"Temenos of Shopping": The Downfall of Temu's US Operations
U.S. sales figures for Temu experiencing significant drop
Catch Up: Temu, a Chinese discount online retailer, has faced a severe blow in the US market due to new tariff regulations. The platform's sales have plummeted by over 25% between May 11 and June 9 as a result.
Why the Dip? Previously, Temu leveraged the "de minimis" tariff exemption in the US. Shipments valued under $800 could be delivered duty-free from China to US customers. However, the abolition of this exemption by former President Trump as part of comprehensive tariff increases left Temu struggling to adapt.
The New Reality After Trump's tariff overhaul on April 9, Temu announced it would overhaul its US business model and tailor deliveries to American customers from warehouses within the nation. The company attempted to persuade its sellers to stock inventories in these centers. Yet, these inventories have been failing to sustain the previous shipping volumes, and prices have surged significantly due to new tariffs.
Ad Spend Slashed In parallel, Temu has reduced its advertising significantly in the US, from tens of thousands of new online ads daily to less than 100 per day. This abrupt cutback, according to industry experts, has "shut down its growth machine," given that aggressive, omnipresent advertising was the driving force behind Temu's rapid growth in recent years.
A Bump in the EU Road While Temu continues to grow in European markets, thanks to duty-free status for shipments valuing up to €150, concerns persist about the competitive disadvantage European retailers face and the safety of numerous Temu products.
Side Effects To counteract the issue, the German government imposed stricter controls on such shipments earlier this year. The EU Commission has proposed a tariff reform that could end duty-free status for small packages, a move supported by German Finance Minister Lars Klingbeil.
Future Outlook With 90% of its 405 million global monthly users now coming from outside the US, Temu has been focusing on expanding into other markets, such as Europe, Latin America, and Southeast Asia. The company's growth strategy will depend on its ability to adapt to US-style tariff challenges, product safety regulations, and market access issues in these new markets.
Takeaways- The new US tariff regulations have significantly impacted Temu's low-price e-commerce model, causing user and profit declines.- To cope, Temu has increased product prices, shifted its fulfillment model, and accelerated growth in other regions.- The EU might introduce new regulations targeting Temu's imports, marketplace operations, and product safety, much like regulatory scrutiny it faced in the US.- Continued success for Temu will depend on its ability to adapt pricing, supply chain logistics, and compliance with tariffs and regulations in these new markets.
- In response to the new US tariff regulations, Temu has revised its community policy to accommodate the shift from imports to local warehousing, urging sellers to stock inventories within the nation.
- Despite the challenges in the US market, Temu has been steadily expanding its employment policy in Europe, Latin America, and Southeast Asia, aiming to adapt to tariff challenges, product safety regulations, and market access issues in these regions.
