interview
Since the shopping platform Temu became active in Germany a year ago, it has gained many new users. In an interview, retail expert Gerrit Heinemann explains the reasons for this rapid growth.
tagesschau24: Temu quickly gained new users in Germany. How will the app develop in the future?
Gerrit Heinemann: If you look at developments in the USA, where Temu has been active for two years, 90 percent of citizens are aware of this platform and 50 percent have already made purchases there.
Here in Germany things will also go in this direction. I assume that the number of buyers will double within the next year and that the end of the road is far from being reached.
tagesschau24: How do you explain this success?
Heinemann: Temu knows how to market and does online marketing in combination with artificial intelligence and customer data. For example, when I search for a product on the Internet, Temu products are always automatically displayed to me.
And that’s basically Temu’s business model. The shopping platform does not primarily earn money from the transactions, but rather from the marketing of the products. As a result, Temu is now making gigantic sales and, above all, is enormously profitable.
Games of chance and videos should stay on the platform
tagesschau24: Temu always offers discount campaigns. For example, users can spin wheels of fortune and thereby secure additional discounts. Is that part of this strategy?
Heinemann: Online trading has been around for 30 years now. So it’s no secret that the likelihood of purchasing is higher and more purchases are made when customers are kept in an online shop or on a platform for a long time.
And that’s exactly what Temu does excellently about the games of chance and videos that are used there. Basically, this is modern marketing. Experts call this a “multiexperience platform.”
tagesschau24: And then we definitely have to talk about the low prices. Even products such as washing machines or vacuum cleaners are offered on Temu for comparatively little money. How can you explain that?
Heinemann: It’s a combination of different things that Temu practices there. On the one hand, Temu is a platform for manufacturers who then sell directly via Temu. They are predominantly small or medium-sized manufacturers from China.
And then Temu avoids customs duties. Apparently 65 percent of the goods are incorrectly declared. For example, orders are always packed in individual packages so that they do not exceed a value of 150 euros and are therefore not subject to customs duties. That makes a big price difference.
Then I also assume to Temu – especially the manufacturers and suppliers from China – that sales taxes are not always paid. And in this combination, it should come as no surprise that the items are at least 50 percent cheaper than elsewhere.
Wholesalers are also being pushed out
tagesschau24: The low prices and the discount campaign make Temu attractive for customers. On the other hand, delivery times are significantly longer than with other platforms. Do customers accept this?
Heinemann: Customers accept this because the delivery times are still within an acceptable range, and when in doubt it is always about the price. And it must also be said that most of the suppliers on Amazon also come from China.
But the latest information I’ve heard shocks me: Apparently retailers are now also ordering items on Temu that they would otherwise purchase through wholesalers.
The dealers do this because some of the items are similar, but they are simply cheaper on Temu. As a result, Temu already operates wholesale business on a large scale – i.e. from company to company.
tagesschau24: What can be done about it?
Heinemann: I appeal to the legislature to pay close attention to customs controls. Because we are dealing with unfair competition here. This should definitely be corrected and, above all, quickly.
Because Temu will remain active and grow in a similar way to the Chinese platform Pindoudou, which, like Temu, belongs to the Chinese parent company PDD Holdings. Both platforms have only been active for a few years and have grown explosively in a very short period of time.
This is the so-called Chinese “leapfrogging”, i.e. rapid progress in development processes. We do not yet know of comparable growth rates.
tagesschau24: In your opinion, does Temu have the potential to force platforms like Amazon, Zalando and Co. out of the market in the future?
Heinemann: You can already tell from Amazon’s reaction. It is rumored that Temu in the USA has already deducted 20 percent of online transactions from other platforms. Something similar could happen here too. In this respect, Temu may be the potential “Amazon killer”.
Even if Temu doesn’t make it, the next platform in China is already on the way, namely TikTok Shop. We hear from them that it is said to be even more aggressive and grows even faster.
We are literally dealing with an attack from platforms from China. And this will probably continue in the next few years.
Anne-Catherine Beck, ARD financial editor, asked the questions. The interview was shortened and edited for the written version.