, but has them coming back for more. - [Narrator] For now,
Amazon's hold on the industry is still ironclad, but the e-commerce giant
has made some changes. In late 2023, Amazon announced
it would reduce the fees it charges sellers for clothing under $20. - Some analysts believe that Amazon's move shows
it's worried about losing suppliers as well as
consumers to other platforms. - [Narrator] In a statement,
an Amazon spokesperson said that the company reduced the
referral fee to help drive and incentivize even greater
selection for customers and competitive prices. But it's not just cheap
prices and seller fees that's putting pressure
on other companies. (upbeat music) - [Speaker] Download the Temu app and shop like a billionaire. It's driving up digital ad costs. That means it's more expensive
for everybody in the space to acquire new users. - [Josh] There's no question that Temu and Shein are are having
an impact in the market. I think those two players
are almost single-handedly having an impact on the
cost of advertising. - [Narrator] Those digital
ads are especially important for e-commerce companies. - They need to be there on social media, making sure that they're
right in front of the consumer to either purchase or to download the app whenever they're in a mood to go buy something or
they're more intentional. - It's like a game of chicken. And for companies like Etsy that are not growing as fast as Temu, they cannot keep up with this level of ad spending at all. - [Narrator] An Etsy spokesperson said that the company is seeing a
strong return on investment for its marketing costs, and the Etsy marketplace is profitable. That's the short term threat
Temu poses to its competitors. But in the long term, what it's done is that
it's actually changed or is changing the
economics of what it means to run an e-commerce business. The existing incumbents in the
global e-commerce landscape aren't just going to lie down and say, well, I guess
we've lost the sale. They're gonna have to make
some hard decisions on whether they're okay to maintain
that with lower sales volume or whether they wanna be
more aggressive in acquiring consumers and retaining those consumers. - [Narrator] But some analysts say, Temu stratospheric
growth isn't sustainable. A Morgan Stanley report noted that the company's momentum is cresting. - So what we really now need
to see is can they drive that repeat purchasing behavior? And that's still very much
an open-ended question. - [Narrator] Still, Temu has cash to burn. - It's willing to lose money to exchange for market share to acquire users. - [Narrator] Analysts
estimate the company lost about $7 per order in 2023. In a statement, Temu said, "That its business model boosts efficiency and that the idea that
Temu sells at a loss to gain market share is simply not true." But with explosive growth
comes more eyes on the company and more controversy. - That junk was trash, the sizing is off. It literally looked like
the pattern that I asked for was printed on it. I think only one thing actually
looked like what I ordered. Everything else was trash. - Consumers have been
concerned about the product safety and quality. I think selling really cheap
products is the first step for Temu to acquire users. - [Narrator] Temu said in a
statement that it works closely with our independent sellers to ensure that their products meet
the required standards and the US government is
already watching the fledgling company thanks to its Chinese ties. A 2023 report from a congressional
commission called out Temu for concerns around data risks, exploiting trade loopholes
and use of forced labor. The company says that in
regards to the trade loopholes, it is open to and supportive
of any policy adjustments made by legislators that align
with consumer interests. It added that it considers privacy and security to be core
functions of the platform and that it's committed to
ethical labor practices, but the company is still
primed to keep growing. - I think that's what Temu, Shein, TikTok, are really gonna bring
to the marketplaces. They're gonna force everybody
to level up their game. And we're gonna see who's real and who was just a pretender. (soft music)
