How Does Temu Get Its Prices So Low? Behind the Pricing Strategy of The New E-Commerce Star
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Originally Posted On: https://www.miamiherald.com/contributor-content/article274328890.html
Boston-based e-commerce platform Temu is transforming the retail landscape by offering quality merchandise at near-wholesale prices, thanks to its innovative Next-Gen Manufacturing (NGM) model. NGM delivers at least 50% cost savings for consumers, streamlining the entire process from product development to last-mile delivery fulfillment. It empowers manufacturers to produce the right products in the right quantities at the right time. Seller and brands benefit from lower production cost and more sales, while consumers enjoy lower price and better customized products to their needs.
Since its launch in September 2022, Temu has attracted millions of customers with a popular proposition to consumers: shop freely without worrying about breaking the bank and yet be assured that the merchandise they are getting is of good quality. A recent price comparison conducted by Tom’s Guide, the popular reviews site, found that popular tech items are priced much lower on Temu than any platform you can imagine. Temu is now available in the US, Canada, Australia, and New Zealand.
“When I see something I do like online, I check with Temu to see what they charge,” said Cliff, a consumer who left a five-star review for Temu on Sitejabber, a consumer review site. “I’ve always saved at least 50%” from what is advertised elsewhere.
What does Temu mean?
Some customers may wonder what Temu means. Temu means “Team Up, Price Down,” which represents the company’s mission to use economies of scale to lower costs for its users. The name is pronounced “tee-moo” with an emphasis on the first syllable.
How are Temu’s prices so low?
So what’s the secret behind the ultra-low prices on Temu? The short answer is Temu reduces inefficiencies and removes hidden costs in manufacturing that consumers have no idea they are paying for.
Temu achieves this through NGM, its innovative e-commerce model that empowers manufacturers to produce the right products in the right quantities at the right time. The NGM model relies on analyzing consumer preferences, enabling manufacturers to predict trends, plan production, and organize logistics more efficiently. This increased efficiency reduces the risk of overproduction and unsold inventory, leading to significant cost savings of at least 50%, which can then be passed on to consumers.
Addressing overproduction is vital, as unsold merchandise eventually ends up in landfills and contributes to pollution, resource depletion, and climate change. This waste disrupts ecosystems, contaminates groundwater, and generates potent greenhouse gases. There is also a huge opportunity cost to the capital deployed to make products that nobody wants, as it could have been used to fund more sustainable projects that create value for communities.
By providing better demand forecasting and inventory management, Temu’s NGM model tackles this environmental problem, conserving resources and energy, and reducing waste. This efficiency contributes to a more sustainable and responsible retail industry.
A core feature of the NGM model is product development based on a deep understanding of consumer preferences. By understanding customers’ preferences and needs, and how they change, manufacturers can create products that align with these desires, reducing the need for extensive marketing efforts and further driving down costs.
With the increased visibility provided by Temu’s Next-Gen Manufacturing model, merchants can also significantly improve their logistics planning, enabling products to swiftly move from the factory floor to sorting facilities and ultimately to consumers within just a few days.
This streamlined process eliminates the traditional, more circuitous route that involves moving products from factories to wholesalers, then to retailers, and navigating through multiple warehouses along the way. By leveraging the power of NGM, merchants can optimize their supply chain, reduce transit times, and minimize warehousing costs, ultimately delivering better value to consumers and enhancing the overall shopping experience.
How Temu promotes inclusiveness
That’s not all. In addition to financial and environmental benefits, Temu’s NGM fosters diversity and inclusiveness by enabling direct communication between manufacturers and consumers. This allows businesses to understand the unique needs of various demographics and develop inclusive product offerings.
Temu’s NGM model drives increased personalization while benefiting underserved or niche demographic groups. The NGM model helps manufacturers identify specific needs, preferences, and trends across different demographic groups, allowing them to design and produce goods catering to a broader range of consumers. By aggregating demand across a diverse customer base, manufacturers can produce specialized products for niche segments at lower costs, making them more accessible to these underrepresented consumer groups.
“No other sites can compare to Temu for me. It doesn’t even matter what’s happening in my home whether my kitchen blender broke or my kids break something,” said Adam, a Temu customer who left a five-star Sitejabber review. “If I realize that I need something, I just know that I can find whatever I need on Temu for a really bargain price (and all the parents out there know how important it is to save money where you can).”
With more households and consumers looking to stretch their budgets, Temu has come at the right time, helping shoppers to get more value for their money while reducing e-commerce’s impact on the environment.
Temu’s Next-Gen Manufacturing model is set to disrupt the e-commerce landscape by delivering near-wholesale prices, promoting sustainability, and catering to diverse consumers. As more businesses adopt this approach, the retail industry could see a fundamental shift toward greater efficiency, affordability, and inclusivity.