Chinese seller Temu suffered a stinging drop in market value today following a poor earnings report, perhaps hampering its drive to get domestic U.S. brands to sell on its site while expanding its presence in the U.S. and Europe.
Temu and other Chinese sellers like Shein and AliExpress have been trying to recruit more U.S. brands but its biggest challenge has been that many brands don't want to be associated with China-based sites.
But the fast-growing company lost $50 billion in market value today after it posted disappointing revenue. Its founder, Colin Huang, was knocked off his pedestal as the wealthiest person in China just weeks after he earned that title.
"We are seeing many new challenges ahead from changing consumer demand, intensifying competition, and uncertainties in [the] global environment,” Lei Chen, co-CEO of PDD Holdings, Temu's parent company, said during an earnings call.
Temu is known for offering a wide variety of products at heavily discounted prices, often shipped directly from manufacturers in China. Temu offers a vast selection of products across various categories, including clothing, electronics, home goods, beauty products, and more.
But Temu faces intense scrutiny by governments for using import trade loopholes and for the quality and origins of its products. While the company is technically headquartered in Ireland, the majority of its employees work in China.
Rapid growth amid controversy
Temu has about 300,000 sellers globally, nearly all of them still based in China, according to Marketplace Plus, which tracks online platforms. It operates on a consumer-to-manufacturer (C2M) model, connecting consumers directly with manufacturers to cut out middlemen and reduce costs.
Temu has experienced rapid growth since its launch in the US in September 2022, becoming one of the most downloaded shopping apps. It has started building warehouses in the U.S., both to speed up deliveries and also to get around U.S. prohibitions against trading with Chinese businesses.
The company has recently hired staff in the U.S. and Europe to get domestic sellers but is reportedly finding that many leading brands don't want to appear on Temu's site. It does, however, expect to sign up many of the lesser-known sellers who appear on the Amazon site.
Temu's goal is to expand beyond the cheap goods that presently dominate its site and add more midlevel products similar to many now found on Amazon. Temu has faced scrutiny, however, regarding data privacy, potential forced labor in its supply chain, intellectual property concerns, and product quality issues.