Forget Amazon, eBay, and Alibaba: last year’s fastest-growing shopping site was Chinese company Temu – yet even as its dizzying success shaped Australia’s holiday shopping season, complaints, security concerns, and legal battles have cast shadows over its long-term future.
That future seemed bright last April, when Temu added Australia and New Zealand to its fast-growing business in Canada and the United States – where its bargain prices and massive inventory of fashion, clothing, technology, homewares and myriad other products drove user numbers to stratospheric heights.
From just 440,000 downloads when it launched in September 2022, last May Temu – whose catchphrase is ‘shop like a billionaire’ – was downloaded over 30 million times, according to Statista, and by its one-year anniversary this had grown to 40.54 million downloads per month, outpacing even the Amazon app.
Temu’s eclectic array of products ship directly from Chinese manufacturers to customers worldwide, with the company’s Australian site – which had reportedly passed 9.2 million Australian users just two months after its launch – recently highlighting best sellers including a $20 wireless doorbell camera, $12 leather bag, $26 massage gun, $24 phone charging station, $11 runners, and more.
Revenues grew from $286 million ($US192 million) in January 2023 to $1.5 billion ($US1 billion) in June alone, according to Business of Apps, although the company’s business model – its marketing budget was reportedly at a run rate of $3 billion ($US2 billion) per year and its cut-price strategy means it is losing money on each shipment – fuelled concerns that the Chinese app was siphoning and selling personal information from users’ phones.
The brand took a hit when Pinduoduo, a China-focused shopping app owned by the same parent company as Temu, was pulled from the Google Play Store last March for harbouring vicious and persistent malware.
Similar concerns were raised when Temu’s app was temporarily pulled by Apple in mid-2023, although these have since been resolved – and Temu became the most downloaded iPhone app in the US last year.
Amidst global furore and outright bans over alleged bad behaviour by Chinese brand TikTok – which joined networking company Huawei, drone maker DJI, and camera manufacturers Dahua and Hikvision on regulators’ blacklists – competitors descended after the outing of Pinduoduo tainted Temu’s growth.
A lawsuit from archrival Shein – a primarily clothing-focused Chinese competitor that has become the biggest ‘fast fashion’ retailer in the US while expanding to Australia and dozens of other countries – triggered a series of retaliatory lawsuits between the two companies, which dismissed their lawsuits against each other in October and lodged additional action just before Christmas.
Amidst the legal battles – which include Shein’s claims that Temu is infringing its trademarks and Temu’s latest argument that Shein is violating US competition laws by locking suppliers into ‘Mafia-style’ exclusive-dealing arrangements – Temu also faces a class action lawsuit alleging that the company is failing to secure masses of customer data that it collects.
That lawsuit, which was filed in September on behalf of every person who had downloaded the Temu app, alleges that the company’s in-app browser “has secretly and invasively amassed massive amounts of extremely private information and data” by using JavaScript code to track their online activities; that Temu “grossly failed to comply with security standards and allowed its customers’ financial information to be compromised” while “wiretapping” its customers; and that Temu’s “failure to secure and safeguard” that data had led to credit card and other information being compromised en masse.
The right proposition at the right time
Legal and moral complexities aside, Temu has succeeded in Australia and elsewhere by using aggressively low prices to undercut competitors and generate word of mouth among consumers that in 2023 struggled with high inflation, rising costs for everyday purchases and expenses, and slow wage growth overall.
Inflation-fuelled prices have created “a battle for consumer spending,” Deloitte vice chair Nick Handrinos said as that firm recently predicted a year-on-year rise in holiday shopping of between 3.5 per cent and 4.6 per cent – although holiday e-commerce sales were predicted to increase by 10.3 per cent to 12.8 per cent over the same period.
“E-commerce sales should continue to be strong as consumers search for the best deals online to maximise their wallets,” Handrinos said – presaging a bumper shopping season for the likes of Temu as “retailers who remain flexible to shifting consumer demand and behaviours will likely be poised for growth this holiday season.”
In a retail climate where cash-strapped shoppers are said to be ‘trading down’ – buying cheaper goods where possible – Temu’s massive Australian user base positioned it as an alternative to giants eBay and Amazon during a holiday shopping season that was predicted to reach $66.82 billion during the November to Christmas trading period alone.
Analyses point to a big win for Temu during this holiday shopping season, with the company accounting for nearly 17 per cent of the US discount store market – but many wonder whether Temu’s luck could run out this year as competitors, customers, and regulators blunt its market success.
With investigators alleging that Temu’s financial model has only succeeded by exploiting ‘de minimis’ loopholes in the country’s import rules to offer such low prices with free shipping – with Temu and Shein said to account for 30 per cent of all de minimis shipments to the US – moves to close these loopholes could prove problematic.
And while Temu claims it is transparent about its data collection and security practices, it faces fallout from a US Congressional investigation that warned of an “extremely high risk that Temu’s supply chains are contaminated with forced labour” in violation of US laws protecting China’s Uyghur minority.
