PDD's budget shopping app Temu sees rapid growth in first quarter as Chinese apps battle for US consumers' wallets

Online budget shopping app Temu, owned by Chinese e-commerce giant PDD Holdings, kept up its momentum in the US in the first quarter with downloads jumping 57 per cent as its cutthroat pricing buoys the app in a tough macroeconomic environment.

Temu saw 19 million downloads in the first three months of the year, bringing its total to 33 million downloads since it launched in the US in September, according to mobile intelligence firm Sensor Tower. Temu is currently the top-ranked free app in the US on both Apple's App Store and Google Play, a spot it has largely guarded since November

Temu, like its rival Shein, has grown rapidly by targeting price-sensitive consumers in overseas markets with inexpensive, made-in-China goods across a variety of product categories, which has become a winning strategy since a spike in global inflation last year and growing macroeconomic pressure, according to Seema Shah, senior director of investor research at Sensor Tower.

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On Temu - pronounced "tee-moo" - US consumers can find dirt-cheap deals with free shipping and free returns for unsatisfied customers. The platform is full of jewellery for under US$1 and clothing for less than US$5.

"Temu's wide assortment of low-priced products ranging from clothing to electronics to home decor have proven to have mass appeal in the US market," Shah said. "Shopping apps such as Temu offer incredible in-app deals for consumers, which are more relevant than ever as macroeconomic conditions have become increasingly constrained amidst rising inflation."

Temu has also been able to tap into growing mobile shopping in the US, according to a recent report from US app analytics firm Data.ai. US consumers spent more than 2.8 billion hours on shopping apps in 2022, a record for the market.

"Chinese consumers were early adopters of mobile e-commerce, which accounts for a large share in the Singles' Day shopping festival," Data.ai wrote in the report. "While the US market has been lagging behind in this area, the outbreak of the Covid-19 pandemic in 2019 accelerated the development of mobile-first shopping habits."

Nasdaq-listed PDD, which also operates Shanghai-based social e-commerce platform Pinduoduo, did not immediately respond to a request for comment. PDD CEO Chen Lei said in a March conference call with analysts that Temu is still in its early stages and will focus on product iteration.

A customer holds a Shein bag outside the Shein Tokyo showroom on November 13, 2022. Photo: Bloomberg alt=A customer holds a Shein bag outside the Shein Tokyo showroom on November 13, 2022. Photo: Bloomberg>

Temu is among a new crop of Chinese e-commerce apps that have been rapidly attracting overseas users. Shein, the Chinese-founded fast fashion retailer now based in Singapore, targets Generation Z consumers with low-priced clothing and managed to top Amazon as the most-downloaded shopping app in the US in 2021. It was knocked off the top spot by Temu in January, according to Sensor Tower.

By the end of the first quarter, Shein and Temu had 23 million and 17 million monthly active users (MAUs), respectively, Sensor Tower data showed.

The timing of Temu's launch also contributed to growth, according to Data.ai. The app launched just two months ahead of Black Friday, which typically marks the beginning of the holiday shopping season in the US with big discounts. Temu launched its own sales campaigns for the event, targeting consumers with less disposable income, Data.ai said in its report.

Weeks later, PDD also splurged on a 30-second ad it aired twice during Super Bowl LVII in February. Telling viewers to "shop like a billionaire", the ad helped grow awareness in the US, with MAUs jumping 83 per cent over January, according to Sensor Tower.

Still, Chinese budget shopping apps have a long way to go before posing a threat to industry giant Amazon.com, Sensor Tower's Shah said.

"Although Temu's rapid rise in popularity has been notable, established e-commerce companies in the US such as Amazon will likely be difficult to steal considerable market share from given Amazon offers a wide array of products from a broader base of sellers and often has same-day delivery for subscribed Prime members," Shah said.

Amazon is also full of third-party sellers in China, who either ship directly from China to save on costs or leverage the e-commerce giant's warehousing and logistics network for faster shipping.

To succeed in this environment, Temu must keep users glued to the app, according to Data.ai.

"The next step for Temu will be to monitor retention and reviews to make sure that its products can meet market demands in the long term," Data.ai said in its report.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2023 South China Morning Post Publishers Ltd. All rights reserved.

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