Everything you’ve shared here is true. But… skirting or ignoring safety standards and labor laws, or exploiting situations where law or enforcement are lacking is a part of the TEMU formula. I have some experience buying in China and around Asia. Some of these suppliers and supply chains I had to turn down, but not all. It is what it is.
The ending bit was unnecessary. China is well known as an authoritarian state with very few worker protections. Suspicion is natural, and to be expected.
You would have done far, far better if, in addition to Australian agriculture, you threw in the example of Italian supplier networks, and invited people to contemplate the return of sustainable work and expertise tied to the home rather than always being directly owned by corporations. This would, of course, involve changes to our laws, including very tight enforcement of anti-monopoly practices at the corporate level. But it would also involve the removal of Temu as an option, so that each set of workers could compete using this model within their national economies.
Even if you're 100% correct, nobody is going to be enthusiastic about a funnel that removes even attempts at personal independence, via endless foreign 'globalization' undercutting. Let each iteration of this model compete within its own cost structure.
I am not 100% correct. I don’t think there is such a thing as being 100% correct. In the article, Temu is just an illustration. I was really talking about something else.
Thanks Francis for the clarity. I’ve always thought “When something seems too good to be true” like really cheap, then it’s something to do with less quality but maybe i will use Temu next time! I have a new appreciation. Thanks : )
Maybe things, all things, shouldn’t be as expensive as they are now. I think in general, "cheap” is relative, and in the race to reduce cost, quality can often be compromised. But there is also the issue of huge margins created by marketing/branding. I have bought charging cables that are really cheap and last for years, as well as expensive ones (like the original Apple charging cable) that break within months. I am now less inclined to equate quality with price.
Wow, this is a great eye-opener, thank you for sharing! Unfortunately in the US we now have to pay tariffs on anything from China and those can be/usually are higher than the cost of the product itself. I wish it were different.
You can reduce costs in many ways: shared supply chains, better forecasting, cluster efficiencies, real-time demand data, and accepting lower margins during lull periods. Mistreating workers is not the best way to grow any business.
If labour issues exist, they should be addressed when there is evidence. China’s per capita GDP rose from under USD1,000 in 2000 to more than USD13,000 today, reflecting decades of investment, process improvement, and manufacturing discipline.
If we want to discuss ethics, we should start with an accurate picture. Conscience without context is just assumptions. Low prices have many possible explanations. We should understand the model before we judge it.
Thank you for detailing the intricacies of informal work: i think this is the part of Asia/South east Asia where the unspoken societal understanding gets misinterpreted by outside societies.
Which brings me to think that perhaps what we truly have screwed up in our lifetime is the education system ~ formal or informal. Have we really abandoned compassion and understanding as a basic compass in favour of cleverness?
Thanks for your thoughts. That’s an interesting conversation regarding education. I do wonder where compassion is taught in our system today. In the past, we had religion, or even Civic education in primary school. I am not sure if these are still taught. Religion, in all forms, seemed to have failed.
You do not talk about whether or not the Temu App embeds harmful content into our devices. My biggest concern with it, and TikTok, is that I simply do not trust the Chinese not to embed some sort of code into my phone. Some of my family members work in sensitive areas of the government and I simply cannot take the risk that I am downloading some form of espionage Trojan horse.
I reread the article, and I see nothing in it that addresses security issues. I see nothing that addresses the possibility of a Trojan horse or spyware being embedded into our devices. So, until I know more, it’s a hard pass for me.
Interesting article, but while I agree with the broad strokes, a few things are not factually correct:
Temu does hold stock in both its Guangdong warehouses and some self-operated overseas warehouses (fully managed model). In other cases, the merchant has stock in overseas warehouses (semi-managed model).
The fully managed model, in which packages are shipped from China to consumers, has always been unprofitable and will probably never be profitable. This is one of the reasons Temu is moving to various overseas warehouse models. The aim is to have 80% of orders fulfilled from local warehouses.
There are many logistical costs across all the models Temu applied. It’s one of the reasons some models remain unprofitable. However, the original model allowed Temu to quickly buy market share.
Temu uses an auction-like system in which the manufacturer with the lowest price for a specific product gets the volume. This can result in a race to the bottom, decreasing product quality. Temu tries to solve this by punishing manufacturers for product complaints (5 times the manufacturer's selling price for each complaint, sometimes for the whole batch).
Another reason Temu’s prices are low is that It subsidises prices ‘behind the scenes’ without consumers knowing. This way it could bring prices down to about half those on Amazon for the same product. In the early stages, Temu subsidised about 30% of the price, considering the customer acquisition costs. Because the consumer is not aware of this, he/she thinks the prices are always that low. Eventually, Temu aims to have a price level at 85% of Amazon’s.
You can read more details in our Temu Watch series on Tech Buzz China.
Thanks, Ed, for your insights and the details in your article. I certainly just glossed over the business model. I wanted to make the point that just because Temu is competitive, it does not mean they have “forced labour” working away to make coffee mugs 24/7, which is quite a common view here in some circles.
But thanks for sharing! You certainly did a much better job than me.
I agree. I stopped using Temu because of the persistent marketing and offers (mostly with terms and conditions) which are not really genuine. Now, I only go there when I want to buy something specific - like a solar power bank or a dish drainer. I don't browse there any more. I also often buy from eBay which is more "retail," I feel. But overall, I buy a lot less things these days.
Everything you’ve shared here is true. But… skirting or ignoring safety standards and labor laws, or exploiting situations where law or enforcement are lacking is a part of the TEMU formula. I have some experience buying in China and around Asia. Some of these suppliers and supply chains I had to turn down, but not all. It is what it is.
I want to add, TEMU didn't invent any of these techniques, it’s all quite a feature of the global economy.
I agree. Exploitation is a global feature.
The ending bit was unnecessary. China is well known as an authoritarian state with very few worker protections. Suspicion is natural, and to be expected.
You would have done far, far better if, in addition to Australian agriculture, you threw in the example of Italian supplier networks, and invited people to contemplate the return of sustainable work and expertise tied to the home rather than always being directly owned by corporations. This would, of course, involve changes to our laws, including very tight enforcement of anti-monopoly practices at the corporate level. But it would also involve the removal of Temu as an option, so that each set of workers could compete using this model within their national economies.
Even if you're 100% correct, nobody is going to be enthusiastic about a funnel that removes even attempts at personal independence, via endless foreign 'globalization' undercutting. Let each iteration of this model compete within its own cost structure.
I am not 100% correct. I don’t think there is such a thing as being 100% correct. In the article, Temu is just an illustration. I was really talking about something else.
Nicely said.
Great job.
Thanks Francis for the clarity. I’ve always thought “When something seems too good to be true” like really cheap, then it’s something to do with less quality but maybe i will use Temu next time! I have a new appreciation. Thanks : )
Maybe things, all things, shouldn’t be as expensive as they are now. I think in general, "cheap” is relative, and in the race to reduce cost, quality can often be compromised. But there is also the issue of huge margins created by marketing/branding. I have bought charging cables that are really cheap and last for years, as well as expensive ones (like the original Apple charging cable) that break within months. I am now less inclined to equate quality with price.
Wow, this is a great eye-opener, thank you for sharing! Unfortunately in the US we now have to pay tariffs on anything from China and those can be/usually are higher than the cost of the product itself. I wish it were different.
And I don’t understand anti TikTok when reels and YouTube shorts are pretty much the same.
It has been politicised. Here's in Australia, the media is even more biased. We watch CNA for a more balanced view.
You can reduce costs in many ways: shared supply chains, better forecasting, cluster efficiencies, real-time demand data, and accepting lower margins during lull periods. Mistreating workers is not the best way to grow any business.
If labour issues exist, they should be addressed when there is evidence. China’s per capita GDP rose from under USD1,000 in 2000 to more than USD13,000 today, reflecting decades of investment, process improvement, and manufacturing discipline.
If we want to discuss ethics, we should start with an accurate picture. Conscience without context is just assumptions. Low prices have many possible explanations. We should understand the model before we judge it.
Thank you for detailing the intricacies of informal work: i think this is the part of Asia/South east Asia where the unspoken societal understanding gets misinterpreted by outside societies.
Which brings me to think that perhaps what we truly have screwed up in our lifetime is the education system ~ formal or informal. Have we really abandoned compassion and understanding as a basic compass in favour of cleverness?
Thanks for your thoughts. That’s an interesting conversation regarding education. I do wonder where compassion is taught in our system today. In the past, we had religion, or even Civic education in primary school. I am not sure if these are still taught. Religion, in all forms, seemed to have failed.
You do not talk about whether or not the Temu App embeds harmful content into our devices. My biggest concern with it, and TikTok, is that I simply do not trust the Chinese not to embed some sort of code into my phone. Some of my family members work in sensitive areas of the government and I simply cannot take the risk that I am downloading some form of espionage Trojan horse.
The article is precisely about this.
I reread the article, and I see nothing in it that addresses security issues. I see nothing that addresses the possibility of a Trojan horse or spyware being embedded into our devices. So, until I know more, it’s a hard pass for me.
Interesting article, but while I agree with the broad strokes, a few things are not factually correct:
Temu does hold stock in both its Guangdong warehouses and some self-operated overseas warehouses (fully managed model). In other cases, the merchant has stock in overseas warehouses (semi-managed model).
The fully managed model, in which packages are shipped from China to consumers, has always been unprofitable and will probably never be profitable. This is one of the reasons Temu is moving to various overseas warehouse models. The aim is to have 80% of orders fulfilled from local warehouses.
There are many logistical costs across all the models Temu applied. It’s one of the reasons some models remain unprofitable. However, the original model allowed Temu to quickly buy market share.
Temu uses an auction-like system in which the manufacturer with the lowest price for a specific product gets the volume. This can result in a race to the bottom, decreasing product quality. Temu tries to solve this by punishing manufacturers for product complaints (5 times the manufacturer's selling price for each complaint, sometimes for the whole batch).
Another reason Temu’s prices are low is that It subsidises prices ‘behind the scenes’ without consumers knowing. This way it could bring prices down to about half those on Amazon for the same product. In the early stages, Temu subsidised about 30% of the price, considering the customer acquisition costs. Because the consumer is not aware of this, he/she thinks the prices are always that low. Eventually, Temu aims to have a price level at 85% of Amazon’s.
You can read more details in our Temu Watch series on Tech Buzz China.
https://techbuzzchina.substack.com/
- Ed Sander
Thanks, Ed, for your insights and the details in your article. I certainly just glossed over the business model. I wanted to make the point that just because Temu is competitive, it does not mean they have “forced labour” working away to make coffee mugs 24/7, which is quite a common view here in some circles.
But thanks for sharing! You certainly did a much better job than me.
I agree. I stopped using Temu because of the persistent marketing and offers (mostly with terms and conditions) which are not really genuine. Now, I only go there when I want to buy something specific - like a solar power bank or a dish drainer. I don't browse there any more. I also often buy from eBay which is more "retail," I feel. But overall, I buy a lot less things these days.