Temu's low-price promotions are killing it, and the US "dollar store" has fallen from grace

It is learned that according to the latest market data, Pinduoduo's cross-border e-commerce platform Temu has successfully attracted American consumers seeking low prices. Temu is challenging the status of discount retail giants such as Dollar General and Dollar Tree (commonly known as "dollar stores").

Data from Earnest Analytics shows that as of last month, Temu had nearly 17% of the U.S. discount retail market. By comparison, Five Below had 8%, Dollar General had 43% and Dollar Tree had 28%.

It is reported that Temu was officially launched in the United States in September last year. The platform uses social media influencers to promote its products, convincing American consumers that its products are better and more affordable than those in traditional stores. In just over a year, Temu has become very successful.

Michael Maloof, head of marketing at Earnest Analytics, said Temu's low-priced homewares and consumer goods posed a greater threat to brick-and-mortar discounters such as dollar stores than other online marketplaces.

Temu, which sells clothing ranging from $12 dresses to $20 sneakers, also sells holiday decorations, storage bins and toys similar to a dollar store. Analysts expect Temu to have revenue of more than $16 billion this year as it expands internationally.

Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors, pointed out that Temu's advantage is that it offers novel and exciting merchandise, which is difficult for traditional low-end discount retail brands to replicate.

Peter Earle, an economist at the American Institute for Economic Research, believes that Temu is benefiting from consumers' fatigue with high prices and high inflation. The financial report released by Temu's parent company Pinduoduo shows that in the third quarter ending September 30 this year, the company's revenue increased by 94% year-on-year to RMB 68.84 billion (approximately US$9.62 billion).

Dollar General has cut its annual profit forecast three times this year as cautious consumers cut back on their spending on high-margin discretionary items and bought more lower-margin consumer goods.

At the same time, dollar stores are reducing merchandise to clear excess inventory, and like many retailers, they have been hurt by theft, which has weighed on their profit margins.

The data also shows that the market share of dollar stores in the United States has dropped significantly due to the rise of Temu and consumer spending cuts. Among them, Dollar General's market share has dropped the most. The company's market share in November was 43%, down 14 percentage points from about 57% in January. In addition, Dollar Tree's market share fell by nearly 4 percentage points, from 32% in January to 28% in November.

Michael Ashley Schulman emphasized that Temu has successfully mastered gamification marketing and reward mechanisms, making online shopping fun and simple through the slogan "Shop like a billionaire".

Editor ✎ Nicole/

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