Temu: shop like a billionaire — a product teardown
Temu was the most downloaded iPhone app in the US in 2023. Is this app worth the hype?
1. Product Overview
Temu is an online shopping platform that offers a wide variety of products at competitive prices. It is known for its extensive range of items, including clothing, electronics, home goods, beauty products, and more. Temu is part of the Chinese conglomerate, PDD Holdings, which also operates Pinduoduo, a popular social commerce platform in China. One of the key features of Temu is its ability to offer products at lower prices offering lots of discounts to entice customers. This is achieved through direct sourcing from manufacturers
Mission: To empower consumers to live their best lives
Founded in: 2022
2. Value Proposition
Temu’s value lies in its ability to offer an expansive selection, affordable pricing, and a convenient online shopping experience, appealing to budget efficient consumers seeking variety and value for their purchases
3. Interesting Statistics
# of downloads in US: 250 million [1]
# active users in US: 100 million [1]
Interesting reported engagement statistics for Q2 2023 (average): [2]
- Temu users spend 18 min/day
- AliExpress users spend 11 min/day
- Amazon users spend 10 min/day
4. Competitors
5. Controversies and Negative Reporting:
- There are reports of counterfeits also being sold on Temu at much lower prices [7]
- Temu has a C rating with the BBB user complaints ranging from low quality and never receiving the order amongst others [7]
- There is also a federal class action lawsuit against Whaleco Inc., maker of Temu [3], and PDD Holdings Inc. that claims the Temu app steals user data
- The US House Select Committee on the Chinese Communist Party published a report [4] that mentions Temu violates the Uyghur Forced Labor Act (UFLPA) which supports enforcement of the importation of goods manufactured wholly or in part with forced labor
6. User Segments
This is a two-sided market with consumers and sellers on each side. Here are some users segments that come to mind.
7. User Experience: Pluses and Minuses
User Sign Up:
What works here:
- As soon as I open the app, I get asked to spin the wheel for coupons. For a user looking for savings, a jackpot of $200 in savings sounds enticing. It also puts the power on the user side choosing to spin (and when to stop the spin once it is rolling)
What did not work:
Lots of pop-ups, even before signing up, makes it feel very spammy
Temu offers me coupons even before I sign into the app. However, signing up is a condition to get the savings which may feel a little deceiving. Also, the $200 is very prominent but in small letters above I can see that I need to buy items to get the $200. A user who did not notice this until later, perhaps when ready to buy, will undoubtedly find this deceiving. This is another way to lose trust in this app.
Temu uses the concept of scarcity bias [6] by placing countdown timers almost immediately after signing in, putting pressure on the user to buy within a bounded time frame. This creates a sense of urgency on the user which promotes impulse buying. In the short term, impulse buying could feel good to satisfy a desire to take advantage of the savings, but in the long term, the user may not see value in what they bought so rushedly and may decide to quit this experience entirely. Temu also makes use of loss aversion [5] by showing the user what they can lose if they don’t act quickly (the $300 in coupons if they don’t shop within the allotted 10 minutes). The fear of missing out is strong in almost every user flow in Temu.
90% of the time I entered Temu and spinned the wheel, I hit the jackpot for $200 in coupons. The rest of the time I get “Try one more spin”. Looks like the games are rigged for the user to hit the greatest reward almost every single time. This takes away from the magic effect of winning the highest price and enters the realm of deception. Once the user realizes this, trust goes out the window.
The items listed in the last page are random and promote wasteful shopping. Deeper insight into what the user is interested in buying is needed to make this experience more meaningful.
Browsing and Purchasing:
What works here:
In Temu’s home page, there are so many options to click on. Temu does a good point of categorizing the products and providing detailed filters so I can further sort by size, color, material, etc. Because the product catalog is vast, it is critical that they reduce choice overload on the user to help users find the products they want to buy.
There are dedicated sections on ‘Lighning Deals’ and ‘Earning Credits & Free Gifts’ which target the user looking for savings and bargains. Placing them at the top makes them accessible for these groups to get to explore products at low cost and get further savings.
On the product showcase page, a discounted item shows the discounted price, the savings in percentage, and the original price grayed out. This makes it easier for the user to know how much they are saving and increases oxytocin levels by making them feel they found a good deal making it easier to purchase.
What did not work:
Temu uses the concept of scarcity bias [6] by placing messages such as “Almost sold out” and “Limited time-offer” along with countdown timers to urge the user to buy fast. Such messages are so prevalent all over the sites that it creates pressure on the user to act fast which could result annoyance and feeling overwhelmed with the experience resulting in the user exiting out of the app. Because it is so prevalent, I almost don’t believe them in their claim that the items are almost sold out. This makes the app lose credibility quickly with the user.
At the bottom of the homepage, we also see it says “Limited-time Free Shipping” but upon further clicking I actually see that they offer “Free shipping on all offers”. This is a little deceiving.
Games and Savings:
From the main page, I clicked on one of the games under the ‘Earn credits & Free gifts’ section called ‘Real Cash win $100’. Below is the recording. Scroll down for further commentary.
Commentary:
I played Real Cash listed under the ‘Earn credits & Free Gifts” section where I earned cash rewards by spinning the wheel. Spinning gives the user the feel that they are in command of their fortune, especially because you win in every single instance, there is no downside to spinning. You also see other people commenting on winning rewards while you are playing. Because the names are anonymized, it is hard to say if these are real people. Inviting friends to the app is what gives you the most tokens. Towards the end, to get to the completion of the $150, you have to invite friends, along the way the app keeps giving you extra bonuses and gifts but you are blocked if you do not invite people. Also, the feel of the game is very much like being in a casino with slot machines and similar. This makes it addictive as so much positive reinforcement comes to the user in the form of savings and coupons. This would explain why the app has grown so much in the US. People motivated to get the savings would refer others to join the app leading to the amazing growth Temu has seen in 2023.
8. Conclusion
Temu has been successful at growing in the US in 2023 through a combination of leveraging shopping urgency, discounted pricing, and games providing savings and gifts. The games also rely on inviting your friends to join the app as a way to get you further savings. Given the users targeted in this app, budget constrained and bargain hunters, it makes sense that these people would invest in finding others to join the app for further gains. Some of the tactics used for the shopping experienced could be qualified as potential dark patterns including deceiving rewards offerings. The app also feels a little spammy with pop ups almost in every flow.
8. References
[1] Temu revenue and Usage Statistics (2023). Business of Apps. (2023, December 12). https://www.businessofapps.com/data/temu-statistics/#:~:text=According%20to%20Bloomberg%2C%20Temu%20surpassed,the%20start%20of%20the%20promotion.
[2] Hong, J. (2023, December 12). Shoppers spend almost twice as long on Temu app than rivals like Amazon. Bloomberg.com. https://www.bloomberg.com/news/articles/2023-12-12/shoppers-spend-almost-twice-as-long-on-temu-app-than-rivals-like-amazon?sref=gni836kR&embedded-checkout=true
[3] Brown, C. (2023a, November 6). Whaleco hit with lawsuit over data collected through Temu App. Bloomberg Law. https://news.bloomberglaw.com/privacy-and-data-security/whaleco-hit-with-lawsuit-over-data-collected-through-temu-app
[4] Selectcommitteeontheccp.house.gov. (n.d.). https://selectcommitteeontheccp.house.gov/sites/evo-subsites/selectcommitteeontheccp.house.gov/files/evo-media-document/reset-prevent-build-scc-report.pdf
[5] Schwab.com. (2023, October 25). Fundamentals of behavioral finance: Loss aversion bias. Schwab Brokerage. https://www.schwabassetmanagement.com/content/loss-aversion-bias#:~:text=What%20is%20loss%20aversion%20bias,gains%20of%20the%20same%20size.
[6] Matsakis, L. (2020, August 6). The subtle tricks shopping sites use to make you spend more. Wired. https://www.wired.com/story/amazon-online-retail-dark-patterns/
[7] Chow, A. R. (2022, December 29). The truth about Temu: Complaints and concerns. Time. https://time.com/6243738/temu-app-complaints/
