In the competitive world of e-commerce, Temu has emerged as a fresh, innovative force. Its rapid growth and expansion into Canada, Australia and New Zealand have caught the attention of industry insiders and consumers alike. It also lately got selected by Google Play’s Editor’s Choice and is working with Google on the new Pixel Fold.
Temu's approach to retail, known as Next-Gen Manufacturing (NGM), has resulted in quality merchandise being offered at near-wholesale prices. By leveraging real-time insights and implementing sophisticated sales forecasting and logistics management, NGM has achieved cost savings of at least 50% compared to conventional processes, savings which are passed on to consumers in the form of lower prices.
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At the core of NGM lies a deep understanding of consumer preferences and trends, enabled by digital technology. This approach contrasts with traditional retail strategies that often rely on discounted sales to offload excess inventory or products that failed to resonate with consumers. NGM offers a more forward-looking vision for the future of retail, where products are created to meet consumer needs, and manufacturers can adapt rapidly to changing market trends.
What is Temu?
Temu focuses on providing high-quality products at affordable prices to consumers. Launched in September 2022, the platform quickly expanded its product range, now offering merchandise across 29 primary categories and more than 250 sub-categories.
Since its inception, Temu has rapidly attracted a growing following of consumers seeking quality and affordability. The e-commerce platform expanded into Canada in February 2023 and now operates in 10 countries including, Australia, New Zealand, UK, Netherlands, France, Germany and Italy.
What does Temu mean?
The name "Temu" represents "Team Up, Price Down," referencing its operating philosophy of creating economies of scale by directly connecting consumers with suppliers and manufacturers, using that scale to reduce both costs and prices.
By utilizing real-time consumer insights, Temu enables merchants to better predict trends, plan production and reduce the risk of overproducing items that consumers don't want. This results in cost savings that are passed on to the consumers. Temu's approach has the potential to put an end to wasteful "spray-and-pray" retail methods and paves the way for a more efficient and cost-effective shopping experience for customers.
Temu’s deep relationships with manufacturers
Temu's ability to successfully implement its pioneering Next-Gen Manufacturing (NGM) model is due in large part to its deep relationships with suppliers and manufacturers.
For an e-commerce platform to effectively employ NGM, it requires extensive connections with top-grade manufacturers who possess the agility to quickly respond to changes in consumer preferences while maintaining economies of scale and the expertise to do so.
Temu has established strong partnerships with manufacturers who are equipped to adapt to the ever-evolving demands of the market. This enables Temu to continually offer consumers high-quality, affordable products that reflect current trends and preferences.
These deep and wide relationships with manufacturers also contribute to Temu's ability to optimize its supply chain, further reducing costs and inefficiencies. By collaborating closely with these manufacturers, Temu can ensure a more seamless and efficient process from product ideation and design to last-mile delivery. This end-to-end approach is a key aspect of NGM and is instrumental in driving Temu's success in the retail industry.
Reducing demand-supply mismatch in retail
The traditional retail-manufacturing model, which revolves around producing items first and then marketing and selling them, is riddled with inefficiencies and waste due to imperfect information. This lack of precision often leads to a mismatch between supply and demand, resulting in surplus inventory and a negative impact on both monetary costs and the environment.
In the current model, manufacturers produce goods based on estimated demand, and retailers stock these items with the hope of selling them to consumers. However, this approach relies on assumptions and forecasts that may not accurately reflect the actual preferences and needs of the consumers. Consequently, retailers can end up with unsold inventory that takes up valuable space and ties up capital. Eventually, these costs are passed on to consumers through increased prices or absorbed by businesses, impacting their bottom line.
Moreover, this model's inherent inefficiencies can have detrimental effects on the environment. Overproduction and unsold inventory can contribute to waste generation, as unsold products often end up in landfills. This not only consumes valuable resources during production but also can add to the growing problem of waste management and pollution. Furthermore, the disposal of unused products can lead to the release of harmful chemicals and greenhouse gases, potentially exacerbating climate change.
The disconnect between consumer preferences and the goods produced in the traditional retail-manufacturing model also results in wasted marketing efforts. Companies invest considerable resources into promoting products that may not resonate with their target audience, leading to ineffective campaigns and squandered budgets.
Does Temu sell counterfeit products?
No, Temu does not sell counterfeit products or knockoffs. The company maintains a strict vetting process for all third-party sellers, ensuring that they adhere to quality standards. Sellers who violate Temu's policies, which include selling counterfeit items, can be permanently banned from the platform. Temu is dedicated to ethical, humane and lawful business practices and requires merchants to comply with its code of conduct and all applicable laws.
What makes Temu different from its competitors?
Temu is different from e-commerce platforms by embracing the Next-Gen Manufacturing model. This method allows Temu to offer considerably lower prices while maintaining an enhanced product fit and upholding quality.
A significant difference between Temu and its rivals is its resolute commitment against drop shipping. This practice, which is frequently linked to poor customer service, inflated costs, protracted shipping periods and convoluted after-sales return and refund procedures, is strictly prohibited on the Temu platform. Through the exclusion of drop shipping, Temu guarantees a superior customer experience for its users.
How does NGM work?
Temu’s Next-Gen Manufacturing (NGM) is a forward-thinking approach to the production and supply chain process that leverages Temu’s digital platform, real-time insights and close collaboration between manufacturers, suppliers and logistics partners. By focusing on optimizing each step of the manufacturing process, starting from product idea and development, all the way to last-mile delivery, NGM aims to minimize waste, reduce costs, and create a more efficient and sustainable model for the industry.
Five primary areas where NGM leads to cost reduction (total savings >50%)
1. Greater comprehension of consumers for improved product suitability (>10% cost savings): Temu offers manufacturers and retailers complimentary access to invaluable real-time insights on consumer preferences and shopping habits. This eliminates the necessity for costly, sporadic market research that quickly becomes outdated in a rapidly evolving consumer landscape.
2. Precise sales forecasts minimize excessive production (>5% cost savings): Through sharing these consumer insights, Temu enables retailers to more accurately anticipate sales volume, thus refining production processes, diminishing waste and enhancing speed to market.
3. Effective inventory control (>10% cost savings): Better sales forecasts reduce inventory risks for both retailers and manufacturers, cutting down on overproduction, storage expenses and environmental waste.
4. Lower marketing costs (>20% cost savings): When supply accurately aligns with demand, marketing efforts can be reduced, providing further savings that can be passed on to consumers.
5. Agile logistics and expedited delivery (>5% cost savings): NGM streamlines distribution by shipping products directly from factories to sorting centers and subsequently to customers. This decreases the need for warehousing and ensures efficient delivery through collaborations with third-party logistics providers.
Temu's innovative Next-Gen Manufacturing model is a game-changer in the e-commerce industry. By optimizing the manufacturing and supply chain process, NGM significantly reduces costs, minimizes waste and offers consumers high-quality products at affordable prices. By embracing digital technology and fostering close collaboration with suppliers and manufacturers, Temu is pioneering a more efficient, sustainable and cost-effective retail model that benefits consumers, businesses and the environment.