Welcome back to the AdExchanger Commerce newsletter!
I’m James Hercher, AdExchanger senior editor and your guide this week as we contemplate Temu, an empty shell of an ecommerce business that is propelled by paid media and … not much else.
Temu time
It’s the shopping sensation that’s sweeping the nation.
Or, wait, it’s what?
Temu, a shopping app launched last September by the Chinese ecommerce giant Pinduoduo, is currently number two in the App Store, ahead of TikTok, Instagram and YouTube. According to Insider Intelligence estimates, Temu became the twelfth-most popular US retail site during the holidays last year, just a hair behind CVS and Macy’s.
Since then, it’s only cranked up the paid media.
Temu purchased two Super Bowl ad placements in February to reach Americans with its marketplace pitch: “Shop like a billionaire.”
But not “shop like a billionaire” in the sense of buying nice things, rather how a billionaire might buy a luxury car with the offhand ease that I’d purchase a candy bar. Now you can buy all sorts of things with the same careless ease, because they cost next to nothing.
A carousel of promoted sales atop the site Monday through Wednesday this week offers “Women’s History Month from $0.39,” a “2023 Vacation Guide” starting at twenty-nine cents and a box labeled “Refresh Your Home down to $0.19.”
The top recommended seller’s featured product achieves the triumvirate of IP violations: a set of Lego knockoffs that copy both “Star Wars” and “Harry Potter” characters. All for under a buck, mind.
There must be some consumer traction here, though. The app gets downloaded, and the site is trafficked.
But Temu is particularly interesting to the ad industry because, in a sense, it’s a manifestation of the value of advertising.
The Temu case study
Although Temu went live in the US last year, its real consumer launch was during Super Bowl weekend.
After its Super Bowl appearances, Temu began a hyper-aggressive paid campaign across display, social media, search and mobile app stores, not to mention launching a generous referral program that rewards people for channeling new users to the service and for revisiting the app multiple times per day themselves.
The ROI defies logic. A piece of kitchen hardware manufactured in China, packaged and loaded onto a boat, shipped across oceans, unloaded and reloaded by teams of US union workers, driven in trucks across the country and, finally, unloaded and delivered to my door by non-union workers … for less than $2?
And I returned it for free the next day.
Temu is pressing hard on the two main levers that generate ecommerce conversions on the internet – price and paid media.
Price and paid media are flip sides of a single coin – for one side to be up, the other must be down. Temu challenges that notion by selling items at impossibly low prices while simultaneously outspending the market on ads.
The whole operation – the idea of an American company called Temu – is a figment of advertising. The only Temu employees listed on LinkedIn (all four of them) are in China. There is no GM or CEO of Temu. Pinduoduo CEO Chen Lei has issued written statements to US press inquiries.
Temu may not be a serious competitor to Amazon in the US, but it could be a solution to a new and uncomfortable problem for the ecommerce economy: mass product liquidation.
The great Temu ROI mystery might be solved by the fact that the Chinese manufacturer Pinduoduo has mountains – actual mountains – of crap it must sell, landfill or burn. Literally.
Adidas recently announced it has $500 million in unsold Yeezy merch that it’s considering feeding to flames if the company can’t move the unwanted sneakers. Funko, which makes collectible pop-culture figurines, is sending tens of millions of dollars’ worth of toys to a landfill, because they cost more to warehouse than they’re worth and aren’t being sold anyway.
Somehow, somebody is paying for all the gasoline that makes this global operation move.
This must be how it feels to be a billionaire.
