On July 5, 1994, Jeff Bezos, a former SVP at the hedge fund The D. E. Shaw Group, launched the companyAmazon. The first products sold on Amazon were books. Between 1994 and 2000, Amazon slowly started selling other products. In 2003, while attending an MBA program, I wrote a research paper where I stated the following:
“The biggest threat to retailers in the U.S. is Amazon. The company’s business model of selling products direct to consumers online will revolutionize not only retail, but logistics. Amazon will leverage enhanced logistics networks to ship products faster to customers at little to no cost. Retail as we know it is about to change forever. The largest retailers operating today, Walmart, for example, should seize the moment and acquire Amazon regardless of the cost. It will be a small price to pay to control the future.”
Walmart didn’t acquire Amazon but I’m sure they wish they would have. In fact, Walmart continued to ignore Amazon for several more years until Amazon’s growth rapidly increased. Why did Walmart ignore Amazon? They didn’t view Amazon as being a threat.
I believe we are witnessing another Amazon in the making –Temu – owned by the Chinese company PDD Holdings. PDD has built a network of sourcing, manufacturing, logistics, and fulfillment capabilities in China. PDD is known by Pinduoduo in China, and it is the 3rd most-popular e-commerce website in China. Pinduoduo went from zero to an average of 751 million monthly users in only six years.
Temu launched in the U.S. in September 2022. The app continues to set records for the number of downloads.
What makes Temu unique is that it has apparently mastered building relationships with select manufacturers capable of manufacturing a large number of orders on short notice, and shipping the products directly to customers and to Temu warehouses.
Unlike Amazon, which has become obsessed with shipping things fast, Temu only promises to ship things slowly – between 7 to 21 days. Shipping is free on most orders.
Temu also offers among the lowest prices of any website. The combination of low prices and free shipping is converting consumers willing to exchange paying less for what they want even if it takes longer to receive their order.
Temu has apparently learned from another Chinese-owned retailerSHEIN, which has revolutionized ‘fast fashion’ by selling stylish clothing at rock-bottom pricing. SHEIN is a major and increasing threat to U.S. specialty retailers such as AMERICAN EAGLE OUTFITTERS INC.,Abercrombie & Fitch Co.,Urban Outfitters, andGap Inc.
Although a threat to retailers, I believe speciality retailers should approach Temu, and ask them to duplicate SHEIN’S business model. Temu can provide specialty retailers with a service they’re unable to provide themselves – fashion as fast as SHEIN with similar pricing.
Keep an eye on Temu.
