Internal strife breaks out in Temu, semi-custody challenges full-custody

It took Temu less than two years from its sudden emergence to its expansion into more than 80 countries and regions around the world.

According to a research report released by Bernstein, Temu's GMV in 2024 may reach US$54 billion, with the GMV in the second quarter expected to be between US$11 billion and US$12 billion. According to the latest data from Stocklytics, Temu's global downloads have exceeded 735 million times as of August this year.

Behind the impressive report card, Temu has attracted more and more overseas consumers with its extremely cost-effective weapons, achieving a surge in sales and influence around the world.

However, Temu, which is now in the limelight, is not sitting back and relax. Intensifying competition, increasingly stringent regulatory environment, and escalating profitability challenges are all hindering Temu's rapid progress.

To this end, while Temu is accelerating its growth, it is also trying to proactively seek change, and has come up with more new weapons such as semi-custody to deal with growth anxiety, and it has achieved the desired results - internal forecasts show that the semi-custody business will contribute US$10 billion in GMV in 2024, and its current development momentum has surpassed that of full custody.

But at the same time, a vortex of competition is also brewing from within - as Temu continues to increase its investment, the semi-hosting and full-hosting forces have quietly started a civil war.

On March 15, 2024, Temu's semi-hosted business officially landed in the US market, and in just two months it expanded to nine major sites including Canada, the United Kingdom, Germany, Italy, France, Spain, Australia, and New Zealand.

As a variant of full trusteeship, the semi-trusteeship model has been gaining momentum since its launch. According to industry reports, the semi-trusteeship business has doubled its monthly performance in the first few months after its launch.

There are also reports that Temu may achieve a GMV of $60 billion in 2024, of which the sales target for semi-custodial business is $20 billion, which is equivalent to the full-year revenue of the full-custodial business in 2023. Not only that, as of the first half of this year, the GMV of goods shipped locally by Temu accounted for more than 20% of the total GMV.

Although the above figures have not been officially confirmed by Temu, it is clear that Temu has high hopes for this new weapon, semi-hosting. While relaxing investment conditions and increasing welfare benefits, it also gives more traffic to semi-hosting merchants.

Since its launch, the scale of Temu's semi-hosted business has grown rapidly. According to industry sources, in just three months, the semi-hosted investment team has reached thousands of people, and seven first- and second-level supervisors have led the teams to compete with each other.

As Temu's semi-hosted business is booming, it is not only the external e-commerce platforms that feel threatened, but also the full-hosted services that are its "predecessors".

Judging from the development momentum, semi-hosting has grown faster than full-hosting. As soon as it went online, it covered nine major sites including Europe and the United States, and is expected to achieve a transaction volume that is comparable to that of the full-hosting business in the whole of last year.

In terms of team management, the semi-hosted business has a huge team of 1,000 people, many of whom are actually from the fully-hosted team. According to people familiar with the matter, in order to accelerate business advancement, a large number of Temu backbones were transferred to the semi-hosted department, and the fully-hosted team has less than 200 people.

It is not difficult to see from this that although semi-custody and full-custody have their own advantages and are the two driving forces of Temu's growth, they are actually competing with each other and there is a trend of conflict of interest.

Although the full custody business has also developed rapidly since its launch, such a highly centralized model also has certain growth limitations. At the same time, a series of turmoil such as fines and deductions that hurt the vital interests of the platform's sellers has repeatedly caused Temu to be caught in the whirlpool of public opinion.

In the view of the semi-hosting business team, the development ceiling of the full-hosting model is limited, and semi-hosting is more competitive in a changing market environment and can give full play to the advantages of this model to meet the diversified needs of merchants and consumers. Therefore, it is recommended to transfer all related businesses to semi-hosting, and boldly predict that semi-hosting will completely overtake full-hosting by 2025.

In such a tense competitive atmosphere, Temu semi-hosting has undergone a series of major adjustments at the organizational level, seemingly in order to accelerate the overtaking of the full-hosting model, mainly involving three major directions: investment, organization and staffing.

1. Category investment

The previous practice of each investment group being responsible for all categories has been changed. Each group will be subdivided into categories. For example, Group A will focus on clothing, Group B will be responsible for beauty, Group C will focus on furniture, etc. This adjustment will be based on the results of the previous inter-group competition to make internal selections to ensure that each category can be operated professionally and efficiently.

2. Organizational Structure

Merge the investment promotion team and the buyer team to jointly carry out category operations, help merchants better operate their business, and improve the overall conversion rate of investment promotion.

3. Staffing

Temu is currently actively examining and training its employees' English proficiency to make full preparations for entering overseas markets.

This series of actions clearly shows that Temu is moving towards refined operations . As Wish has learned, simply burning money for growth and relying on extreme cost-effectiveness to capture the minds of consumers is not enough to support the long-term healthy development of the platform.

Temu, which has grown rapidly overseas and is now quite large, needs to think about how to retain more customers if it wants to go further and last longer. At present, Temu has its own solution - improving user experience from aspects such as quality control, service, and logistics. To achieve this goal, semi-hosting is undoubtedly a more effective weapon.

Amid the secret infighting between Temu's semi-custody and full-custody, the ecosystem of platform sellers has also undergone a major reshuffle.

Under the full-hosting model, Temu mainly targets trading merchants and factory sellers, with small and light items accounting for the majority of sales. With the opening of the semi-hosting window, Temu will extend its tentacles to overseas warehouse sellers with mature operating experience and local fulfillment capabilities. These sellers mainly sell large items with high value and quality.

Now, when you enter Temu's official website, you can see that the platform's product structure has changed significantly: more and more large items such as home appliances and furniture have appeared on the stage, and products such as beds, tables and chairs, and televisions have gradually occupied the best-selling list. Looking around, a large number of green labels (local warehouses) come into view, and Temu's product recommendation list is almost dominated by semi-hosted products.

At the same time, a large number of leading overseas sellers with mature supply chains have successively entered the semi-hosted model, including Anker Innovations, Dreame Technology, Huabao New Energy, and Qian'an Technology. In addition, domestic established giants have also set their sights on Temu's semi-hosted cake, including Midea, Xiaomi, Liby, Vinda, Lenovo, and Unilever, all of which have established cooperation with Temu to further expand their overseas business.

It is understood that, in comparison, Temu has made some improvements in the treatment of merchants.

First, the threshold for investment promotion has been lowered. The deposit and pricing requirements for semi-custodial services have been relaxed within a few months of going online. For example, the merchant deposit has evolved from being paid upon entry to being paid after selling a certain number of products.

Second, the profit margin is more abundant. The price of some semi-hosted products is based on Amazon's 10%, 15%, 25% discount, etc., but the profit base is higher in comparison. In addition, additional logistics subsidies are provided for products below $30. Some sellers have reported that after deducting shipping costs and cargo damage, some categories still have more than ten times the profit.

Third, the platform provides strong support. Currently, Temu's semi-hosted business is still in the bonus stage of "traffic finding goods", and the platform has a large inclination towards the traffic of semi-hosted goods. An industry insider said that 70% of the platform's traffic is allocated to semi-hosted goods.

As the semi-hosted forces continue to grow, the living environment of more and more fully-hosted merchants has been squeezed. On the one hand, the homogeneous competition among fully-hosted merchants continues to intensify, and the profit side is also under the test of the platform's extreme control; on the other hand, as the market continues to become saturated, the entry of semi-hosted merchants has seized more exposure opportunities.

Faced with the aggressive momentum of semi-hosting, some businesses that lack competitiveness are being quietly eliminated, while some businesses have decisively changed direction and begun to embrace the semi-hosting model.

Temu's success over the past two years is inseparable from the full trusteeship. Through the model of eliminating middlemen, Temu has been able to integrate the domestic high-quality supply chain, quickly gather factory-type and industrial and trade-integrated sellers with deep supply and independent production capabilities, and achieve extreme cost compression with a highly centralized management system.

However, compared with e-commerce platforms such as Amazon, although Temu has created an absolute price barrier, it is constrained by weak logistics fulfillment, user operations and other links. Therefore, the introduction of semi-hosting on the basis of full hosting is the only way for Temu to improve user experience and increase repurchase rate.

From the perspective of external competition, cross-border platforms such as SHEIN and TikTokShop are also eyeing Temu, each launching a differentiated hosting model, and engaging in a head-on collision on the price and supply side. At the same time, Amazon, as the number one rival, is also unwilling to fall behind in terms of price-performance ratio, and has launched a low-price mall to resist Temu's offensive.

From the perspective of the overall business environment, as the saying goes, "a tall tree attracts the wind", Temu's crazy expansion around the world has attracted the attention of governments around the world, and they have successively extended their regulatory claws to its tax-free policies.

For Temu, the full-hosting model helped it overcome the initial development stage. Now, as its scale gradually matures, semi-hosting has assumed a more important role in the next stage of its overseas journey.

Under the semi-hosted model, Temu targets mature sellers with rich operational experience, strong supply chain foundation, and local shipping capabilities.

In other words, Temu hopes to achieve localized development through this model and break away from the limitations of its single positioning as a cross-border platform. While further enriching its product structure, reducing logistics costs, and improving logistics efficiency, thereby bringing a more complete user experience, it also hopes to emulate Amazon, leverage a more diversified customer base, and build a stronger competitive barrier.

At first glance, the internal struggle between Temu's full hosting and semi-hosting seems to be a case of "survival of the fittest". However, in Temu's overseas expansion, both models have played an irreplaceable role at different stages and achieved mutual benefit and complementarity, so full hosting will not be eliminated by semi-hosting.

Of course, as Temu continues to accelerate its overseas expansion, in the next stage of development, it may also derive a "mutated" model based on full and semi-hosting to adapt to its growing development needs.