doChinese online marketplace Temu has enjoyed explosive international growth thanks to an eye-catching and often absurdly cheap range of products, but such price-cutting tactics have run into increasing obstacles as it seeks to conquer new markets in the southeast. Asian.
Indonesia ordered Temu removed from app stores in October, a move it said would protect the country’s smaller merchants. Last week, Vietnam threatened to ban Temu and Chinese-owned fast fashion retailer Shein before the end of the month, saying they had not been approved to do business in the country.
The flood of cheaper products made in China – often with minimal import taxes – has hurt local sellers and manufacturers, who cannot beat the speed, quality or prices offered online, according to co-founder Simon Torring. from the market analysis firm Cube.
“Temu has become the lightning rod for all regulators, and now everywhere is worrying about whether cross-border import rules should be changed,” he said.
Poom Chotikavan, chief operating officer of Taksa Toys in Thailand, has had difficulty finding a local manufacturer to make children’s toys because many suppliers have closed. Almost 2,000 Thai factories in all sectors closed and more than 50,000 workers lost their jobs in the last financial year, Reuters reported, partly due to increased Chinese competition and higher costs.
“It has never been easier to get products from China (so) their sales have simply been eliminated,” Chotikavan said. “How will they survive in this landscape where their customers can simply turn to (Chinese) factories?”
Temu’s Chinese equivalent, Pinduoduo, has operated since 2015, and the global platform will launch in the US in 2022 and take European markets by storm the following year. Temu has been expanding its presence in Southeast Asia, starting with the Philippines and Malaysia in 2023 and then Thailand, Brunei and Vietnam this year.
The growing consumerism of Southeast Asia’s burgeoning middle class has made the region an ideal market, with online shopping sales approaching $160 billion in 2024, according to a Bain & Co analysis published in November.
That boom came at the right time for Temu to pursue international growth, as the slowdown in the Chinese economy caused domestic customers to reduce purchases from Pinduoduo, according to Jianggan Li, chief executive of venture firm Momentum Works.
“In China, growth is stagnant compared to the 2010s and yet it is very competitive, so players need to find other avenues to grow (such as) overseas markets,” he said.
But the slowdown has also left Chinese factories with excess capacity, forcing Temu’s main suppliers to sell in high volumes and low costs and giving a boost to the market as it opens up.
“Amazing how cheap it is”
As it has done in Western markets, Temu combined those cheaply produced products with massive discounts and an increasingly aggressive advertising campaign, while keeping shoppers hooked through a gamified experience of prize wheels and timers. countdown.
It has reached hundreds of thousands of customers, including Chotikavan, who bought a MagSafe iPhone mount for his car in Temu for $3, less than a seventh of the price it would have cost otherwise.
“The products are getting cheaper, but the quality is pretty decent,” he said. “It’s amazing how cheap it is.”
It’s the same story throughout Southeast Asia. Local vendors in Indonesia sell woven straw purses available for $3 in Temu for six times that price. Jackets sold in Vietnamese markets for $15 are available at Temu for the same price and with free shipping.
While consumers enjoy greater access to cheap products, local businesses want their governments to act.
Indonesia has taken the strongest stance, raising taxes and banning e-commerce on social media platforms in 2023, forcing TikTok Shop to buy shares in a struggling local competitor to continue operating. While a ban would protect local manufacturers and higher taxes would boost government coffers, Temu would try to make its way anyway, Torring said, pointing to the platform’s repeated requests to enter Indonesia despite constant refusal.
“It is a signal to other markets: ‘if it is easy, we will come.’ If it’s difficult, we’ll still come. “They show us the rules, they show us what we have to do, but we will do it,” he said.
“His mandate is to ‘conquer the world’.”