"Temu Takes a Hit: Plunging US Sales Amid Customs Woes and Advertising Overhaul"
US Temu sales are significantly decreasing
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The delivery platform Temu, known for its customs exception and incessant advertising, is currently grappling with a sales crisis in the US. The primary culprits? New customs regulations and a significant reduction in advertising budget. Meanwhile, the influx of budget-friendly packages persists in overseas markets, like the EU.
According to Bloomberg reports, American consumers' payments to Temu dropped by over 25% between May 11 and June 9 compared to the previous year. It appears that the company has almost stopped its aggressive advertising efforts in an attempt to adjust its business model to the new customs rules in the US.
Temu previously benefited from the "de minimis" customs exception, which allowed products shipments valued under $800 to be delivered duty-free from China to US customers. This exception, abolished by US President Donald Trump as part of his comprehensive tariff increases, was estimated to facilitate around one million packages per day with Temu orders reaching US shores.
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In response to tariffs affecting its discount model, Temu's parent company PDD Holdings has shifted its focus to local fulfillment centers within the US to reduce tariff costs by using domestically stored inventory in bulk. However, this adjustment has compromised Temu's price advantage in the market, as domestic competitors such as Alibaba and JD.com intensify competition and benefit from government subsidies.
Despite the challenges faced in the US, Temu's business continues to thrive in the EU, where duty-free status for shipments up to €150 still stands. With billions of packages imported into the EU last year, Temu remains a considerable player even amid regulatory hurdles, protectionist policies, and sustainability and safety regulations.
To combat the difficulties, new customs reforms proposed by the EU Commission could end the duty-free status for small packages. This plan is also backed by German Finance Minister Lars Klingbeil. This potential change could pose significant financial challenges to Temu and other e-commerce platforms that rely on this shipment segment.
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In the past, Temu achieved substantial growth due to intensive advertising and ultra-low prices. However, the recent decline in US sales indicates a strategic shift or retrenchment from the US market, potentially redistributing resources elsewhere due to increased costs and competition.
Sources- ntv.de- mbo
- Mail Order
- E-commerce
- China
- USA
- Foreign Trade
- Tariffs
Enrichment Data:
- Macroeconomic Impact:
- With the shutdown of its "growth machine" by reducing its advertising spending drastically, Temu's overall sales have been affected, presenting challenges for the consumer technology sector as a whole.
- Regional Differences:
- The US market is experiencing a decline of around 25-36%, while the EU market is still growing (+63% revenue growth) despite challenges such as customs fees and regulatory hurdles.
- Competition:
- Established competitors such as Alibaba and JD.com are intensifying competition in the US market, causing additional pressure on Temu's operations and profitability.
- New Trends:
- To cope with the increased costs stemming from tariffs, Temu has started adopting strategies like utilizing warehouses within the EU to pay a reduced customs fee, providing a potential roadmap for other e-commerce platforms to follow.
- The changes in US customs regulations and reduced advertising budget have significantly impacted Temu's employment policy, forcing the delivery platform to reassess and possibly reallocate resources in its bid to adjust to the new business environment.
- As Temu faces financial challenges in the US, industrial sectors related to e-commerce and mail order services may experience shifts in employment policies due to the apparent retrenchment from the US market and the need for strategic adaptations.
