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Editor | Zheng Xuan
Half a year ago, on the occasion of the first anniversary of the establishment of TEMU, a cross-border e-commerce platform under Pinduoduo Group, we interviewed some of these merchants - at that time, someone mentioned that the only problem of TEMU is logistics and warehousing, and the future trend is to ship overseas and shorten the delivery time. 」
Such a prediction happened. In March, TEMU officially launched the "semi-managed" function.
The so-called "semi-custodian" is different from the core difference of "full custodianship" of TEMU's main theme is that commodity transportation no longer takes the cross-border logistics of the platform, but is prepared and distributed overseas by the merchants themselves. This means that the delivery time has been greatly shortened - in the past, small items on TEMU were transported by cross-border air, and large items were transported by cross-border sea, and the former took at least a week, and the latter took at least half a month. Now, with local delivery, consumers can receive their products within 2-7 business days.
For merchants, this increased level of service can lead to more orders for them. For those merchants who open Amazon stores at the same time (they need local warehousing and delivery), this also gives them an additional local sales channel. All of this leads to higher business growth.
Lin Sheng from Taizhou, the "hometown of home storage", is one of them.
This 25-year-old young man who has just graduated has stepped on every development node of TEMU accurately. At the end of 2022, he became the first batch of merchants to settle in TEMU. This kind of "fully managed model" in which the platform is responsible for everything and the merchant only delivers the goods allowed him to get started quickly as a student and earn the first pot of gold in his life. After that, he became one of the first merchants to settle in the "semi-custodial" and encountered the first peak of growth.
In September 2022, Pinduoduo Group launched TEMU, which quickly brought a huge storm to the cross-border industry. With North America as the fulcrum, it expanded to more than 50 countries and regions around the world in a year and a half, covering all continents. According to SimilarWeb, as of December 2023, Temu has 467 million unique visitors, ranking second in the world after Amazon.
TEMU's strong growth has also allowed it to shoulder the revenue and profit "beam" of its parent company, Pinduoduo Group. HSBC estimates that in 2023, Temu will contribute 23% of Pinduoduo Group's total revenue. This figure will rise to 43% in 2024 and more than 50% in 2025.
The myth of TEMU's growth continues, and for merchants, what they can do is to keep up with the development of the platform and seize every wave of dividends. What they will reap may be unprecedented opportunities to make money. Lin Sheng's story is an example of this.
From "full custody" to "semi-custody", a 25-year-old college student earned his first pot of gold at TEMU
In February this year, foreign media reported that a 19-year-old college freshman in Pennsylvania, USA, came home and found that his mother had rearranged her room: pink curtains with the words "hello gorgeous" (hello, beauty). There are also matching pink sheets, storage boxes, and bathroom shower curtains, toilet lids, and rugs. She excitedly calls her mother "Temu Magician".
These goods may come from Taizhou. As the "Kingdom of Plastic Products" and the "Hometown of China's Molds", Taizhou has a molding industry with a 100-billion-level industrial cluster. According to the data of the Taizhou Plastics Fair, 6 out of every 10 plastic daily necessities in China are "made in Taizhou".
Lin Sheng's family is no exception. As a native of Taizhou, his parents run a plastic products factory with an annual revenue of 10 million. In the past, they mainly did traditional foreign trade. However, the dilemma of traditional foreign trade is similar: extremely dependent on customers, unstable order volume, business risks in the deposit model, and only processing, and low added value of the industry. With the changes in the global macro environment in recent years, the number of foreign trade orders has decreased, and merchants have also accelerated their "involution", with serious homogenization and taking the low-cost route.
In this case, in 2021, Lin Sheng, who was studying overseas, decided to try cross-border e-commerce. At the time, he was interning in the international department of a major e-commerce company and realized that this would be a big trend. However, as a student, he had to study and run an online store, and he could not take care of his energy from the other side of the ocean, such as remote delivery, customs declaration, warehousing, and fulfillment, so he gave up.
But soon, the newly formed TEMU gave him a chance.
According to Geek Park's observation, the key to the rise of TEMU is the "three-board axe", the ultimate quality-price ratio, gamified operation and huge marketing investment. Like Pinduoduo's main website, TEMU focuses on quality-price ratio, with the slogan "Shop like a billionaire". At the same time, it focuses on the logic of explosive products, and only 10-20 pieces of goods are stocked for testing for the first time. Retail analyst Neil Saunders described TEMU as "the Amazon on steroids."
And the huge marketing investment accelerates this process. According to foreign media reports, TEMU spent nearly $2 billion on advertising on Meta (the parent company of Facebook and Instagram) in 2023, making it the advertiser who contributed the most to Meta's revenue last year. Temu also made it one of Google's top five advertisers last year.
However, more fundamentally, it is TEMU that leverages the strong supply chain of China's manufacturing industry through the "full custody" model: first, the platform provides insight into fashion trends, and then merchants design styles according to trends, and ensure the competitiveness of supply prices and product quality. After the merchant passes the review of the platform, he can apply for a stocking list and produce a small number of goods (dozens of pieces) and send them to the platform warehouse. After the platform is approved, the product will be put on the shelves. As soon as the sales momentum of the product is good, the merchant will immediately replenish the stock (hundreds, thousands).
This means that the merchant only needs to be responsible for production, while the platform is responsible for the whole process of delivery, operation, logistics, etc. In essence, this model integrates the key links of delivery, operation, and logistics, which are originally large and small merchants, so as to form a scale effect, reduce costs and increase efficiency, and ultimately make the entire system run more efficiently than other e-commerce platforms. More directly, it also lowers the threshold for merchants to participate, greatly increasing their enthusiasm for participation.
Comparison between "fully managed" and "semi-managed"|Image source: Zebra Yijing
For Lin Sheng, this is exactly the case. As a student, he only has to focus on the operation of the online store, and the production and distribution are all taken care of by the elders in the family. In this way, the 25-year-old young man achieved in one year the scale of the business that his parents took decades to do.
Now, after graduating, Lin Sheng no longer regards this as a side hustle, but is doing it with all his might. After that, he settled in the "semi-managed" store for the first time.
In the "semi-custodial" model, the benefits for large items are more obvious. The reason is that in the past, large goods could only be shipped by sea, and the time limit was too long. And now local delivery, which is more conducive to the sale of large items. Now, Lin Sheng's "semi-managed" store mainly sells large items or combined home storage products.
In the view of the person in charge of the cross-border outdoor category of Duoduo, the benefits of the "semi-custodial" model for swimming and water sports products (such as inflatable products such as surfboards and inflatable pools) are also extremely obvious, and they also belong to the category of large-scale goods.
Of course, merchants are responsible for local warehousing and delivery, which also means that they have to bear higher costs. In order to ensure profits, on the one hand, Lin Sheng continues to communicate with the platform, such as discussing more suitable commodity prices. On the other hand, he also finds ways to work on the cost of goods, such as using thinner packaging.
During the promotion of the platform shortly after entering the "semi-custodial", he encountered his first growth peak, and the number of orders increased by 4 times. In the future, he will devote more time to "semi-managed" stores.
TEMU needs more good goods
Recently, Lin Sheng has frequently traveled to Taizhou, Guangzhou and other places. He wants to find more sources. In his opinion, it has been more than a year since TEMU was launched, and now the platform has put forward more requirements for the breadth and depth of goods. Breadth refers to the need for a richer supply of goods on the platform.
With the launch of TEMU in more than 50 countries and regions around the world, across all continents, and the needs of consumers in each country and region are different, this poses a great test to the richness of commodity supply. "We need to meet the needs of consumers from different geographies and cultural backgrounds, which are far more complex than those in the domestic market. TEMU clothing buyer introduced.
TEMU Taizhou Industrial Docking Conference Scene|Photography: Shusen
It is precisely for this reason that this year, TEMU has held dozens of industrial belt docking activities in more than 100 manufacturing industrial belts in the Yangtze River Delta, Pearl River Delta, Beijing-Tianjin-Hebei and Jiaodong regions, hoping to attract more businesses in the industrial belt to settle in and provide richer commodity supply.
The types of goods that are urgently needed by the platform are opportunities that merchants can grasp. According to Geek Park, at the Changshu matchmaking meeting, TEMU buyers said that trendy sweatshirts, slim suits, and casual shorts in the men's clothing category are all categories that need to be supplemented by the current platform. The yoga clothes, sports vests, dresses, and horse-faced skirts with traditional Chinese cultural characteristics in the women's clothing category are also being loved by consumers.
In addition, onesies, T-shirts, and clothing for girls and children are long-term key recruitment categories. On the other hand, casual sweatshirts and sweatpants and one-piece jumpsuits with embroidery are products that are recruited in season and sold well abroad.
Taking the outdoor category as an example, according to the person in charge of the outdoor category of TEMU, because the domestic sports and outdoor industry is still in its infancy, many businesses often include sports and outdoor products in the large household category, but in the consumption scene in Europe and the United States, sports and outdoor as an independent category are widely popularized, and the product repurchase rate is high, and the market scale is very large.
"At present, there are not enough domestic merchants who supply sports and outdoor products, and the spring and summer period is the peak sales season for this category in Europe and the United States, which is a great opportunity for merchants. He said.
These are exactly what businesses like Lin Sheng are most concerned about. With insights into the consumption trends and habits of hundreds of millions of overseas shoppers, TEMU will help Chinese manufacturing merchants produce better selling products and create so-called "explosive products", so as to expand revenue and improve profit margins - using consumer feedback to produce, which is the classic C2M (Customer to Manufactory) model.
Previously, Lin Sheng had keenly seized the opportunity through the platform's consumption insights. In 2023, the movie "Barbie" will be a big hit, and "Barbie fans" will sweep the world. After communicating with TEMU buyers, Lin Sheng decided to open the mold to design a "Barbie-style" storage cabinet. Generally speaking, the development of new molds requires an investment of 300,000 to 400,000 yuan, and if there is no "definitive sales estimate" for the consumer side, the merchant will not easily open a payment. And TEMU gave Lin Sheng confidence, and he finally got his wish and the goods sold well.
As for the depth of the product, it refers to the strength of the supply chain, such as the quality control of goods, the production capacity of orders, etc.
Lin Sheng feels that TEMU is gradually strengthening its control over the quality of goods. If the quality of the product does not meet the platform standards, it will be returned directly. On the other hand, the "peak fluctuation" of TEMU orders - because the platform helps merchants advertise, merchants may suddenly receive a large wave of user traffic, and they must have the ability to undertake large orders - this is essentially a test of the supply chain.
The changes in these requirements are implying the future direction of TEMU's platform. When the platform gradually matures, it will be difficult to sustain the original initial sales path of undertaking traffic and doing white labels. In the long run, the way out for merchants must be to have better quality, a stronger supply chain, and even build their own brands. This is the key to keeping up with the development of the platform and having long-term competitiveness.
More than a year after its launch, TEMU is gradually improving other consumer experiences, hoping to achieve both "more, faster, better and cheaper". Through the ultimate service for users and the ultimate requirements for merchants, TEMU has established the most efficient cross-border platform. On the one hand, it has increased its investment in the global market, and has "conquered the city" at the extreme speed to attract global consumers. On the other hand, it drives merchants to produce more cost-effective, richer, and faster goods, so as to achieve a positive cycle.
For merchants, the higher requirements of the platform are pressure, but also opportunities. Lin Sheng tends to see this pressure as motivation, and he is bent on keeping up with the development of the platform and making the business bigger. Today, tens of thousands of Chinese manufacturing businesses like Lin Sheng have become the source of TEMU's growth overseas. The rapid growth of TEMU overseas has also created unprecedented business opportunities for Chinese manufacturing merchants. This kind of story of the mutual achievement of e-commerce platforms and China's manufacturing industry happened once during the rise of Pinduoduo's domestic e-commerce main station, and now it will be repeated in overseas e-commerce markets.
And for a business like Lin Sheng, everything has just begun.