1️⃣ Advertising overload 💥
Think of Temu as the new WeWork of e-commerce, splurging a staggering $1.2 billion on Meta ads according to Goldman Sachs estimate. Going forward in 2024, Temu shows no signs of slowing its advertising ambitions. With 76% of this on social media and another €13.1M Super Bowl ad on the horizon, they're betting big on visibility. Their strategy is clear: visibility at all costs. But is flooding the market with ads sustainable or just a flashy way to burn cash?
2️⃣ The Wish Effect and Unit Economics📉
It's like watching a sequel to the Wish disaster movie – heavy on ads, light on innovation. With each order bleeding cash, Temu's strategy seems more like digging a financial hole than building an empire. With each order costing them about €9.4, and an average sale of just €23.4, they're bleeding cash. Their current model, reliant on volume over value, seems a risky gamble in the long run.
3️⃣ Shrinking demand 📉
Here's the twist: customers aren't as thrilled as the numbers suggest. Quality issues and diminishing trust are causing shoppers to back away, with Temu's purchase intent plummeting by 14%. It seems the allure of cheap is wearing thin.
4️⃣ Seller strategy shift 🔄
In a bold move, Temu is opening its doors to U.S. and European sellers, attempting to diversify beyond its Chinese roots. It’s a play straight out of the Wish, Shein and AliExpress playbook. However, they were largely unsuccessful in both attracting a significant number of domestic sellers and repositioning themselves in the eyes of consumers.
5️⃣ Business model 🤔
Temu's banking on its cheap, unbranded products, but this might be a short-lived triumph. To truly succeed and avoid being a flash in the pan, they might need to pivot, just like Amazon did with Prime and AWS.
Will Temu's aggressive growth strategy pay off, or is it a path to financial ruin
