Insights
Temu’s US Strategy: Achieving Ecommerce Stardom
In a little over a year, Temu achieved meteoric growth in traffic and sales — a huge proportion of it in the US.
In this post, we’ll take a deep dive into Similarweb Digital Data to reveal the strategies and tactics that made Temu a marketing superstar in such a short space of time.
We’ll cover:
- The marketing one-two punch that allowed Temu to achieve 43M web visitors in the US in under 12 months
- The strategy that gave them a +17% boost in web traffic and a +40% jump in app downloads in February 2023
- The consumer behavior “perfect storm” that is the foundation of Temu’s winning marketing strategy — and that you can incorporate into your own marketing
- Who Temu is stealing traffic away from, and what this reveals about its strategy
But first, let’s examine their traffic and app downloads.
Temu’s meteoric rise in traffic and app downloads
Temu, an online marketplace, was founded in July 2022. It’s based in Boston, Massachusetts, but is operated by the Chinese ecommerce company PDD Holdings.
Just a few short months after its launch, Temu had 172 million app users, making it as popular as TikTok and Facebook.
And, if you think those numbers are impressive, take a look at Temu’s website traffic. As you can see in the graph below, Temu has seen exponential growth in its number of monthly US web visits.
Why is Temu targeting the United States?
According to Similarweb digital data, the global market for ecommerce sites has maintained a strong market growth over the past year.
The US market accounts for more than 20% of ecommerce industry traffic and continues to grow.
Naturally, this combination of stable growth and large market share makes the US an attractive market for any up-and-coming ecommerce company.
Now, before digging into Temu’s strategy, let’s first understand who they are competing with.
Whose market is Temu overlapping?
Digging into the Similarweb Audience Overlap report, we can see the Unique Visitor overlap between Temu and its competitors.
What we see is:
- Temu has a similar target audience to Amazon and Walmart
- Temu’s app & web usage does not significantly overlap with Aliexpress
- Temu’s audience overlaps with fellow social commerce company SHEIN as well as eBay and Walmart
Temu is still a relatively small player compared to ecommerce giant Amazon. Similarweb data shows that 47% of Temu web users also visit Amazon on the same day. But only 2% of Amazon’s users will visit Temu on the same day.
The implication is that Temu isn’t (yet) a major competitor to Amazon.
Now, let’s look at some other sites Temu competes with.
You’ll see below that although Temu has a similar business model to AliExpress, their audiences do not overlap significantly. Temu’s audience overlaps only slightly with SHEIN’s audience, even though both brands compete for social commerce buyers.
(Social commerce means the process of directly selling your products or services on social media, where the entire process happens on social media, from product discovery to checkout.)
Interestingly enough, the new contender has a greater audience overlap with Walmart and eBay: Temu now overlaps 8.1% of Walmart’s audience and 8.2% of eBay’s.
Okay, we now understand where Temu’s audience overlaps with its competitors. Now, let’s understand how they are acquiring customers.
It all starts with a big idea.
Temu’s marketing big idea
Have you ever dreamed of being a billionaire? I’m sure that everyone has at some point in their lives.
Well, that’s the marketing concept Temu invested $14m in during 2023’s Superbowl.
With Temu, their ad claimed, you too can shop without limits, like a billionaire. How? By buying quality products for a fraction of the price you’d expect to pay.
And while measuring the direct impact of Superbowl advertising is notoriously hard, in the week following the big game, Temu saw a 17% jump in web traffic — plus a 40% jump in app downloads week-over-week (WoW).
During the quarter following the Super Bowl, Temu amplified its message by investing heavily in PPC ads — an investment of over $200m that quarter. In fact, among the competitive set in the graph below, their PPC spend was second only to Amazon’s. In a strong display of cost efficiency, Temu was spending slightly more than Walmart but was growing six times faster.
This growth was vital, as strategically, Temu needed to generate a massive user base to optimize their algorithm to use this data in the production cycle. (More about this later.)
The result of this heavy investment: Temu’s Unique Visitors increased by a higher percentage during that quarter than anyone else in their competitive set.
Worth noting: this kind of massive marketing budget at launch is the same strategy that SHEIN and TikTok used when they both entered the US market.
But user growth isn’t the only important metric that Temu must keep their eye on for their business to be a long-term success.
It’s all about retention
Improving retention is vital for Temu — not only because it increases customer lifetime value but because Temu’s business model is based on discovery shopping.
While traditional shopping relies on user search queries, discovery-based shopping uses algorithms to suggest products based on the user’s behavior.
This is similar to how social media platforms hook users in by presenting them with content based on previous user interactions.
In other words, once a user has made a search or a purchase, the platform will bring tailored recommendations based on those searches. And, because Temu collects vast amounts of user data, their machine learning algorithms are able to predict what users want. The next step is to fulfill that need by suggesting more products.
Temu’s retention is lower than its competitors, both on the web…
…and on their app.
To attempt to deal with this, Temu has experimented with customer advocacy, where customers earn rewards by enticing their friends to use the platform. Our data shows that these offers have resulted in a huge traffic increase in the last few months.
Temu’s secret weapon: Next-generation manufacturing (NGM)
Temu is able to sell you the dream of shopping like a billionaire by offering quality products at a fraction of the price of its competitors.
Now, when consumers see staggeringly low prices, they begin to wonder how those prices are so low. Are they low quality?
Temu’s answer? Next-Generation Manufacturing.
In any given manufacturing process, there are a number of hidden costs that make their way into the final price. For instance, it’s impossible to predict the exact demand for a product. The result is that manufacturers produce more of the product than necessary, which leads to additional manufacturing, transport, and storage costs.
And this model also leads to the seller stocking products that they have no way to make a profit on.
Temu gets around this problem elegantly. It all comes down to one commodity.
Data.
Temu uses its platform to collect massive amounts of consumer data. This helps them to understand exactly what consumers search for based on their pain points, general needs, and desires.
They then share this data with the manufacturers for free, giving the manufacturers a clear picture of what demand is and what consumers are searching for.
This allows them to avoid waste by fulfilling smaller orders. It saves on storage, shipping, and marketing costs, which means lower prices for the consumer.
In other words, more happy consumers.
Happy consumers mean more user data for the platform to share, which means more insights for the manufacturers.
And the cycle continues. And prices drop.
Can Temu continue leveraging its innovative approach to manufacturing – plus its aggressive marketing strategies – and become an ecommerce giant to rival Amazon?
We’ll be watching closely over the coming months.
