In just two years, the Chinese e-commerce platform Temu has emerged as a key contender in the global marketplace. In France, it ranked as the fifth most-visited online commerce platform in October 2024. In the United States, it is number three; globally it’s ranked second. At the heart of this remarkable achievement are its ultra-low prices, which many observers argue are made possible only through questionable practices, such as poor product quality, dumping, aggressive marketing, and deceptive trade tactics. 

Despite widespread skepticism over its long-term viability, Temu continues to invest heavily in advertising and market penetration, challenging an e-commerce sector where no new player has made a significant breakthrough in the past decade. While other online retailers, like AliExpress and the fashion giant Shein, have disrupted Western markets with similar cutthroat pricing strategies, only Temu has done what few believed possible: outperforming Amazon, the long-standing gold standard for competitive pricing.

From Factory to Global Store

Temu’s pricing policies are not revolutionary in China. The platform closely follows the business model of its parent company, Pinduoduo (or PDD Holdings). As Pinduoduo’s international arm, Temu represents China’s ambition to transition from being the world’s factory to becoming the world’s store. Its low prices are not a temporary launch tactic but a fundamental pillar of its long-term strategy.

Established in Boston in September 2022, Temu is an offshoot of the Chinese e-commerce giant Pinduoduo, founded in 2015 following the success of Pinhaohuo. Introduced by Colin Huang in April that year, Pinhaohuo used WeChat’s group-buying model to sell bulk orders of fresh fruit. Its rapid growth led to the creation of Pinduoduo, which disrupted China’s e-commerce market – long dominated by JD.com and Alibaba – before expanding globally through Temu. Today, Temu operates in 79 countries.

Reverse Auctions and Consigned Inventory: Driving Down Prices

At the heart of Temu’s pricing strategy is the Consumer-To-Manufacturer (C2M) model, introduced by Pinduoduo in March 2023. This approach utilizes reverse auctions, where Temu solicits bids from manufacturers, forcing suppliers to compete by offering the lowest possible prices. PDD Holdings sets final product prices and profit margins, and manufacturers deliver products directly to Pinduoduo’s warehouses........

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