Temu Is Losing Millions of Dollars to Send You Cheap Socks

2 weeks ago 22

PDD’s push into the US with Temu is costing it a lot, and angering some of its suppliers, but it’s born of necessity. As Chinese customers spend less, other giant ecommerce companies are pushing into Pinduoduo’s core markets, selling unbranded goods and trying to capture a less wealthy demographic. That means the company has to look overseas. “Exploring the US market is the best, and probably the only strategy  Pinduoduo could use, when facing an saturated and overly competitive domestic market,” Si says.

But the US market isn’t just hard; it’s increasingly risky for Chinese companies.

Temu currently takes advantage of a trade loophole that allows for duty-free shipments up to $800 into the US. By shipping small packages from its warehouse in Guangzhou to individual American customers, the company can essentially sell duty-free in the US. But small business lobbies are advocating for this “de minimis” threshold to be lowered to $10. If that were to happen, Temu’s costs would spike.

And, as a Chinese-owned platform, Temu faces scrutiny from US authorities who see the collection of data by Chinese companies as a national security threat. In April 2023, the US–China Economic and Security Review Commission issued a brief that warned of data and supply chain risks emerging from Chinese-owned ecommerce platforms, including Shein and Temu.

Calls to ban Chinese-linked apps altogether have become commonplace in the US. In May, Montana became the first US state to formally ban TikTok, the social media platform owned by Beijing-based Bytedance. The previous month, a CNN investigation showed that the Pinduoduo app can bypass users’ cell phone security to monitor activities on other apps, check notifications, read private messages,...

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