Investment News 12-06-2023 03:02 12 Views

Shoppers are flocking to Temu for cheap deals — but will the novelty last?

A pair of running shoes for $11.98. Waterproof wireless earbuds for $4.39. A 40-color eyeshadow palette for $2.69.

These are some of the offerings on low-cost shopping app Temu, which since launching in the United States in September has exploded in popularity. Waves of raving hauls and reviews have since flooded social media, convincing many once-skeptical consumers to test out a gimmicky online megastore filled with spin-the-wheel discounts and steep lightning deals.

Temu, owned by a Chinese company, ships its products directly from manufacturers in China for arrival typically within a week or two. Despite the lack of guaranteed two-day shipping offered by the likes of Amazon, many customers say the low prices make it worth the wait. For some, the constant cycle of gifts and discounts have also swayed them to increase their compulsive shopping.

Upon opening the app, shoppers can browse everything from clothing and beauty products to electronics and industrial tools — all at extraordinarily low or heavily slashed prices as brightly colored banners and ticking clocks urge users to hurry and add to their cart.

Serena Fuschi, who’s been shopping on Temu since about a month after it launched last year, is in the top 5% of the app’s affiliate program earners — having raked in $5,000 in commission from recruiting new shoppers.

“The whole focus is getting new users, which is what heightened its popularity in the first place,” she said. “It’s genius marketing: Here, we’ll send you a free air fryer if you refer five people to the app. Then those people may purchase something or they’ll tell their friends.”

Fuschi has also shared dozens of hauls on TikTok from her Alabama home. Though she said she has never been sponsored by Temu, she also regularly updates a series on Amazon products that can be found for cheaper there, as well as a collection of tips for users to make the most of the app.

But Fuschi said she’s considering slowing down on Temu content due to controversies surrounding the app, such as ethical concerns over the culture of mass consumption fostered by such companies.

“Especially in the influencer sphere, it’s buy, buy, buy. Big boxes get more views. And a lot of people really are starting to not enjoy that,” she said. “So you’ll see a huge shift of those styles no longer being popular and, in fact, receiving a ton of criticism. And we’ve already started to see that.”

Some of the criticism Fuschi said she’s received on her videos include accusations that Temu has stolen product designs from small businesses and questions around what labor conditions are like in the factories that manufacture its products.

Temu did not respond to requests for comment.

“It’s unfortunate that that is how we have to be but you have to be callous when you’re on a budget and you can only afford so much,” Fuschi said. “You don’t have the luxury to be picky about where you purchase. If on Temu you can buy your kid’s whole school wardrobe for $100, that’s kind of where you got to shop.”

To clinical psychologist and behavioral scientist Joshua Klapow, it seems Temu is targeting two types of consumer bases: those with lower budgets, due to its nearly unparalleled low prices, and those who are more likely to impulse buy, as a result of its gamified discounts and pushy limited-time deals.

“It has more of a Dollar Tree feel than Amazon or Walmart and that in and of itself is not bad, it’s just different,” Klapow said. “And so I find it interesting from a competition standpoint, because it’s almost like they’re not in the exact same market, or at least not yet.”

When Toronto-based fashion creator Nkiruka Okocha kept receiving links from her friends promising a free gift if she were to join Temu, she wrote them off as a scam. But the links kept coming, so she decided to finally click — and to her surprise, the gifts actually showed up at her door.

That’s when she decided to give Temu a real try. Ever since she placed her first order in April, she said she’s now consistently turning to it for all of her small purchases. Now, after her initial Temu hauls went viral on TikTok, Okocha has accepted a sponsorship from the company. ​​

If Temu is going to stay with us, they’re either going to have to constantly be recruiting new users or users who are more apt to impulse buy, or they’re going to have to refine their user experience to people who are more analytical in their purchase decisions.

-clinical psychologist and behavioral scientist Joshua Klapow

“Instead of going on Amazon, which is what I would usually do, I go on Temu and I get it for a cheaper price,” Okocha said. “The shipping takes a little bit longer than Amazon but it’s still more convenient and cheaper to shop on Temu.”

What Temu excels at right now is pulling new users in, Klapow said. But its appeal is going to be difficult to sustain, especially among higher-budget shoppers. Upon reaching a comfortable disposable income threshold, he said, people tend to put more care into the quality and sourcing of their products rather than simply scouring for the cheapest deals.

“If Temu is going to stay with us, they’re either going to have to constantly be recruiting new users or users who are more apt to impulse buy, or they’re going to have to refine their user experience to people who are more analytical in their purchase decisions,” he said.

But the biggest hurdle counteracting what Temu does best is the delayed gratification caused by its relatively slow shipping. The perceived value of a discount is diminished, Klapow said, when a shopper must wait weeks to see their impulse purchase in their hands. 

“Ultimately for Temu, this is flashy and it’s catching on, but they’re going to have to be able to sustain consumers,” Klapow said. “And they don’t have enough of the components to sustain, meaning quicker delivery, ethical products and services — that’s a question mark, meaning we don’t know — and some part of the user experience that allows for a more intentional pace.”

This post appeared first on NBC NEWS
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