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Blog Summary:
Explore how Temu Business Model leverages a direct-to-consumer approach, a vast global supplier network, and aggressive pricing strategies to disrupt the e-commerce market. This guide uncovers how Temu operates, generates revenue, and plans to scale in the international marketplace.
Table of Content
Temu emerged as a leading e-commerce giant, making headlines with its standout user acquisition strategy. Over the years, it scaled quickly using a low-cost and factory-direct approach. The approach enabled Temu to attract more users within only 6 months, compared to how one of its archrivals, Shein, achieved this in under 8 months.
Temu’s explosive growth is influenced by using network-scale efficiencies. It leverages the size of its network to improve performance at reduced costs. It utilizes a shared infrastructure that helps Temu reduce redundancy, resulting in better efficiencies as more users are added.
In the retail sector, businesses are frequently disrupted by rapid market changes and shifting customer preferences. Temu, however, emerged as the disruptor, becoming the top-grossing shopping site and surpassing even Amazon in the US market. Its popularity in app stores is evident as the number of downloads in May 2024 reached 53 million.
Temu started with a gross merchandise value (GMV) of USD 290 million when it began business in 2022. In 2023, it grew 4,500 times, reaching USD 14 billion. Forecasts indicate that Temu’s GMV is expected to continue growing, reaching USD 41 billion by 2025.
Since its launch in September 2022, with around 440,000 app downloads, it continued to grow until April 2023, when it reached 15.3 million downloads. By May 2023, there was a sudden 98% increase in app downloads, resulting in more than 30 million downloads.
Although it experienced a decline in downloads in June 2023, it regained momentum and reached 40.5 million downloads by September 2023. From January to March 2024, downloads reached 41.3 million, marking the highest monthly downloads.
Apart from app downloads, Temu saw a massive increase in site visits from April to May 2023, with a 96.5% rise from 110.6 million visits in April to 217 million visits in May.
Temu’s popularity has grown significantly, but it remains relatively behind e-commerce giants like Amazon. However, it had already surpassed two other e-commerce leaders, Etsy and Wayfair, in revenue generation by 2023.
Temu earned USD 13.8 billion, beating the other two, which earned USD 11.6 billion and USD 11.5 billion, respectively. Consumer perception also increased for Temu, with the rate growing from 11% of consumers who bought products in 2023 to 32% by 2024.
Within 2 years of its inception, it has become a favorite of at least 630 adults out of 700. The average time spent on the Temu app by customers is double the amount of time spent on the Amazon app, which is 22 and 11 minutes, respectively.
It was launched by PDD Holdings, the parent company of the Chinese e-commerce platform Pinduoduo, in Boston. As mentioned earlier, it works on a direct-to-consumer model where every product, from home goods to electronics, is sold at heavily discounted prices.
By connecting consumers directly with manufacturers, Temu saves on shipping costs, enabling it to offer steep discounts with fast shipping times. It responds to consumers’ immediate needs, which also helps reduce production costs by minimizing excess inventory.
At Moon Technolabs, our experts have developed robust, real-time D2C platforms that mirror this model, Instagroc – a grocery delivery app that connects users directly with sellers for maximum speed and affordability.
Temu’s business model is similar to that of Walmart, AliExpress, and Wish, serving as an intermediary between sellers and buyers. In the process, it saves on storing inventory in warehouses by incentivising prospective customers.
It attracts more buyers through social referrals, unlocking additional discounts and keeping users engaged throughout the shopping experience within the app. In-app gamification also enables Temu to offer free shipping by circumventing customs duties.
Temu follows a non-traditional approach to carry out its logistics operations, which is different from other well-established businesses in the same line. It doesn’t primarily focus on having warehouse storage and doesn’t own any of them under its name.
While it has established third-party fulfillment centers in markets such as Europe and the US, it still experiences long delivery times.
Temu follows a process that allows shipping products directly from manufacturers to doorsteps, which also significantly lowers their logistics costs. For businesses seeking similar logistics automation, they can develop custom e-commerce app development solutions to support factory-direct, low-cost delivery models.
Temu’s operating strategy involves providing affordable products by partnering directly with manufacturers and suppliers. The model works by cutting out intermediaries, which helps reduce costs.
It implements advanced algorithms and analytics to identify trending products and optimize their offers accordingly. Custom software development services are the ideal way to integrate trend analytics and demand forecasting.
Here are the key elements of its operating model:.
With a user-friendly app and a robust website, Temu makes it easy for its customers to search, browse, and purchase products. A convenient checkout process enables customers to place orders, which Temu’s efficient logistics and fulfillment centers deliver to their customers.
It integrates not just traditional Chinese retailers but also factories with its platform. These manufacturers use air freight to ship products directly from Chinese factories to customers in Europe.
Since the C2M model, followed by Temu, focuses on customer-based production on demand, it eliminates the need for wholesalers and retailers. These prices establish direct connections between manufacturers and marketplaces, resulting in lower prices as they eliminate the markup of retailers.
Since prices are low, customers are also willing to accept longer delivery times, as products are sold directly from China rather than being stored in European warehouses. It means a T-shirt sold online for £20 by another online retailer would be sold for £10 at Temu.
Wholesalers and retailers are removed from the supply chain, helping Temu establish direct access to customers. Through its app advertising and other marketing efforts, such as aggressive advertising on Meta, it offers products at ultra-low prices.
Temu utilizes consumer data to capture their preferences. To achieve accuracy and speed in insights, it implements various tools, data sources, and methods. For example, to identify current trends, it uses social listening tools that help it identify TikTok trends.
Similarly, for consumer behavior analysis, it utilizes platform data that helps both manufacturers and retailers develop precise product offers that align with their needs. The process is called reverse manufacturing because production for items doesn’t begin before customers add them to their carts.
While the reverse manufacturing process is a key component of the C2M model, it requires proper data management to produce products that cater to consumer demand while maintaining a balance between overproduction and discounts.
Whether you’re building a multi-category platform like Temu or a niche retail app, Moon Technolabs’ cross-platform development services ensure your app performs seamlessly across devices while staying cost-effective and scalable.
Let us help you turn your next global e-commerce app concept into a powerful product strategy that sells and grows fast.
Temu’s business cost structure is built for rapid expansion and market disruption, prioritizing user growth and brand awareness over immediate profitability. The company’s largest costs are marketing, shipping subsidies, and technology investment.
Here’s a short overview of the cost structure of Temu’s business model before heading into the detailed description:
| Cost Category | Details |
|---|---|
| Marketing & Advertising | $2–3B in 2023; Super Bowl ads, influencer campaigns, giveaways |
| Shipping & Logistics | Subsidized/free shipping, air freight, logistics partners |
| Platform Maintenance | App/website development, AI, data analytics |
| Supplier Payments | Direct sourcing, inventory, and quality control |
Temu spends aggressively on digital advertising, influencer partnerships, and high-profile campaigns. This includes discounts, referral rewards, and giveaways to attract and retain users.
Temu heavily subsidizes shipping, often offering free or low-cost delivery to customers worldwide. Partnerships with logistics providers like J&T Express, UPS, and FedEx are crucial, but shipping subsidies often result in Temu losing money on each order.
Temu continually invests in its mobile app and website, including AI-driven personalization, advanced recommendation algorithms, and engaging gamified shopping experiences. Hence, it also has to heavily invest in the costs of technology infrastructure, cybersecurity, and data analytics.
Temu sources directly from Chinese manufacturers, minimizing costs by squeezing supplier margins and eliminating intermediaries. Payments to suppliers are kept low; however, Temu must still cover the costs of inventory, quality control, and returns.
Partnerships with Chinese suppliers are the backbone of Temu’s low-cost, high-volume business model. They enable Temu to minimize procurement, inventory, and shipping costs, allowing for ultra-competitive pricing.
However, these savings come with trade-offs: Temu must spend on quality assurance and supplier support, and faces the risk of cost increases if supply chain or regulatory conditions change. Let’s understand how:
Temu often employs a model where suppliers ship products directly to consumers or Temu’s cross-border logistics hubs. Some suppliers may participate in dropshipping arrangements, further lowering Temu’s need for physical inventory and the associated costs.
Temu leverages the U.S. “de minimis” rule, which allows packages valued under USD 800 to enter duty-free. This regulatory advantage, combined with direct supplier partnerships, keeps import and customs costs low.
While direct partnerships can reduce costs, Temu must invest in quality assurance and supplier management to maintain product standards, which adds to operational expenses.
Temu’s platform is digitally integrated with many Chinese suppliers, automating order processing, inventory updates, and payments. This reduces administrative overhead and transaction costs.
Suppliers’ willingness or unwillingness to accept low prices is crucial for Temu to maintain its pricing strategy. Higher input costs, currency fluctuations, increased demand elsewhere, or dissatisfaction with low margins can lead to increased expenses for Temu.
Let’s build logistics-powered platforms that enable you to deal with scattered vendors and shipping chaos.
Temu’s primary business strategy focuses on a multi-category marketplace. Compared to Temu, Shein is a fast-fashion retailer, and AliExpress is an e-commerce platform with a B2C extension of Alibaba. Temu offers a broad range of products, similar to an Amazon-style catalog, across fashion, electronics, and home and pet care.
On the other hand, Shein’s business model is primarily focused on fast fashion and accessories for Gen Z. AliExpress supports Chinese vendors who sell their products overseas through a marketplace-style listing model. Here’s a detailed list of differences between all of these:
| Differentiation Criteria | What Sets Temu Apart |
|---|---|
| Inventory Control | Temu works on a centralized selection compared to Shein’s vertically integrated fashion and AliExpress’s vendor-controlled listings:
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| Logistics and Fulfilment | Temu is backed by its parent company, Pinduoduo, for global logistics compared to Shein’s centralized fashion and AliExpress’s seller-managed shipping:
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| Pricing and User Incentives | Temu’s pricing is discount-based and loss-leading compared to Shein’s low-cost fashion with frequent sales and AliExpress’s wide pricing ranges:
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| Consumer data and technologies | Temu uses demand forecasting by PDD Holdings compared to Shein’s predictive design and AliExpress’s less advanced personalization:
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| Global expansion strategies | Temu expanded to the US first, followed by the EU and ROW, compared to Shein’s global deep fashion penetration and AliExpress’s, which went global from the start:
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Temu’s rapid rise showcases how integrating supply chain operations with predictive analytics is a recipe for global e-commerce success. If you’re a business looking to build such multi-category marketplace apps with centralized control, Moon Technolabs enables you to replicate Temu-like capabilities tailored to your business goals.
We are a leading online marketplace and e-commerce app development company that helps you innovate at scale and reduce time-to-market with AI-driven logistics and gamified user acquisition.
Our experience in product strategy and intuitive UI/UX design, combined with scalable backend systems and AI-based recommendation engines, ensures your app delivers seamless, cost-effective multi-platform user experiences.
For verticals such as home services, medicine, and groceries, we’ve already built live-use marketplace apps, including MedGo – an online medicine delivery app that replicates Temu’s C2M agility at a niche level.
From supplier integration and shipping logic to loyalty systems and gamification, Moon Technolabs builds fully custom apps tailored for global reach. Explore our retail app development solutions or get started with a free consultation.
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Jayanti Katariya is the CEO of Moon Technolabs, a fast-growing IT solutions provider, with 18+ years of experience in the industry. Passionate about developing creative apps from a young age, he pursued an engineering degree to further this interest. Under his leadership, Moon Technolabs has helped numerous brands establish their online presence and he has also launched an invoicing software that assists businesses to streamline their financial operations.
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