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Temu promises cheap goods. Here's how the shopping app does it

Temu has soared in popularity since it launched in 2022. Here, a photo illustration shows the Temu app in an app store reflected in videos of Temu consumers in Washington, D.C.
Stefani Reynolds
/
AFP via Getty Images
Temu has soared in popularity since it launched in 2022. Here, a photo illustration shows the Temu app in an app store reflected in videos of Temu consumers in Washington, D.C.

Temu's Super Bowl ads promise to let people "shop like a billionaire" — and they've helped the Chinese-owned online discount marketplace expand in the U.S. at a breathtaking pace.

"In less than a year, this business has spun up an online retailer that is, like, 75% the size of [Target.com], which is enormous," The Atlantic's Amanda Mull told NPR last fall, citing Temu's $16 billion in revenue in 2022.

But that explosive growth has also fueled skepticism from consumers over the quality of Temu's offerings. And some U.S. officials accuse Temu of underpinning its business with unfair and/or unethical practices.

Here's a quick guide to Temu and the questions about it:

Very low prices are only part of the story

Temu aggressively markets "hot deals" — such as a hooded button-up fleece jacket currently going for $8.32 or a car-mounted vacuum cleaner selling for $13.48. Eye-catching prices like those are frequently cited in its online ad campaigns.

The reasons behind those low prices range from Temu's business model and aggressive market tactics to an obscure U.S. import law.

For decades, importers and retailers have racked up profits by buying Chinese-made items wholesale, bringing them to the U.S. and selling them at a markup. Temu pursues a similar tactic, but it promises a direct, streamlined link between consumers and manufacturers.

"Dispatching goods directly from the source eliminates the need for multiple stages of transportation and warehousing," a Temu spokesperson told NPR, "addressing what is often the most significant expense and inefficiency in conventional retail operations."

Temu's strategy follows a model that Pinduoduo, the huge Chinese retailer behind Temu, honed when it streamlined connections between farmers and consumers in China's food and produce sector. In 2022, the U.N. Food and Agriculture Organization said Pinduoduo allowed "more than 16 million farmers to sell their produce to 880 million consumers who shop on the platform."

Temu is aiming at Amazon

Compared with its ultrafast-fashion counterpart Shein, Temu focuses a bit less on clothes and more on ultracheap home goods and plasticware. It's increasingly mentioned as one of the biggest threats to Amazon's e-commerce domination.

For now, Amazon's lead is secure — the company recently reported $170 billion in net quarterly sales, including $70.5 billion from its online stores and $43.5 billion from third-party seller services.

But Temu has quickly made inroads — one metric of the retailer's impact is U.S. mail carriers, including one who recently described to Forbes the phenomenon called being "Temu tired," as she seemingly delivers more of the company's orange-labeled packages each day.

On Apple's list of shopping apps as of Tuesday, Temu held No. 1, followed by Shein and then Shopify and Amazon.

Temu has reportedly been undercutting its competitors' prices, absorbing losses to win over customers, according to an analysis by China Merchants Securities that was cited in Chinese-language financial news media and by Wired. Recent reports have also alleged that Temu has pressured sellers to keep prices low.

When asked about those claims, Temu's spokesperson told NPR, "Merchants who have developed economies of scale and demonstrate cost efficiency thrive in Temu's environment. Their ability to offer competitive prices, driven by reduced production and operational costs, are rewarded by consumers looking for that combination of price and quality."

An obscure U.S. law helped Temu's meteoric rise

E-commerce innovations alone don't explain Temu's low prices. Lawmakers also accuse Temu of abusing a loophole in U.S. import tax law. The loophole lets companies skip import fees for smaller-value shipments, and Temu uses that rule when shipping individual packages to people's homes rather than importing in bulk to a warehouse.

The rule in question is called de minimis, a legal term for something too insignificant in value to bother imposing duties. The threshold differs around the world; in the European Union, it's 150 euros (about $160). The U.S. level used to be $200, but it rose to $800 in 2016 — among the highest in the world — when then-President Barack Obama signed the bipartisan Trade Facilitation and Trade Enforcement Act.

"Both Temu and Shein rely heavily on the de minimis exception to ship packages directly to U.S. consumers," a congressional review found last year, "allowing them to provide less robust data" to Customs and Border Protection and avoid import duties.

"Temu and Shein alone are likely responsible for more than 30% of all packages shipped to the United States daily under the de minimis provision," the committee said in its report.

The import method also minimizes the chances that Temu's packages will be screened for compliance with the Uyghur Forced Labor Prevention Act, the House Select Committee on the Chinese Communist Party said. That law blocks products from China's Xinjiang region, where systematic human rights abuses against the Uyghur minority have been reported.

"Regarding the compliance issue of products related to forced labor, we attach great importance to it," the Temu representative told NPR. "Our current standards and practices are no different from those of major U.S. e-commerce platforms. The allegations in this regard are completely ungrounded."

Timing and inflation have boosted Temu

Temu exploded in popularity in the U.S. after its first Super Bowl ad in 2023, becoming one of the most downloaded apps in the United States.

The bold decision to tout its months-old marketplace and app with high-profile TV ads came as the company sought a foothold in the U.S. market. Almost immediately, downloads and use of Temu's app spiked, according to Momentum Works, a Singapore-based market research firm.

That first Super Bowl ad placement, which the company repeated in 2024, came as Americans were reeling from record levels of inflation. In that context, Temu's promise of selling everyday items at remarkably low prices resonated.

But there has been backlash, including a federal class action lawsuit filed last year accusing Temu and its parent company of collecting "user data beyond what is necessary for an online shopping app, including biometric information and data from users of the app."

Are Temu products legit?

"On average, some of them are going to be exactly the same, some of them are going to be coming from exactly the same sellers" that consumers might find at other retailers, The Atlantic's Mull said last year. "Others are going to be a little bit junkier. Others might use substandard materials that might not always pass muster in the U.S. for safety standards."

Also worth noting: Pinduoduo's app and website — but not Temu itself — has for several years been on the U.S. list of "Notorious Markets for Counterfeiting and Piracy," recently updated bythe Office of the United States Trade Representative.

The USTR listing says that despite Pinduoduo's claims of adopting new anti-counterfeiting initiatives, a litany of issues remains, including refusals to remove bogus products and "a further deterioration of Pinduoduo's already ineffective seller vetting."

Last year, Pinduoduo changed its corporate name to PDD Holdings Inc., which is now the parent company of both Pinduoduo and Temu. Shares of PDD Holdings are listed on the Nasdaq exchange; at the end of stock trading last week, PDD Holdings closed at $127.48, giving it a market capitalization of $169.37 billion.

As for the U.S.-based Temu, the company is not accredited by the Better Business Bureau, which gives it a rating of C-plus. For comparison, Amazon, which is accredited, has a B rating. To earn accreditation, a business must both meet BBB standards and pay an annual fee.

Alina Selyukh contributed additional reporting. contributed to this story

Copyright 2024 NPR. To see more, visit https://www.npr.org.

Bill Chappell is a writer and editor on the News Desk in the heart of NPR's newsroom in Washington, D.C.