What’s behind Temu’s scandalously low prices? If it seems impossible for high-quality products to come so cheaply, perhaps it is.
Even if you don’t make a $30 million salary like General Motors CEO Mary Barra, there’s an e-commerce app that claims to help you shop as if your wallet is 33 times the size of hers: Temu. Perhaps you have seen Temu’s familiar orange logo on Facebook, Instagram, or nestled in the ads of pretty much any internet site you visit. Or maybe you couldn’t believe their scandalously low prices, like $1 “gold” necklaces or wedding dresses for $23. Such prices seem too good to be true, and it’s hard to believe that Temu is legit.
If it seems like something sketchy is going on here, it’s probably best to follow your instinct.
Based at least superficially in Boston, Temu is owned by PDD Holdings, a Chinese company which recently moved its headquarters from Shanghai to Ireland. Temu burst onto the American e-commerce scene in September, 2022, launching an unavoidable blitzkrieg of ads on social media. Following a pricey Superbowl ad buy in February, Temu’s mobile app became the most popular download in the United States. It’s not hard to perceive the appeal of the company’s shockingly low prices to both cash-strapped Americans and those who love an impossible deal so much that they’re willing to overlook the “impossible” part.
However, after pop tech guru Kim Komando checked into Temu’s safety, reliability, and privacy issues, and copypasta versions of her article went viral in social media reposts, questions arose about the company, its parent company PDD Holdings, and what exactly went into the process that made such subterranean prices available to the everyday consumer.
So let’s take a look.
Komando’s take weighed in heavily on the data grab that Temu allegedly requires from users of its mobile app. According to her article, Temu has its sticky fingers on all your data, not only basic personal information like your name, address, phone number, and birthday, but also your social media profiles, browsing data, and GPS location, for those who have that turned on. She adds a patriotic edge to her warning, because the way she sees it, Temu is feeding all of this personal data straight to the Chinese Communist Party. “Americans using Temu are selling the country out for bargains that really aren’t worth it,” she says, advising that users delete the app from their phones, if they can.
To be fair, it’s not Temu’s app asking so much of its users. PDD Holdings, however, is a different story. That company, once named Pinduoduo, did pack its original 2020 e-commerce app with a suite of privacy leaks and malware, including a zero-day vulnerability that allowed Pinduoduo to control app users’ devices and steal private information. The catch? They targeted users in rural China, hoping they’d be able to avoid detection. After all, the Pinduoduo app was meant to connect agricultural products directly with low-income buyers, cutting out the middlemen, and malware-based versions of the app were only available via third party “off store” websites, the sort of places where Chinese people download their apps, since China blocks both the Apple and Google Play stores.
Compromised versions of the Pinduoduo app weren’t available via Google Play or the Apple Store, but they removed the more legit versions anyway, because that kind of corporate behavior is alarming. Pinduoduo also claims to have fired the developers who exploited Android vulnerabilities for the company’s profit.
So if Temu isn’t a front for selling your social media commentary, tooth brushing habits and shoe size to the CCP for fun and profit, then, again, how can they sell such goods for so little money?
First, PDD Holdings claims that it is leveraging its “vast and deep network” of manufacturing and logistics partners and “established ecosystem” built over many years of doing business to keep Temu’s prices low. However, since PDD Holdings made 80% of its revenue in 2022 from selling advertising services to an array of merchants, one must wonder what kind of established ecosystem that would be. When the people who think they’re the customers aren’t paying the cost of the goods and services being sold to them, they’re probably the product, similar to the way Facebook’s business model is to sell its users eyeballs to various ad customers. Could Temu and PDD Holdings be on to something comparable?
Temu works with a multitude of manufacturers, and like the Pinduoduo app before it, connects them directly to (usually low-income) buyers. While the direct connection saves money by skipping middlemen who would have taken a slice of the action, this also has the effect of undercutting a great many businesses and potentially leaving lots of people unemployed. While this saves money for the buyer, who may get a selection of make-up brushes for under a dollar (including shipping), it’s a job killer in much the same way Amazon put local shops out of business, driving more poverty and more business for cut-rate vendors, in an unfortunate feedback loop.
Also like Amazon, Temu is, for a while, operating at a loss in order to offer those low prices. On average, Temu’s losing $30 per sale in order to build up a customer base that they hope will stick around long after its subsidized prices and free shipping go by the wayside. Eventually, the company will have to turn a profit, or it won’t be a business anymore.
Like WalMart, Temu puts the squeeze on its suppliers. Temu is said to dictate the prices it will pay to suppliers for the goods it sells, and if the supplier can’t afford to provide goods at that price, they can’t do business through Temu.
In order to provide goods at such low profit margins, manufacturers would have to cut every possible corner, whether that means selling dollar-store quality flimsy merchandise, knock-off counterfeits or designs plagiarized from original artists.
Likely, some of their suppliers also use forced (enslaved) labor. A 2022 investigation uncovered that some cotton used in Temu’s products came from the Xinjiang Uyghur Autonomous Region, where the Chinese government detains Uyghurs, an oppressed religious and cultural minority, in “re-education” camps. Temu doesn’t have any credible policy in place to ensure compliance with United States laws forbidding the import of products produced by forced Uyghur labor, and Temu says they rely on third parties to flag such violations rather than keeping watch over its own suppliers. They are currently under investigation along with other retailers, such as Shein, for such violations.
Since products are shipped directly from Chinese wholesalers to international customers, Temu also takes advantage of a loophole that allows individual shipments of under $800 in value to skip out on paying import tariffs, a significant savings not afforded to other retailers which import goods in quantity.
In a world where pollution is piling up to such a degree that it’s causing the climate to destabilize around us, perhaps more consumerism, driven by such violations of conscience, is not what we really need. If you want to “shop like a billionaire,” real billionaires are unlikely to be stocking up on flimsy, low-grade merchandise with badly copied designs made in sweatshops and by enslaved prisoners, marketed with psychological tricks.
Related: Who Doesn’t Love Free Stuff?