PDD's online dollar store, Temu, to launch services in Australia and New Zealand soon

Rebbeca Ren

posted on March 7, 2023 5:11 am

Temu, the online dollar store owned by PDD Holdings, will launch its services in Australia and New Zealand on March 13, a major expansion after first going live in the US last September.

PDD Holdings, which went public on Nasdaq in 2018, has a market capitalization of more than $100 billion and owns China’s third-largest e-commerce company, Pinduoduo.

Much like its Chinese sister app, Pinduoduo, Temu offers a variety of products at jaw-dropping prices, such as a wool coat for $19.49, a fanny pack for $1.98, a necklace for under $1, an eyeshadow palette for $3.19, and more. 

In the US market, driven by shoppers looking for bargains and the company's extensive promotions, Temu has been the No. 1 shopping app in the App Store in recent months, overtaking both Amazon and Shein.

The platform is seen as a robust competitor to Chinese fast fashion retailer Shein. Both of them are leveraging comprehensive, cost-effective supply chain and building a direct-to-consumer model that offers products at ultra-low prices and a wide selection.

In an effort to catch up with Shein, Temu has targeted a gross merchandise volume (GMV) of $30 billion in the next five years, according to a previous report by Chinese tech news outlet 36Kr. In the first half of 2022, Shein generated $30 billion in 2022, a 91% increase on the $15.7 billion it made in 2021.

The launch of Temu marked PDD's first foray into international markets, and so far the venture has gone well as the company is expanding into other markets, including entering Canada in February. The giant will reportedly boost its investment in overseas operations, with Temu's marketing budget set to exceed 7 billion yuan ($1.01 billion) in 2023.

During the 2023 Super Bowl, the most-watched annual event in the US, Temu aired two 30-second-long commercials, reportedly at a cost of about $14 million. In addition to the Super Bowl ads, Temu also invested heavily in social media advertising, offering promotions to customers who share the company's products. These marketing efforts have been successful in generating interest and driving app installs, with data analysis company Sensor Tower estimating that Temu has been downloaded 24 million times since its launch.

"The overseas business is one of the opportunities we see many peers in the industry achieving good results, so we believe it’s a direction worth trying out," Chen Lei, CEO of PDD Holdings, said in the company's second-quarter earnings conference call.

Recently, sources have said that Temu is shifting its focus from expanding its user base to increasing per-customer spending, in an effort to narrow the gap with Shein and achieve its long-term goals. Per customer transaction amount of Temu is pretty low, standing at $25. By comparison, per customer transaction amount of Shein came in at $75 in Q2 2022.

Credit Suisse estimated in a report last month that Temu could potentially sell around $3.6 billion worth of goods this year, but would also incur an operating loss of $1.7 billion. 

Temu now loses an average of $30 per order due to large-scale discounts offerings and free shipping, according to 36Kr. As the PDD owned platform expands into new overseas markets, it is likely to face an increasingly intense head-to-head battle with Shein. It will be interesting to see how Temu can balance revenue growth and long-term profitability while increasing per-customer spending.