Meet the Chinese e-commerce app dominating the App Store charts

A Chinese e-commerce app that promises to let you “shop like a billionaire” has rocketed up to #3 on Canada’s App Store charts.

Driving the news: Temu has exploded in popularity in Western markets since first launching in the US last year by shipping ultra-cheap products to shoppers directly from manufacturers in China—and often with free shipping to boot.

  • Some of the “Best Sellers” on the app include 5 pairs of socks for $2.29, a 6-pack of lip balm for $2.49, and a wireless video doorbell for $15.58.

But how is it so cheap? An analysis of Temu’s supply chain by WIRED found that the company loses, on average, US$30 per order it ships—a number that a company insider confirmed. 

  • Temu is losing somewhere between US$588 million and US$954 million per year, brokerage firm China Merchants Securities estimates. 

Why it’s happening: Temu is hemorrhaging money as a trade-off to break into the North American market—the idea being that it will eventually become big enough to challenge Amazon, with a long-term goal of having Americans make 30 purchases a year on the app.

  • Temu can sustain these losses thanks to cash from its parent company PDD Holdings, which has a market cap north of US$100 billion.

Why it matters: Temu’s strategy represents a challenge to North American e-commerce and retail giants who can’t possibly hope to compete on price—and in our high-inflation era, price matters a lot.

Yes, but: Temu’s growth-above-everything strategy could be catching up to it. As WIRED notes, some suppliers are leaving the app since they’ve been left with no margin for profit. Meanwhile, PDD has seen shares fall substantially from their peak in January and has been besieged by a wave of short-sellers due to broader concerns over the e-commerce sector.—QH