Temu’s Affordability Explained: Parent Organization PDD Holdings And NGM

Temu has quickly become a rising star since PDD Holdings established it in the US last year. Customers have loved the low prices, high-quality products, and excellent customer service offered by this newcomer to the online shopping space. But many customers wonder how is a company that only just launched capable of offering such low prices year-round?

The answer is that Temu’s ability to offer low prices comes down primarily to two factors: one, its relationship to parent company PDD Holdings, and two, its Next-Generation Manufacturing business model and how it enables manufacturers to tailor their production to consumer demand.

To explore exactly how Temu is capable of delivering year-round low prices, we’ll go over its relationship with parent company PDD Holdings.

What Is Temu?

But first, let’s talk about Temu. The US-based company was founded in September 2022, with headquarters in Boston, Massachusetts. Temu is an online marketplace that connects consumers with millions of sellers, brands, and manufacturers across the globe. It operates through its website, temu.com, and its iOS and Android apps.

According to Techcrunch, Temu’s mobile app is the No. 1 ranked iPhone and Android free app across all categories since the start of 2023. The company recently launched a Big Game ad entitled “Shop Like A Billionaire’‘ that perfectly captured Temu’s ability to deliver close-to wholesale prices for its customers. Whether users are in need of clothing, electronics, or accessories, Temu has a wide range of affordable products to meet even the most unique and individual needs.

What Is PDD Holdings?

PDD Holdings is a multinational commerce group that has offices in Boston, Dublin, Hong Kong, Shanghai and Singapore. Listed on the Nasdaq stock exchange since 2018, the company owns and operates multiple businesses across the globe, including Temu. With over a decade of experience in commerce, PDD Holdings has developed a wide network of over 11 million suppliers and brands. They’ve built up fulfillment and logistics capabilities that Temu can tap on to kickstart their operations.

PDD Holdings has around 10,000 employees worldwide, serves over 900 million users, and handles 200 million parcels per day. As of September 30th, 2022, their trailing twelve-month financial results showed a revenue of $17 billion USD, a profit of $5.2 billion, and net cash of $17.2 billion. As of February 3rd, 2023, their market cap was $120 billion.

Why Are Temu’s Prices So Low?

Temu can offer such low prices because it already has strong sourcing, supply chain, and logistics capabilities that have been developed by PDD Holdings over the years. As a newcomer to the e-commerce industry, Temu has been able to skip past most barriers faced by its peers. This means that their reach is incredibly wide, allowing them to source a huge variety of products at wholesale prices. Instead of having to invest in building out new relationships with manufacturers and shipping partners, Temu can start delivering for their customers right away.

Another reason Temu has been able to keep its prices low is their ability to match consumer demand with cost-efficient suppliers and manufacturers. Most retailers and e-commerce sites have higher prices because they require middlemen to match consumers with manufacturers. Temu gives manufacturers a platform to directly connect with interested buyers, getting rid of the unnecessary middleman and allowing customers to buy retail items at wholesale prices.

Do Temu’s Low Prices Mean Poor Quality?

No. Temu sources its products only from heavily vetted manufacturers and sellers. Because of the legwork done by PDD Holdings in identifying trustworthy manufacturers and reliable shipping partners, Temu is able to ensure quality every time. To give customers even greater peace of mind, Temu has a comprehensive customer care program that ensures the customer is always satisfied. Most items are eligible for return within 90 days, which is one of the most generous return policies in the e-commerce industry.

Standard shipping can take between 5-20 days depending on the item, although Temu also offers Express Shipping, which can arrive usually within a week. To make sure customers are aware of their estimated delivery times, Temu gives a day-by-day breakdown on item order pages. Temu also provides frequent tracking updates to keep customers informed until the item arrives.

Anyone who has visited Temu’s homepage or browsed through the app has seen that the company is almost always offering a sale or promotion of some kind. By drawing on the vast resources of parent company PDD Holdings, Temu is almost always able to offer customers the most affordable versions of the products they need.

Temu’s Next-Gen Manufacturing Model Passes Cost Savings to Consumers

Temu is able to achieve exceptionally low prices on merchandise because its Next-Gen Manufacturing model directly connects manufacturers to consumers so that they can understand and respond directly to consumer demands and preferences in near real-time by improving the information flow and reducing the number of intermediaries standing between the producer and consumer.

Next-Gen Manufacturing is made possible through digital technology and Temu’s e-commerce platforms. By leveraging digital tools such as online marketplaces and analysing consumer preferences, manufacturers can identify consumer demands and tailor their production accordingly. This can result in more efficient production, reduced inventory, and greater customer satisfaction.

With its Next-Gen Manufacturing model, Temu achieves better demand and supply matching, resulting in cost savings for consumers through lower prices, while also reducing waste by using more targeted manufacturing that fits consumer needs.

McClatchy newsroom and editorial staff were not involved in the creation of this content.