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    Why is Temu so cheap? Shopping on the popular but ruthless Chinese app

    enSeptember 19, 2023

    Podcast Summary

    • Express love with Blue Nile's pearls and gemstones, or save with Mint Mobile and TimuBlue Nile offers luxurious gifts for Mother's Day with fast shipping, Mint Mobile disrupts wireless industry with $15 unlimited data, Timu provides affordable deals through gamification

      This Mother's Day, express your love and appreciation with a meaningful gift from Blue Nile. Their exquisite pearls and mesmerizing gemstones make for a heartfelt present, and fast shipping options ensure timely delivery. Meanwhile, Mint Mobile, led by Ryan Reynolds, is disrupting the wireless industry by cutting prices significantly, offering unlimited data for just $15 a month. On the retail front, the explosively popular Chinese app Timu is providing affordable deals on various items, but its business model relies on gamification to keep customers engaged. Amidst rising costs and a struggling high street, such affordable options may be enticing, but their long-term impact remains to be seen.

    • Shein's Explosive Growth through Low Prices and Fast ShippingShein, a new shopping app in the UK, offers impossibly low prices and fast shipping from China, attracting over 9 million downloads and shoppers with its convenience and affordability, despite potential quality concerns.

      Shein, a new shopping app available in the UK since April, is experiencing explosive growth through an intense marketing strategy and referral schemes, offering impossibly low prices, reminiscent of both Amazon and TikTok's endless scrolling. With over 9 million downloads in the UK, Shein's prices, starting from as low as £1.34, invite customers to "shop like a billionaire." While the quality of the goods, which range from household items to fashion, can vary, Shein's business model is built on fast shipping from China, which can take 2-3 weeks for standard delivery but can be expedited for an additional fee. The app's popularity is evident in the viral ads and user-generated content, with one ad featuring a woman dancing and picking up bargains. Despite the potential drawbacks, the convenience and affordability have attracted many shoppers to give it a try.

    • Timoo's Success Factors: Aggressive Advertising, Referral Scheme, and Low PricesTimoo's success is driven by aggressive marketing, a referral program, and extremely low prices, made possible by weekly auctions among Chinese suppliers, tax loopholes, and a business model that tolerates huge losses to build market share.

      The rapid growth of Timoo, an app with over 9 million downloads in the UK, can be attributed to aggressive advertising, a referral scheme, and low prices. The company, owned by a Chinese conglomerate worth over $100 billion, is willing to tolerate huge losses to build market share. The supply chain is opaque, but it's believed that weekly auctions among Chinese suppliers encourage price undercutting. Timoo also exploits tax loopholes in both China and the UK, avoiding import and export duties on most consignments. This business model, while seemingly impossible, allows Timoo to offer extremely low prices, making it an attractive option for consumers in a cost of living crisis.

    • Shopping on Timu: Lower Prices, Unknown RisksWhile shopping on Timu offers lower prices, consumers may be unknowingly taking on risks due to the company's lack of transparency in quality control and supply chain practices. Potential issues include inadequate checks on goods and potential use of forced labor.

      While shopping platforms like Timu offer significantly lower prices than traditional retailers, consumers may be taking on unknown risks due to the lack of transparency in the company's quality control and supply chain practices. The prices may reflect inadequate checks on goods, and there have been concerns about potential use of forced labor in the supply chain. Timu has been unresponsive to inquiries regarding these issues. While there is no evidence of law-breaking, the opacity of the supply chain is a cause for concern, particularly when it comes to children's toys or electrical goods. Consumers need to be aware that the low prices may come with hidden costs.

    • Exploiting loopholes and direct-to-consumer models for lower pricesCompanies like PDD Holdings offer unbranded goods at lower prices by exploiting loopholes and using direct-to-consumer models, but concerns over data security and potential access by foreign governments persist

      Companies like PDD Holdings, which owns Timur in the US and Pinduoduo in China, have been able to undercut traditional retailers by exploiting loopholes and direct-to-consumer models, providing unbranded goods at lower prices. However, concerns have arisen regarding the security of these apps, as reportedly, Pinduoduo's app in China was found to contain malware that monitored activities on other apps, read private messages, and changed settings. The safety of Timur in the UK is currently unknown, as it is a new and rapidly growing platform. The potential for data to be accessed by the Chinese government is a concern, similar to the ongoing scrutiny faced by Chinese companies like TikTok in the US.

    • Pinduoduo funding Temu's expansion despite operating at a lossPinduoduo's financial success in China fuels Temu's growth in the UK, but the sustainability and timeline for profitability are uncertain

      Pinduoduo, the parent company of TikTok subsidiary Temu, is using its financial success in China to fund Temu's expansion in markets like the UK, even if it means operating at a loss. The company's current stock market valuation is over £100 billion, and its main business is in China, where e-commerce is more advanced than in other countries. Temu's business model, which involves attracting users with low prices, is a throwback to the era of low interest rates and venture capital funding. However, with the economy changing and investors demanding profitable growth, Temu and other similar companies may need to raise prices to become profitable. Temu's main competitor in the fashion market, Shein, is more focused and profitable as a fashion manufacturer and label. Despite the challenges, Temu's strategy is to continue expanding and gaining market share. However, the sustainability of this model and the timeline for profitability remain open questions.

    • Shein's Successful Business Model and Impact on UK High StreetsShein's fast fashion business model, exploiting tax loopholes and direct shipping, is disrupting UK high streets, raising concerns for traditional retailers like Aldi, Lidl, Marks and Spencer, John Lewis, and even luxury brands.

      Shein, a fast fashion brand from Chinese factories, has found a profitable business model by quickly anticipating trends and producing designs based on online discussions, exploiting tax loopholes, and shipping directly from China to cut out middlemen. Shein's success has raised concerns about competition with traditional retailers, particularly those targeting budget-conscious consumers, and the potential impact on UK high streets. Despite concerns over product quality, safety, and data privacy, Shein's popularity continues to grow. The UK government has yet to prioritize addressing this emerging threat through tax policy or import duties. The ongoing pressure on the high street retail sector, highlighted by the closure of over 17,000 sites in 2022, leaves many wondering how far Shein's market share could extend, potentially affecting established retailers like Aldi, Lidl, Marks and Spencer, John Lewis, and even luxury brands.

    • Online shopping limitations and importance of no-brainer decisionsOnline shopping offers convenience and unique products, but cannot compete with immediate delivery or in-person customer service. Businesses can streamline operations with no-brainer decisions like using Stamps.com and align with consumer values and trends, such as clean, vegan, cruelty-free, and eco-friendly products.

      While technology and convenience have become key factors in consumer shopping behavior, there are still limitations to what online-only platforms can offer, such as immediate delivery or in-person customer service. The example given was of the app Timu, which had mixed experiences for the guest, and while it offers unique and personalized toys, it cannot compete with the immediacy and convenience of retail stores or larger online retailers. Another key takeaway from the discussion was the importance of no-brainer decisions for businesses, such as using services like Stamps.com for mailing needs, which can save time and money. Additionally, the promotion of Mother's Day gifts from Osea, a woman-founded and led brand, emphasizes the importance of clean, vegan, cruelty-free, and eco-friendly products, which resonate with consumers and align with current consumer trends. In summary, while technology and convenience are important factors in consumer shopping behavior, there are still limitations to what online-only platforms can offer, and businesses can make no-brainer decisions to streamline operations and align with consumer values and trends.

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