Have you ever stumbled across a deal on Temu that made you look twice?
Like, a "Wait, how is this so cheap?" kind of moment?
If so, you’re definitely not alone.
Quick Answer: Why is Temu so cheap?
The main reasons why Temu is so cheap include offering extreme welcome deals, direct sourcing from manufacturers, economies of scale, and lower labor costs.
For quite some time now, Temu has been offering prices that seem almost too good to be true.
In this article, we'll discuss the 11 secrets that make Temu products so cheap.
For example, did you know that Temu is willing to make a $30 loss on someone's first-time order in the hopes of getting a return on subsequent orders?
Keep reading to learn more!
11 Reasons why Temu is so cheap
Here are the 11 reasons why Temu is so cheap:
- Extreme welcome deals
- Direct sourcing from manufacturers
- Economies of scale
- Many counterfeit items
- Lower labor costs
- Cheap shipping rates
- Digital-first approach
- Lesser focus on customer service
- Less stringent regulations
- Competition with Alibaba
- Manipulation of the Chinese currency
1. Extreme welcome deals
Let’s start with one of Temu's favorite tricks: the welcome deals.
If you’ve ever signed up for Temu or even just visited their site for the first time, you’ve probably seen some pretty incredible offers.
For example, some massive discounts, buy-one-get-one-free deals, free gifts just for signing up, or these 'lightning deals':
I mean, just look at these discounts. They offer up to 93% off!
Looks pretty great, right?
But there’s more to it.
These deals are designed to hook you into becoming Temu's customer.
Here’s how it works: Temu knows that if they can get you to make that first purchase, there’s a good chance you’ll come back for more.
And the best way to get you to hit that “buy” button is by offering a deal that you can't say no to.
Once you’ve made that initial purchase, you’re more likely to return, even when the prices go back to normal.
But there are also other layers to this strategy.
For example, Temu’s welcome deals create a sense of urgency.
Like these 'Lightning Deals,' they’re often time-limited, making you feel like you have to act fast or miss out.
This taps into our natural fear of missing out (FOMO), pushing us to make that purchase before the deal disappears.
And here’s the thing: while these deals might seem like a huge giveaway, Temu is playing the long game.
They’re willing to take a loss of up to $30 on these initial sales because they know that once you’re in the door, you’re more likely to keep coming back.
Plus, if you’re happy with your purchase, you might even spread the word to your friends, bringing in even more customers for Temu.
The strategy works.
Just eight weeks after its launch, Temu ranked 5th on the list of most downloaded free shopping apps on the Apple App Store.
Even though it lost millions, Temu now has millions of returning customers who will keep shopping with them.
2. Direct sourcing from manufacturers
Another reason behind Temu's prices is that the products you see often come directly from manufacturers.
In a traditional retail chain, you’ve got wholesalers, distributors, and sometimes even multiple layers of suppliers.
Each one of these adds a little more to the price tag because, naturally, everyone in the chain wants to make a profit.
By the time the product reaches you, the customer, it’s been marked up several times.
Temu, however, cuts out many of these middlemen by working directly with manufacturers.
This direct connection allows Temu to offer much better deals on the products it sells.
Of course, this approach isn’t without its challenges.
Working directly with manufacturers requires strong relationships and efficient logistics.
But Temu has clearly figured out how to make it work, and the result is a huge selection of products at prices that are hard to beat.
3. Economies of scale
“Economies of scale” might sound like business jargon, but the concept is pretty simple.
Imagine you’re baking cookies.
If you make just one cookie, the cost of ingredients, time, and effort is high.
But if you decide to bake a hundred cookies in one go, the cost per cookie drops significantly.
This is economies of scale—doing more of something to make each unit cheaper.
Temu operates on a massive scale. More than 500 million people visit its website every month:
When a Temu seller sells lots of items, they can produce more at once, reducing the cost per unit.
This concept also applies to other aspects of Temu’s business, like shipping, marketing, and logistics.
For example, when Temu ships thousands or even millions of items, they can get deals with shipping companies to lower the cost per package.
Additionally, they can spread their fixed costs—like technology, customer support, and warehousing—over a much larger number of sales.
4. Many counterfeit items
Let’s be honest—one of the reasons Temu can offer prices that seem too good to be true is because, in some cases, they are.
You'll find a large number of counterfeit items on Temu’s platform.
For example, there are several stories of designers accusing Temu of stealing their branded products:
Because these items don’t have the same production standards or brand recognition, they can be sold at much lower prices.
In some cases, the difference between the fake and the real thing might be hard to spot—until you receive the product and realize it doesn’t quite match up to your expectations.
Now, this isn’t to say that everything on Temu is fake.
The platform offers many genuine products, and many shoppers find great deals on items that are exactly what they expect.
However, the presence of counterfeit goods is a real issue, and it’s one reason why some products on Temu can seem so cheap.
5. Lower labor costs
Another reason Temu can offer such low prices is the lower labor costs associated with the production of many of its products.
Most of the products sold on Temu are manufactured in China, where labor costs are significantly lower than in places like the United States or Europe:
In many cases, China's lower wages reflect broader economic conditions, but there are also instances where workers are paid poorly, work in unsafe conditions, or are denied basic rights.
At one point, US lawmakers even gave out a warning of an "extremely high risk" that products sold on Temu and Shein have been made with forced labor.
Temu replied to the rapport, saying they are not responsible for third-party sellers using its platform.
In the end, it’s a complex issue with no easy answers, but it’s worth considering as you shop.
6. Cheap shipping rates
One surprising aspect of shopping on Temu is the free shipping.
You might wonder, “How can they afford to ship products all the way to my door without charging a hefty fee?”
The answer has to do with the Universal Postal Union (UPU), an agreement under which certain countries carry other countries' parcels for cheap or even for free.
The UPU is set up so that rich countries pay a higher fee to get their international mail delivered while developing countries pay a much smaller fee.
For many years, China was seen as a developing country and benefitted from insanely low shipping rates.
According to the CBC, shipping a part from China to the US could cost less than $1, while shipping that same part within the US would cost $22.99.
The difference in cost is paid by the American taxpayers.
Of course, this agreement heavily benefits China, while it's a huge cost for the US.
So, in 2018, Donald Trump threatened to pull the country out of the UPU.
After some negotiations, the US was allowed to raise its fees, while Canada and other countries can raise their fees by about 16% annually.
So, the shipping cost from China has been rising and will be doing so in the coming years.
However, the shipping costs from China are still lower than they actually are, and this is an important reason why Temu products are so cheap.
To give you an idea, a country like Canada would need a 200% to 400% increase to close the gap between domestic and international rates!
7. Digital-first approach
Temu’s digital-first approach is another reason they can keep prices so low.
Temu operates almost entirely online, without physical stores.
This means they eliminate a huge chunk of expenses like rent, utilities, in-store staff, and maintenance, allowing them to offer products at lower prices.
Another big advantage of a digital-first approach is the ability to reach a global audience with minimal additional cost.
Temu doesn’t need to invest in multiple physical locations around the world; instead, they can serve customers from virtually anywhere through their online platform.
8. Lesser focus on customer service
Temu has made some strategic decisions about where to allocate resources, and one area where they’ve chosen to cut back is customer service.
Let’s face it: maintaining a high-quality customer service team can be expensive.
So, instead of having a large team available to handle every issue, Temu directs customers to self-service options, such as FAQs, automated chatbots, or email support with longer response times:
This means that you may face some challenges if something goes wrong with your order.
Getting help can be a slower and more frustrating process compared to more service-focused shops.
9. Less stringent regulations
One often overlooked factor contributing to Temu's low prices is the difference in regulatory standards between China and the United States or Europe.
In countries where regulations are less strict, such as China, companies are not required to meet the same safety standards or provide as many benefits to their workers.
This can significantly reduce the cost of production.
Environmental regulations are another area where less stringent rules can lead to lower prices.
In regions with lax environmental laws, manufacturers might be allowed to use cheaper processes that are more harmful to the environment, such as using toxic chemicals or improperly disposing of waste.
10. Competition with Alibaba
Alibaba has dominated the ecommerce market in China for a long time.
However, this dominance also created opportunities.
Pinduoduo, which owns Temu, is a newer company that quickly became popular in China and is now one of Alibaba's main competitors.
They’ve done this by using a unique shopping model in which people can team up to buy products in bulk, which lowers the price even more.
This approach has been especially successful with price-conscious shoppers.
Temu’s approach to pricing and competition is heavily influenced by Pinduoduo’s success in competing with Alibaba.
They've taken the things they've learned and are applying them on a global scale.
As a result, Temu is able to offer prices that rival those on platforms like AliExpress, which is owned by Alibaba.
11. Manipulation of the Chinese currency
One of the more complex reasons behind Temu’s ability to offer such low prices involves the manipulation of the Chinese currency, the yuan (also known as the renminbi).
Here’s the basic idea: The value of a country’s currency affects the cost of buying goods from that country.
When a currency is weaker compared to others, products made in that country become cheaper for people in other countries.
In China’s case, the government sometimes takes steps to keep the yuan’s value lower than it might be if left to market forces.
This is often referred to as “currency manipulation.”
China has kept the value of its currency artificially low since 1994:
By keeping the yuan’s value low, Chinese companies like Temu can sell their products at lower prices in foreign markets like the United States or Europe.
This is because when the yuan is weaker, it costs less to produce goods in China, and these savings can be passed on to you as lower prices when you buy those products online.
What are the trade-offs of Temu's cheap prices?
While Temu’s low prices are tempting, they come with some trade-offs that are worth considering before you buy.
1. Product quality
One of the most notable trade-offs is product quality.
When prices are rock-bottom, it often means that the products are not made with the highest-quality materials or the most careful craftsmanship.
Some shoppers are perfectly happy with the “you get what you pay for” mentality, but others might be disappointed with products that don’t meet their expectations:
So, when buying from Temu, just remember that clothes may not fit quite right, electronics won't last as long, or items look different from their pictures.
2. Customer service
As we mentioned earlier, Temu tends to have a more automated approach to customer service.
This means that if you encounter issues with your order, you'll probably have to look through their FAQs to find the right do-it-yourself process to follow:
3. Long shipping times
Because Temu often ships products from China, delivery can take much longer than what you might be used to.
While some people don’t mind waiting a few weeks for their orders, others might find it inconvenient, especially if they’re buying something they need quickly.
The low prices are made possible, in part, by slower, more cost-effective shipping methods.
4. Ethical considerations
As we discussed, lower labor costs and less stringent regulations contribute to low prices.
However, these factors might also involve less favorable working conditions, less sustainable environmental practices, or even the presence of counterfeit goods.
Summary
Before we go to the conclusion, we've created a quick summary of this article for you so you can easily remember it:
- Temu’s low prices come from cutting out the middlemen and sourcing products directly from Chinese manufacturers.
- They also play the numbers game with economies of scale and use the lower labor costs to keep costs down.
- You’ll find some deals that are almost too good to be true—because sometimes they are, with counterfeit products.
- Remember that Temu's bargain prices come with a catch—potential compromises in product quality, customer service, and some ethical gray areas.
Conclusion
Temu’s unbelievably low prices are no accident.
They’re the result of a complex mix of business strategies, global economic factors, and calculated trade-offs.
But, as we’ve seen, these prices come with a few strings attached.
Sure, you can find some amazing deals, but it’s important to think about what you might be trading off.
If quality, quick shipping, or ethical considerations are important to you, it might be worth paying more elsewhere to get exactly what you want.
Want to learn more about ecommerce?
Ready to learn more about online retail? Check out the articles below:
- How Do You Track a Package From China in 2024?
- How Does AliExpress Work? (What You Should Know in 2024)
- How to Start Dropshipping From China in 2024 (& Should You?)
Plus, don't forget to check out our in-depth how to start an online store guide here.
