Temu’s U.S. expansion plans might be more ambitious than meets the eye.
According to Chinese media, the e-commerce marketplace has signed partnerships with two third-party logistics companies to facilitate U.S. fulfillment.
WinIt and Easy Export’s services will now be available to the U.S. marketplace sellers Temu has been looking to onboard since it announced in January that it would begin courting U.S. sellers.
Now, the play is raising questions about what the Chinese company has to gain by doing so.
When Temu first announced the U.S. seller program, the burden of fulfillment fell solely on sellers hawking their goods on Temu’s marketplace. But, with these new partnerships, that stands to change.
Though WinIt and Easy Export have signed on as U.S. fulfillment partners, analysis by Marketplace Pulse shows that none of the sellers on Temu’s U.S. marketplace have primary places of business in the U.S. According to Juozas Kaziukėnas, the founder and CEO of the analytics and research firm, Temu’s 5,000-plus U.S. marketplace sellers are actually operated by Chinese companies.
The partnerships with WinIt and Easy Export could make it even easier for Chinese manufacturers to drop ship inventory to the U.S.
“We’ve only seen Chinese sellers entering [Temu’s marketplace] in the U.S. These two logistics companies also seem to be very focused on Chinese cross-border commerce,” he said. “So if anything, this is a service to Chinese sellers that currently don’t have inventory in the U.S., [or] don’t have a 3PL in the U.S., and this is a path for them to to set it up.”
When Temu originally offered to onboard U.S. sellers, it made it clear that those sellers would be responsible for their own fulfillment. Kaziukėnas said though WinIt and Easy Export have come into the picture, sellers likely still have the option to fulfill their own inventory through other third-party logistics partners, particularly since Temu doesn’t own either of its new partners.
Kaziukėnas said he sees these two partnerships as a test; if the U.S. marketplace booms, Temu may invest in its own facilities. But, for now, it makes sense for it to attach itself to existing logistics providers, because it allows immediate functionality for potential and existing sellers.
But if sellers based in the U.S. begin migrating onto Temu, Kaziukėnas said he doesn’t see them using WinIt and Easy Export unless mandated to do so, because the two platforms lack notoriety in the U.S. market and are not easily accessible to American sellers operating their businesses within the States. Instead, he said, they may turn to existing, popular 3PL partners in the U.S., like Fulfilled by Amazon (FBA).
That assumes that Temu can even recruit U.S. sellers. Regardless of what entity fulfills the orders, the main play is to make shipping faster.
Shein, Temu’s nemesis, announced last week that it had partnered with a more prominently known 3PL among stateside sellers: Flexport. Still, it has also struggled to onboard American sellers onto its recently launched marketplace, despite deploying a more robust recruiting effort.
“I think both [Shein and Temu] are struggling quite a lot to get us brands to join for two reasons. One, there’s a lot of unproven demand. So it’s not clear if, as a brand with a higher price point, once you join the table, how much demand there is for your products and your price point,” Kaziukėnas said. “Also, there’s quite a high level of anti-China sentiment amongst consumers as well as amongst businesses. This is the second reason why I think many of them will shy away from associating themselves with Shein or Temu.”
Jason Goldberg, chief commerce strategy officer at Publicis Groupe, said brands may remain reticent to join Temu’s U.S. marketplace, given that doing so could pose a reputational risk.
“Whatever your brand’s position is in the market, you need to be careful about selling down market from that position, because it will erode the perception of your brand. There are a lot of brands that, for a long time, didn’t want to sell on Amazon because they felt it would cheapen the brand…and many more brands have that attitude about Walmart,” Goldberg said.
“Temu, in many ways, is like the new Walmart, at the very bottom of this ecosystem. It’s easy to be an established brand in the U.S. and go, ‘I would never put myself on Temu because it cheapens me—Temu is a platform for cheap junk, and if I put myself on that platform, I’m de facto telling all my consumers that I’m cheap junk,’” he added.
But Temu isn’t trying to be the new Walmart, and its consumers’ actual thoughts on the quality issue may vary by generational cohort, Goldberg said.
Among Gen Zers and millennials, Temu may not have such negative connotations. In Goldberg’s mind, young shoppers may see the platform as a way to procure “dupes” of luxury goods and trendy styles in a way that’s budget friendly for them.
Scott Ohsman, vice president of digital commerce at Quickfire, said Temu may continue to capitalize on those demographics’ infatuation with discounted goods.
“The U.S. market loves a perceived deal, and that’s what Temu is gaining on right now. It’s 90 percent off every single day, and Americans love a huge discount,” Ohsman said. “They’re betting on our love affair with commodities.”
Goldberg said he predicts that the first brands to give Temu a shot could be direct-to-consumer (DTC) brands that have been struggling to gain market share. If these brands can’t secure shelf space at Kroger, Target or Macy’s and struggle against oversaturation on other marketplace platforms like Amazon, they may turn to Temu.
But Kaziukėnas said unless or until Temu expands into more categories and garners more attention from a broader market, DTC brands may not find the audience they’re searching for. By contrast, sellers that currently turn profits on unbranded goods on Amazon and other marketplaces may have a new sales channel, he noted.
Whatever its future in the American market, analysts and trade experts alike share doubts that Temu could eclipse Amazon’s market share. They also lack faith that it has the ability to build meaningful logistical infrastructure in the way that Amazon has over years.
Ram Ben Tzion, co-founder and CEO of Ultra Information Systems, however, said Temu may have a unique advantage on the digital side.
“I don’t think that Temu has an edge…based on its ability to master logistics better than Amazon—that’s not going to be the case. [But] Temu has the ability to offer sellers in the U.S. market two things that Amazon does not: less regulation and more data,” he told Sourcing Journal.
“Because of the fact that they’re so aggressively obtaining consumer data, that can then be transformed to more accurate targeting and analytics that can better serve whoever wants to sell on their marketplace,” he added.
In order to shop on the platform, consumers fork over their email address almost immediately—and if they shop on mobile, they are almost always redirected to the company’s app, which allows Temu to capture constant insights on consumers’ patterns and preferences.
Ohsman said it’s likely that, if Temu continues to allow its sellers to fulfill their own orders, it could prove mutually beneficial for both the Chinese e-commerce site and Amazon.
“Temu and Shein and all these [companies] may say, ‘Let’s hook our wagons to this logistical juggernaut. They’ve already done all the work; they’ve already spent all the money. Let’s lean on the sellers,’” Ohsman said.
Ohsman went on to say he believes it would be too costly, and too complex, to build out the logistical infrastructure to compete with Amazon.
“How many [companies] have tried and failed?” he said, referring to flops like Wish.
Ultimately, though, Temu may not care about turning profits in its early days, Kaziukėnas said. It’s owned by PDD, a Chinese company large enough to take risks and not fret too heavily about net loss—so it may be willing to hemorrhage cash on experiments as its audience grows. This is akin to the Amazon model as well, as the internet behemoth endured years of losses as it targeted growing market share.
For now, Temu may only be setting up shop with its U.S. marketplace in an attempt to please its customers and grab the attention of potential customers by shipping quickly. At the moment, the cost associated with that appears to be minimal—but the gains may be, too.
Amazon stands to profit from a logistical perspective if Temu sellers are allowed to use its services for fulfillment. FBA is one of the more expensive 3PL solutions on the market, and Goldberg said the company could change its policies on a dime—as it has in the past. If, for instance, sellers using FBA begin shipping high quantities of goods they have sold on Temu’s marketplace, Amazon may choose to bring that to a halt. Consequently, Temu sellers may be forced to find an alternative.
Ben Tzion said he finds it unlikely that Temu would work to become that alternative, suggesting it may instead defer to other 3PLs, as it has already done with WinIt and Easy Export.
“I think a big part of [Temu’s] growth has been their ability to piggyback on the existing supply chain routes, including those of the U.S. Postal Service,” he said. “I highly doubt we’re going to see Temu building a global logistics infrastructure arm comparable [or] competitive to the existing giants. I think what Temu does well is the online part, the digital part—not the real-world part, which is a completely different set of challenges.”
