Temu: The Discount Ecommerce Disruptor

Who knew that encouraging consumers to “spend like a billionaire” could work? But it’s a marketing strategy that seems to be working for the ecommerce platform Temu. 

Described as "Amazon on steroids", Temu is an online marketplace that offers heavily discounted consumer goods shipped to consumers directly from China. 

The company has exploded onto the ecommerce scene to become a real rival to big players in the market by using algorithms and artificial intelligence (AI) to personalize the shopping experience.

While many young people are familiar with the brand due to its presence on social media networks, its use of other marketing channels (and some pricey Superbowl ads) has made its presence known to all age groups. 

But it’s costing the company a lot of money to do so. Many experts believe that Temu is operating at a loss due to its low prices and enormous advertising budget.  

There are also concerns over data privacy and forced labor as well as legal disputes with another retail giant, Shein and rumblings that the company could put other platforms like Etsy out of business as they struggle to compete. While Amazon plans to launch a discount section with direct shipping from China to compete with Temu.

So it’s not plain sailing for Temu. But where did the company come from and what digital marketing strategies is it using to make consumers flock to the site to part with their money?  

Who is Temu?

Temu is a Chinese ecommerce company that's based in South Korea. It is owned by the global commerce group PDD Holdings, which was founded by Chinese billionaire Colin Huang. 

The platform was launched in 2022 in the United States and currently operates in Australia and New Zealand, France, Germany, Italy, the Netherlands, Spain and the UK. It is also available in the Latin American market and South Africa. 

In April 2024, Temu’s app was downloaded over 46 million times all over the world, making it more popular than Amazon’s marketplace app according to Statista. This growth is extraordinary considering there were only 9 million downloads at the start of 2023.  

The company claims to have more than 25 million items in its catalog which includes technology, clothes, homeware, pet supplies, toys and cosmetics. In fact, it’s hard to find anything you can’t buy on the platform - Happy Birthday toilet paper anyone?!  

Let’s examine what marketing tactics have seen Temu’s gross merchandise volume hit $15.1 billion in 2023 with no sign of stopping. 

1) Investment in paid advertising

Temu has been “pouring money into marketing, trying to become the go-to place where Americans can buy cheap goods online,” according to a Wall Street Journal podcast. In Q4 2023, Temu was the fifth biggest digital advertising spender and JPMorgan analysts estimate that its marketing bill will hit almost $3 billion by 2025.

A lot of that marketing budget is going towards paid advertising, namely Meta and Google. 

In June 2024, 16,000 ads were placed on Meta’s platform across Facebook and Instagram. These promote a range of products using images and videos at discounted prices with promo sales added into the mix. 

On Google, Temu placed roughly 1.4 million ads across its various channels in 2023 and was one of Google's five biggest ad clients by total spend. 

Data from Similarweb shows that while 34% of traffic to Temu.com is ‘direct’, paid search accounts for 32% while organic only accounts for 16% and social media 9%. Display ads drive an additional 6%.  

“Platforms like Temu come along every so often. Wish was the first. Temu is the first company, to my knowledge, to be spending this aggressively. However, is Meta still able to work for the majority of advertisers as a profitable choice of traffic? I still believe so, but it’s not easy and I feel for those in direct competition with a site like Temu,” David Herrmann, media buyer and president of Hermann Digital told AdWeek.

2) Hyper-Personalize using data and algorithms

Temu uses advertising to acquire users and then leverages the data and its algorithm to personalize the shopping experience. 

One of Temu’s key features is a type of ‘For You’ page that encourages users to browse trending items and those they may be interested in based on past behavior or shopping cart additions. 

Thanks to social platforms like TikTok and Instagram, consumers are now used to viewing content by scrolling. This behavior helps Temu as it provides larger quantities of user data than page layouts and reduces the cost of interaction. 

Data is also gathered across all Temu’s channels – from the app and desktop websites to ad and email campaigns. It constantly adjusts the interface by offering fun experiences such as minigames and outfit contests to drive engagement and boost user experience. 

Temu also uses its algorithm to recommend shops and products on its homepage - all informed by user data.

3) Gamification

Gamification is not new on apps. Many brands use it to entice and engage customers such as Starbucks and Sephora. But few brands combine shopping and gaming in the way that Temu does. 

Users of the Temu app claim to have been bombarded by an array of gaming elements such as a roulette wheel to give coupon rewards along with countdown timers.  Games like Fishland, Coin Spin, and Card Flip can also be played for rewards.

Through gamification, Temu uses behavioral psychology tactics to capture the attention of consumers. For example, it uses the principle of social proof by showing product reviews, number of five-star ratings, how many people purchased it in the past 24 hours and the number of customers who currently have the product in their carts.  

4) Referral Programs

Referral programs are commonly used by brands to raise brand awareness and gain more customers. Revolut, Uber, and Dropbox have used them in the past. 

In essence, these programs are used to encourage existing customers to share a brand with friends and family. 

Spotting an opportunity, Temu set up a referral program that allows existing users to invite friends and earn rewards. If a referral link is used to make a purchase, the referee and new user  or referee get rewarded.

Rewards include coupon bundles (to urge people to buy in bulk), discounts or free gifts. 

One of the best things about referral links is that they are trackable so Temu can get insights into customer behavior and product preferences. A lot of influencers also use these codes when promoting products or hauls (when a creator or influencer unboxes a package and showcases and reviews different products) on social media. 

Temu claims that its referral program results in a 35% increase in new users, 70% higher lifetime value and 20% high order value.  

5) Influencer partnerships

Temu uses influencer marketing to promote and engage customers on social networks, particularly TikTok. 

But rather than focus on big names or macro influencers, Temu partners with micro-influencers to boost their reach and drive brand awareness. 

The reason? "Micro-influencers have strong communities, so their endorsement means a strong trust towards these products," Ines Durand, an e-commerce expert at SimilarWeb told the BBC. 

One such influencer is Youkywu on TikTok. She has over 80,000 followers and posts about her daily life and “fave things.” Haul videos are often shared from Ulta and Temu.

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The company actively pursues relevant influencers like TheCraftyDIYGuy on YouTube. 

“Temu did reach out to me and asked if I would partner with them on this video and they wanted me to share some of their products and of course I jumped at the chance and said yes,” explained TheCraftyDIYGuy. “This is probably one of my most organized hauls ever.”

These influencer hauls encourage other people to do the same thing. On TikTok the hashtag #temuhaul has nearly 180,000 posts. 

6) Leverage big events

While Temu invests heavily in online advertising, in 2024 they took the bold move of booking advertising slots for the Superbowl with the aim of attracting American users to the platform. 

The brand bought four 30-second commercial spots at a reported cost of $7 million each. 

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After the ads were aired Temu saw a 20% increase in daily active users compared to the prior day, according to Modern Retail. The company also had the biggest surge in user growth and downloads on the day of Super Bowl LVII.

“The [Superbowl ads are] not going to be a make-it-or-break-it moment for Temu. But, if anything, it shows this sort of willingness and boldness in their marketing to really go from zero to 100 just in a matter of months,” Juozas Kaziukėnas, founder and CEO of Marketplace Pulse told Modern Retail. 

7) Data collection and sharing

Data collection is crucial for any ecommerce platform and Temu does it at scale. The company has a system that relies on heavy data collection at scale. 

"They collect data on consumer trends, the most searched and clicked products, which they give to individual manufacturers," Ines Durand, an e-commerce expert at SimilarWeb told the BBC. 

“The big difference between Temu and Amazon is that while Amazon sells its data to manufacturers at a premium, Temu gives it to producers free of charge so they can "test the market" with a relatively small number of products.”

This data collection at scale allows Temu to get insights from vast amounts of information that can then be fed into its interface and algorithm to drive personalization. 

However this data collection has come under scrutiny. In 2023, Google suspended Temu’s Chinese sister platform Pinduoduo from its app store after it found malicious software. 

In the meantime, a class-action lawsuit in the U.S. alleges Temu violated customer privacy rights by collecting private data and using "deceptive" and "unscrupulous" practices to access that data. 

What's the Future for Temu?

Temu grabs customer’s attention by offering cheap deals. Its strategy seems to be to undercut other ecommerce sites to drive brand awareness and gain market share. And it will do this by forsaking profits. 

Its heavy investment in paid advertising in 2023 particularly on Facebook saw it attract Gen Xers and baby boomers who already shopped more frequently on the platform and spent more than younger shoppers, according to Bloomberg.

If the launch of Temu in America is anything to go by (it was one of the fastest-growing websites in that region in 2023, growing web and mobile traffic by more than 700% according to eMarketer), the platform is set to keep growing. 

But like other Chinese platforms (including TikTok), Temu is facing scrutiny. A report published by the US-China Economic and Security Review Commission accused platforms like Temu of “data risks, sourcing violations and trade loopholes”.

This segment on Saturday Night Live highlights the issues with fast fashion and gives a nod to Temu as one of the biggest offenders. The rise in consumers seeking companies that value sustainability may be a concern for Temu but as the end of the skit suggests - will people keep buying from these outlets even if they know the environmental and societal impact?

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It will be interesting to see what comes next for Temu. 

What can marketers learn from Temu?

• Size up the competition - It’s important to know what your competitors are doing. From how they communicate with customers to their competitive advantage in the marketplace. Conduct a thorough competitive analysis to see what they are doing well and any gaps you can leverage to attract and engage customers. Temu currently uses price as its differentiator.  
• Consider influencers - The influencers you use do not need to have thousands of followers or sponsorship deals. What they do need is to have sway amongst your target audience along with an authentic voice and good content that gets engagement. 
• Experiment with paid ads - While Temu may have a mammoth budget, the advantage of paid advertising is that it is targeted and can be personalized to a specific group.  If you have a social media channel that works well with your audience, look at how you balance organic results with paid ads.
• Be transparent with data collection - With data privacy laws and regulations in place, it’s important to be transparent with your audience. Be clear on what you are using data for and always include an unsubscribe option in your emails (Google and Yahoo tightened up regulations on this in early 2024). 
• Look at a loyalty or referral program -  Do you have brand advocates or ambassadors. Are there customers that are passionate about your brand and happy to speak out about it? If so, take advantage of this type of loyalty by creating a VIP or loyalty program or consider offering discounts or benefits for referrals. 

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