Temu's annual loss may exceed 15 billion? Nearly half of the sellers are still waiting!

It is learned that on May 26, Pinduoduo released its first quarter financial report of 2023.

The report shows that Pinduoduo's operating income in the first quarter was 37.637 billion yuan, a year-on-year increase of 58.2%; net profit reached 8.101 billion yuan, a year-on-year increase of 212% . Both figures were higher than market expectations, but the net profit decreased compared with the fourth quarter of last year.

▲ The picture comes from Pinduoduo’s financial report

According to the financial report, Pinduoduo pointed out that the company's revenue growth in the first quarter of 2023 was mainly due to the increase in revenue from online marketing services and transaction services. Its cross-border e-commerce project, Temu, is still in the early investment stage and accounts for a small proportion of revenue.

However, industry insiders pointed out that today, Temu not only accounts for a small proportion of the total revenue, but it can even be said to be in a stage of losing money and spending more than it earns.

It is learned that according to a recent report by foreign media @WIRED, an insider of Pinduoduo Temu confirmed that Temu invested a lot of money to enter the US market, with an average loss of US$30 (approximately RMB 213) per order.

It is understood that the composition of this fee mainly includes international transportation costs, discounts and cash coupons provided to customers, as well as service and management costs.

Among them, according to multiple data analyses on transportation costs , even a small package costs about $14 to ship from Temu's Guangzhou warehouse to the United States. Although Temu's logistics partner J&T Express bears part of the cost, Temu needs to pay $9 or $10 for each batch of goods.

Relevant data shows that as of February 2023, Temu's average daily sales volume is about 200,000 orders . Based on this data, Temu's annual loss will reach approximately US$2.19 billion (based on 365 days a year), which is approximately RMB 15.58 billion.

At the same time, the report also stated that Temu's customers in the United States are mainly Asians or low-income buyers with an annual household income of less than US$30,000, and Temu insiders believe that gaining brand awareness through a large number of advertising in the market is the best option to expand this audience.

As a result, Temu plans to invest $1.4 billion in marketing activities in the United States this year and another $4.3 billion next year.

It is learned that since its launch in September last year, Temu has complied with the demand for overseas consumption downgrades under the pressure of high inflation and has achieved explosive growth in a short period of time. According to MarketplacePulse data, as of February 2023, Temu has ranked first in the list of shopping APP downloads in countries such as the United States, France, Italy, Spain, Germany and the United Kingdom.

But at the same time, it can be seen from the above sales data that Temu's rapid rise was achieved by increasing exposure, continuously lowering prices, sacrificing the profits of sellers and suppliers, and attacking overseas sinking markets with quantity and speed.

Therefore, while Temu's traffic continues to rise, its profit model has frequently been questioned by industry insiders.

A survey conducted in May this year showed that among the 489 sellers surveyed, 18% of them have currently settled in Temu, while 82% have not yet settled in Temu.

Among them, 34% of sellers have no intention to settle in Temu. 15% of the sellers who have settled in Temu believe that Temu can only be operated in the short term to quickly reap a wave of dividends. 8% of the sellers believe that Temu can be operated in the long term, and nearly half of the sellers are still on the sidelines about Temu.

Sellers who are optimistic about Temu believe that Temu's platform has large traffic and it is easier to place orders . Compared with Amazon, Temu's operation is simpler, the overall cycle is shorter and the threshold is lower. For some supply-type sellers, it is an excellent choice of overseas platform.

Sellers who are not optimistic about Temu's current model say that Temu's ultra-low prices are obtained by squeezing sellers , and will only become more and more competitive. The risks of stocking up and being fined are higher than other platforms, and the frequently changing platform rules often catch sellers off guard.

Regarding the platform rules, many Temu sellers have recently reported that following the mandatory fines, bidding model and other rules, Temu has added a new policy called "Temu has the final right of interpretation for the return of inventory goods."

According to this rule, once the seller's goods are put into the warehouse, if the seller and Temu cannot reach an agreement on the handling of the goods, Temu will return the goods and force SF Express to pay on delivery, which means that Temu has further strengthened the requirements for product quality inspection. This is not good news for sellers.

At present, Temu is still relying on low-priced products and viral marketing to attract traffic, but these traffic strategies obviously require huge capital to maintain. How long can they last? Whether Temu can rely on this period of high traffic to cultivate overseas consumers' shopping habits remains a big question mark.

What do you think of Temu? Welcome to discuss in the comments section~