Indonesia issued to remove Temu from its app stores to protect small-scale retailers.
Temu saw success in rapidly growing in the global marketplace thanks to its attractive and ridiculously low-cost product lines. But, as it looks to conquer new markets in Southeast Asia, these cut-price tactics seem to be causing some resistance.
It was founded by a 43-year-old Chinese billionaire, Colin Huang, and is the sister site to the domestic e-commerce platform Pinduoduo. It is owned by a Chinese ecommerce company, PDD Holdings, though it is formally incorporated in Delaware and has its headquarters in Boston.
In October, Indonesia issued to remove Temu from its app stores to protect small-scale retailers. Last week, Vietnam threatened to ban Temu and Shein, another Chinese-owned fast fashion outlet, by the end of the month unless they registered their business operations in the Vietnam trade ministry.
It is reportedly facing an investigation from the European Union as it has been accused of failing to prevent the sale of illegal products.
There has been a flood of cheaper-made Chinese products, which has caused the local manufacturers and sellers to suffer as they cannot match the speed, quality, or prices offered online.
Many suppliers have gone out of business. According to reports, increased Chinese competition and higher costs have led to almost 2000 Thai enterprises in all industries closing down, and more than 50,000 workers have lost their jobs in the last financial year.
Pinduoduo has been equivalent to Temu in China and has been in business since 2015. The worldwide platform will debut in the US in 2022 and take over European markets the following year. Temu has been growing its business in Southeast Asia, starting with the Philippines and Malaysia and then Thailand, Brunei, and Vietnam.
Bain & Co. released a report stating that online retail sales in Southeast Asia will reach $160 billion in 2024 due to the booming middle class and rising consumerism.
The boom came at the right time for Temu to chase international growth. Since there was slow economic growth in China, local customers decided to cut back on buying from Pinduoduo, according to Jianggan Li, CEO of venture firm Momentum Works.
He added that China’s growth has been stagnant compared to its 2010 growth but remained very competitive. So, sellers decided to look for new ways to expand, like entering international markets.
The slowdown has freed up capacity in Chinese factories, which forced its primary suppliers to sell at high volumes and low costs, boosting the market.
It combined its low-quality products with massive discounts and aggressive marketing campaigns, just like it performed in Western markets.
It also engaged its customers through gamified experiences like prize wheels and countdowns.
It was a huge success, and it reached hundreds of thousands of customers, like Chotikavan, who purchased a MagSafe iPhone holder for his car in Temu for $3, less than a seventh of the price it would cost otherwise.
He praised that even though the quality is pretty decent, the products are extremely affordable and becoming cheaper.
Even though it is praised for low cost, in Indonesia, local traders sell woven straw satchels for six times the price that the app offers at just $3. Similarly, jackets sold in Vietnamese markets for $15 are available in the app for the same price, along with free shipping
This has impacted many local companies, even though the consumers seem to enjoy more access to affordable goods, which urges the government to act on this situation.
Indonesia has taken the strongest stand with the higher taxes and the 2023 ban on commerce on social media platforms. It forced TikTok to buy into struggling local competitors to stay in business.
According to Simon Torring, co-founder of market insights firm Cube, Temu would try to force its way, referring to the repeated bids made to enter Indonesia, despite repeated rejections, even though a ban would safeguard local manufacturers.