Whether it is semi-managed or fully managed, when the traffic dividend recedes, the battle for the right to speak between merchants and platforms will eventually be put on the table.
Text: "Chinese Entrepreneur" reporter Li Xiaotian
Edited by Yao Yun
Header image source: Visual China
"From the time the buyer places the order, the time for the product to reach the buyer shall not exceed 7 days. More than 7 days will result in a fine. Zhao Dejun, a staff member in charge of the cross-border platform of Guangzhou Yiyang Trade, told "Chinese Entrepreneur" that in March this year, after the launch of the semi-custodian model of Temu in the United States, there were rigid regulations on the final logistics of merchants who chose semi-custodian.
In Temu's custody system, logistics can usually be divided into 3 stages, and last-mile logistics is one of them, as well as first-leg logistics and cross-border logistics. The first leg of logistics refers to the stage where the merchant transports the goods to Temu's domestic warehouse; Cross-border logistics is the stage where goods are transported from Temu's domestic warehouse to overseas warehouse; Last-mile logistics refers to the stage where the goods are transported from the overseas warehouse to the buyer to complete the delivery.
Last year, the annual keyword of cross-border e-commerce was "full custody".
In September 2022, Temu launched the "first-of-its-kind" fully managed model. Full custody means that the platform assumes a considerable part of the responsibilities for the seller, the seller only needs to ship the goods to Temu's warehouse in China, and the rest of the links, including store operation, traffic delivery, logistics and after-sales, are all completed by Temu.
Temu's fully managed model is known as "0 threshold for going to sea", which objectively greatly reduces the difficulty of merchants going overseas. Even domestic sellers do not need to understand English, Temu's backend supports Chinese, and the Temu buyers who come to connect with sellers to select products are also Chinese.
In addition to the traditional e-commerce platforms Amazon and eBay, most cross-border e-commerce companies have been involved in this hosting war. Before Temu, cross-border e-commerce did not have the concept of "hosting" services, and merchants opened stores on the platform on their own and then carried out follow-up sales. In September 2022, Temu first proposed the concept of "full custody", and other platforms of cross-border e-commerce have successively launched their own "hosting" models. In December 2022, AliExpress announced the provision of fully managed services; In March 2023, Shopee, which focuses on the Southeast Asian market, announced the launch of full custody; In May, TikTok Shop also launched a fully managed service.
In September 2023, Amazon Vice President Mehta announced the launch of "end-to-end supply chain services", that is, merchants can first use Amazon Global Logistics to ship products to warehouses around the world; Then use AWD (Amazon Warehousing Distribution Network) to manage inventory and achieve automatic replenishment; Finally, FBA (Fulfillment by Amazon) is used to sort, pack, and distribute, and finally fulfillment.
This means that Amazon is involved in the whole process of cross-border e-commerce such as logistics, warehousing and operations. Although Amazon has repeatedly denied that the "end-to-end supply chain service" is fully managed, from the results, this system has created the conditions for "factory direct" merchants to enter Amazon to the greatest extent.
Now, a year and a half after the launch of the fully managed model, Temu, which has been on the "table", has begun to develop a semi-managed model.
According to SimilarWeb data, as of December 2023, the number of unique visitors to Temu has reached 467 million, and U.S. consumers spend nearly twice as much time on Temu as on Amazon. However, the conversion rate is poor, with 56% of shoppers who browse Amazon completing a purchase, compared to 4.5% at Temu.
In response to questions related to the "semi-custodial" mode, the reporter sent an email to Temu through the public contact information on the Temu station, asking about the reason for the launch of semi-custodian at this time, but there was no reply before press time.
Temu "returns" semi-escrow
On March 15, Temu announced the trial of a semi-custodial business in the United States, which changed the business circle overnight.
Runkejun's fully managed store has also been affected, "In the past, when there was no semi-custody, the background price could be set in 1 day. But since the semi-custodian was launched, the nuclear price on our side has basically taken 3~4 days. Runkejun said.
In 2019, he entered the field of cross-border e-commerce, initially opening his own store on Amazon, mainly selling building materials. In 2022, Temu will be launched in the United States, and Runkejun felt that he could give it a try, so he decisively registered a Temu store.
The nuclear price in Runkejun's mouth is a link in Temu's custody model. Since the final pricing power is in the hands of the platform, the Temu backend only supports merchants to fill in an expected offer, and the backend will get a final price based on the merchant's expected offer, similar product price comparison, etc. If the merchant agrees to the price, the product will be put on the shelves, and if not, the price will be invalidated.
This is not an isolated case.
"It's been two weeks, no price check, no shelves. Why doesn't anyone care if we live or die? All running and half hosting. On March 20, a blogger with the ID of Xiaohongshu "Apple is not a plum (crazy version)" posted. Under this note, many Temu fully managed sellers complained that the nuclear price cycle was much longer than before: there was no nuclear price for a week, the nuclear price was not touched for a month, and even after the nuclear price was urged, the platform gave a ridiculously low price.
Source: Screenshot of Xiaohongshu
In addition to manpower, the problem of traffic skew also plagued Runkejun, who told China Entrepreneur: "Since we have semi-escrow, the number of transactions in our store has dropped by 50%. Although we can't blame all the reasons for semi-custodianship, as well as platform competition, it is indeed true that the majority of traffic is distributed to semi-custodian, and the lack of traffic and exposure leads to our transaction volume not being as good as before. ”
This made Runkejun, who switched to Temu from Amazon, a little painful, and he told "Chinese Entrepreneur" that most Temu merchants have a similar state of mind - the merchants have too little power in their hands, but because they can still make money, they still hold on.
Runkejun said that there are two main reasons why he switched from Amazon to Temu: the first is to fancy the platform's traffic dividend period, and the second is its efficient and convenient supply method.
It is understood that before Temu was fully managed, cross-border e-commerce mostly adopted the Amazon model, and buyers opened stores and were responsible for all aspects of cross-border transactions: products were transported by themselves, stores were operated by themselves, and traffic was bought by themselves. Shein took the lead in changing this situation and launched its own model – closer to self-management, where the platform buys from factories and then sells through the platform.
In this context, Temu first launched a custody model for all categories. In its fully managed mode, the selection of products is completed by negotiation between the platform and the merchant, rather than the platform procurement. The framework of this fully managed model has also become the prototype of full custody of other cross-border platforms.
"Temu full custody only requires you to send things to their warehouses in China, including traffic delivery, store operation, after-sales service, cross-border logistics and last-mile logistics, and the platform will help you complete it." Runkejun said.
But now semi-managed is different. Zhao Junming's company is currently operating a fully managed store in Temu, but after the semi-managed was launched, they chose to enter the semi-managed store. "We already have overseas warehouses, and we also operate Amazon and AliExpress stores, so semi-hosting is more suitable for us." Zhao Junming said.
Zhao Junming's statement is in line with the vast majority of merchants who have switched from full custody to semi-custody - they already have overseas warehouses to stock up, skip the link of sending samples and selecting products to the platform before stocking, and can decide what to send and where to ship the goods flexibly.
Lack of brands and categories, Temu copies Pinduoduo
Temu's "retreat" is actually "advance".
On April 18, in the online live broadcast of Temu's food investment promotion, Qingchuan, the head of the food category, mentioned the four types of partners that Temu wants to establish a relationship with under the semi-managed model: traders with export experience, domestic brands that form brands, factories with export processing experience, and sellers with FDA qualifications.
In the live broadcast, Qingchuan specifically mentioned the brand: "In addition to domestic brands, Temu will also include brands in Europe, America, Japan and South Korea to enrich the breadth of food categories." ”
Just 3 days before the live broadcast of Qingchuan, at the Temu Yiwu Investment Conference, Ou Hao, the head of investment promotion in the beauty category, also mentioned that he hoped that more brands could enter Temu under the semi-managed model, and he suggested that the seller should go to the medium and high customer unit price, and even played the slogan "The higher the price, the greater the advantage".
This looks like it's the opposite of the low-price model of the fully managed period.
According to a source in charge of going overseas for a small household appliance brand in China, around March this year, Temu attracted investment from well-known domestic brands. When the reporter asked Vinda, Liby and other enterprises for verification at the Canton Fair this year, they all received a definite answer, and the staff of Vinda told the reporter that the company had begun to cooperate with Temu; At present, Liby, which mainly promotes the Southeast Asian market, is also considering entering Temu.
Temu's investment prospectus shows that the commission and traffic delivery fees for merchants entering the platform are 0, but the price requirement is 85% of Amazon's. At present, Amazon's platform commission is about 15%.
"At the moment, the company is indeed considering entering Temu, but we also have concerns. First, Temu has always taken the low-price route overseas, and we are also worried that it will lower the style of our own products after entering it; Second, if we are asked to list Temu at 8.5% off Amazon, then why don't we sell it on Amazon at 9% off? Said the above-mentioned source.
Temu has embarked on the old path of Pinduoduo's "upgrade".
In 2021, Pinduoduo set up a special investment promotion group for big brands to settle in, but the concerns of big-name merchants are also focused on "low prices". Take Adidas as an example, although it is an official entry, it has only launched its own "official outlet store" on Pinduoduo, selling low-priced products that are cleared. In the mobile phone category, although Xiaomi and Huawei are officially settled, they all open stores in the name of dealers.
This is the same situation with Temu at the moment. The reporter searched for Xiaomi on Amazon and Temu respectively, and Amazon showed the official online store certified by Xiaomi. Although the products displayed by Temu are also marked with the words "Direct from XIAOMI", and they are also marked as "Highlight" on the product details page, they are displayed as a mobile phone store when they click on the store.
Source: Amazon screenshot
Source: Temu Xiaomi search page screenshot
Source: Screenshot of Temu Xiaomi mobile phone page
In terms of price, taking the Redmi Note 13 Pro as an example, Temu marked the price of $273.49 for direct sales from Xiaomi and $299.95 for the official Amazon store.
In addition to the brand, Temu may also want a category.
Huang Long, CEO of Zhiliao Data, said in an interview that Temu stores have exceeded 100,000, and SKUs are about 2 million varieties in the United States, but Amazon's SKUs have already exceeded 10 million.
Before semi-custodial, the cross-border logistics under Temu's full custody mode was mostly handled by the air transport trunk lines of J&T and Yuntu Logistics. This determines that if the seller wants to trade large items, the cost of Temu cross-border air freight will be a terrible number, and the merchants who choose to settle in Temu can only be retail, small white-label merchants.
Taking hair dryers as an example, the reporter searched for hair dryers in Temu and Amazon. The Temu search results page shows only 2 branded products, and the rest are all white-label products. Most of the products on the Amazon search page are concentrated in hair dryers produced by European and American beauty brands such as Revlon and Meconya, and there are no white-label products.
Source: Screenshot of the Temu hair dryer search page
Source: Screenshot of Amazon hair dryer search page
After semi-escrow, cross-border logistics no longer need Temu to contract, and merchants can choose flexible transportation methods to ship products to overseas warehouses, as long as they ensure that overseas warehouses are available for delivery before putting them on the shelves. This greatly fills the gap in categories such as home furnishings and home appliances on Temu.
The reporter consulted the cross-border department of Midea on whether to settle in Temu, and the reply was that Midea had already cooperated with Temu, but the cooperation was still in the early stages. Search for Midea on Temu US station, and related products have not yet been displayed. Zhiou Home Flossing also mentioned in the Q&A with investors that Temu has entered its US station after launching a semi-custodial model.
The logistics timeliness is also an important reason why Temu wants to switch to semi-custodial. According to the GWS survey, consumer satisfaction with Temu logistics is only 30%, far lower than Amazon's 52%.
It is understood that it takes about 7~10 days from the buyer's order to the receipt of the goods under the Temu full custody mode. The ordinary logistics cycle of Amazon in the United States is about 2~5 days, and Prime members can achieve 2 days from order to receipt.
Although Temu has enabled high-cost air freight trunk lines in order to shorten the logistics cycle, the logistics timeliness is still a problem compared to Amazon. The emergence of semi-escrow has somewhat relieved the pressure on logistics on Temu. The overseas delivery model saves the time of cross-border logistics, and the last logistics cycle selected by the merchant is nailed by Temu as "must arrive within 7 days".
When the traffic bonus subsides
"This 7-day requirement is too pitiful, if it is close to the warehouse, it is good to say, but if it is to be sent to a remote place, no logistics company can guarantee that it will be delivered within 7 days. But no matter what the reason is the delivery overtime, Temu will fine the merchant with a 40 yuan per order. Zhao Junming said.
In addition to overtime delivery and delivery abnormalities, Zhao Junming shared his experience on social platforms, the buyer filled in the wrong address and caused the abnormal delivery track of the goods to return to the warehouse, Temu judged that there was a problem with logistics and distribution, and fined the merchant 40 yuan. "This kind of thing is not under the control of the merchant, you can refund the buyer, but it is too unfair to fine the merchant." Zhao Junming said.
The company he works for has stores on Amazon, AliExpress and Shein, "but Temu is the only platform that adopts a 'one-size-fits-all' rule for last-mile logistics timeliness." Zhao Junming told "Chinese Entrepreneur" that in the Temu semi-custodial seller exchange group he created, some people often complain that the money earned cannot make up for the gap in fines.
This penalty constitutes a refund from the customer in addition to overtime delivery. Similar to Pinduoduo, Temu also has a "refund only" clause, which means that if the buyer does not meet the expectations after buying the product, they can use the "refund only" clause, and after filling in the reason for the refund on the refund page, there is no need to return the item, and the platform will automatically return the refund to the original account after review.
The American wool website "make money without a job" has published an article "About Temu's Returns and Refunds", which details what kind of goods meet the conditions of "refund only" under the "refund only" clause, and how to operate "refund only" to achieve a real 0 yuan purchase. This article is not unique on social platforms in Europe and the United States, YouTuber CLD uploaded a video titled "How to get Temu for a refund only - a new way to Temu" last year, in which CLD uses a mobile phone to step by step to operate the whole process of refund-only. There are also plenty of video tutorials on TikTok to search for "how to get Temu for a refund only". According to the blogger in the video, Temu only has a 95% success rate for refunds, and Temu's balance is infinitely tilted in favor of consumers.
Source: YouTube screenshot
Xiaohongshu blogger "Going to sea with his life" calculated an account of "refund only", "Semi-managed delivery is the merchant's own responsibility for the final freight, starting at $4.5 a piece, we generally have 2 pounds of goods, and the shipping cost is as high as $10 one-way." If the buyer signs for the return of the goods, then the merchant needs to bear the two-way freight, 2 pounds for example, it costs $20, according to the light and small pieces, the minimum and cheapest warehouse is also $9. "Semi-managed "refund-only" merchants incur more costs than fully managed.
Source: Screenshot of Xiaohongshu
But even if you don't use "refund only", the risk of overloading goods brought by returns also makes merchants anxious.
This is also the main reason why Runkejun chose to wait and see the semi-custodian, he registered a semi-custodian store in Temu, but never uploaded the goods, "Your goods are sent overseas, in case they can't be sold and are pressed in the warehouse, what do you want to do?" Runkejun said.
Pressing goods is the problem that Zhao Junming is most worried about. Although his company has entered the semi-managed market, as a semi-managed store, he is worried about the goods being pressed in the warehouse every day. "You have to spend money to ship the goods overseas first, and then pay for the overseas warehouse. If you can't sell it, do you continue to keep it in the warehouse to pay the management fee, or do you spend another amount of money to send the goods back to China? Zhao Junming said.
But neither Zhao Junming nor Runkejun denies that they will continue to choose Temu, and the reason is traffic.
"Let's put it this way, I started doing Amazon, and it has been 5 years now, and I have only sold 1,000 orders. But in Temu, 1,000 orders exploded casually, and I sold 30,000 orders in less than a year at Temu. Runkejun said. At present, his Amazon store is also operating as usual, and the company has a team of 5 people to Amazon, but the team of the Temu store has 30 people to operate.
The game between merchants and platforms has always existed. At the end of last year, Hema received a notice from snack chain brand Wang Xiaolu to stop cooperating with Hema at the end of last year, mentioning that it stopped cooperating with Hema in order to maintain the company's own price system. In the cross-border e-commerce industry, at the beginning of 2023, Amazon also sent a letter to sellers that "listing was deactivated due to product pricing errors". The email is intended to "force" the merchant to change the pricing of the product. Until the merchant changes the price to the price of the same second-hand product of the product, it can be put back on the shelves for sale.
"There are few similar sellers on the platform, and at the best time, the goods that cost 40 yuan can be marked to 80 yuan after Temu is checked, and with the support of traffic, 80 yuan products will still burst orders." Temu's semi-managed traffic bonus period reminded Runkejun of the scene when he first started a Temu fully managed store.
Whether it is semi-managed or fully managed, when the traffic dividend recedes, the battle for the right to speak between merchants and platforms will eventually be put on the table.
In the past year or so, Runkejun has experienced the "grand occasion" of his peers opening fully managed stores in Temu, the price of similar products is getting more and more volatile, and the profit has increased from 40 yuan in the past to only a few yuan now. "Semi-custodian is now looking lively, the nuclear price is loose, and the price is high, but as long as the pricing power is in the hands of the platform, the price will definitely be lower and lower." Runkejun said.
Runkejun is a pseudonym in the article
Resources:
"Temu In-depth Observation: The Secret Weapon of "New Brother" Pinduoduo", IT Times
"Cross-border E-commerce Industry Review Report: Temu Semi-custodian Goes Online, Improving Performance Efficiency and SKU Breadth", Zheshang Securities