If you spend much time online you’ve probably seen one in every of Temu’s vibrant ads – punctuated by its catchy tagline: “shopping like a billionaire”.

Temu specialises in selling various on a regular basis items, including clothing, toys and household goods, for terribly low prices. Shanghai-based company PDD Holdings launched the net marketplace late last yr (initially within the United States) to cater to overseas customers.

Since then, Temu’s reach has skyrocketed. The total value of products sold went from US$3 million in September last yr, to US$400 million in April. At the time of publishing this text, Temu was the preferred free iPhone app within the US, United Kingdom, Australia and Germany.

Why has Temu been such a large success? It’s protected to say the platform has some winning strategies that keep consumers coming back. But beyond that, much like other e-commerce platforms, using it isn’t entirely risk- or guilt-free. Here are some things to think about if you happen to’re pondering of giving it a shot.

What are Temu’s secrets to success?

1. Value

Many Australians might associate “made in China” with low cost price tags and low quality. However, Temu’s consumers are starting to view it as offering inexpensive products that don’t necessarily compromise on quality. In some cases, 10–20 products will only set you back US$20–30.

Temu claims it could actually offer these prices because of this of cutting out the middlemen in the availability chain. While the manufacturers provide the product details and the products themselves, Temu handles all the pieces else – from customs processing to international shipping. This streamlining helps reduce unit costs.

Nonetheless, achieving such value doesn’t come with out a cost. Concerns are rising that Temu and its suppliers could also be operating at a loss. However, it’s common for startups to experience negative money flow of their initial years attributable to heavy marketing investments, including offers of competitive prices and marketing campaigns – all of which is finished to construct brand awareness and gain acceptance.

This is very true within the fast-paced e-commerce sector, where success and failure occur swiftly. Temu and its suppliers, who’re mainly from Temu’s sister e-commerce platform Pinduoduo, are likely aware of this dynamic.

Startups will often operate with negative money flow of their initial stages.

2. An effective marketing strategy

Unlike other e-commerce platforms that concentrate on functional advantages similar to saving money, Temu caters to consumers’ emotional needs. It overlays the shopping experience with the thought of “shopping like a billionaire” – which also aligns with its value-based strategy.

Temu entered the market at a time when consumers were grappling with global inflation, leading them to hunt “value”. In the primary month after its launch within the US, Temu invested some US$200 million in promoting and planned a US$2 billion budget for the yr.

Given China’s leadership in live-streaming influencer marketing, Temu is now recruiting social media influencers, suggesting it would leverage its Chinese expertise to explore a social-commerce strategy. Social commerce harnesses a way of “friendship” conveyed by influencers, making the net shopping experience more engaging and product recommendations more convincing. It also works especially well with sales promotions.

Sales promotion tactics

While Temu employs common sales tactics seen on other e-commerce platforms, it uses what’s arguably the broadest array of those techniques. Here are just a few examples:

  • Gamified experiences. Gamified promoting hinges on two core elements: challenge and reward. Interacting with Temu’s spinning wheel is a minor challenge, however the substantial discount offered is a serious reward. Such “games” create the illusion of getting lucky, and subsequently generate positive emotions in consumers – while the reward gives them an incentive to interact more seriously with their browsing, increasing the likelihood of spending.
Temu’s spinning wheel promotion offers a ‘gamified’ shopping experience that creates an illusion of getting lucky.
Shasha Wang
  • Lightning deals and limited-time offers. One commonly used promotion tactic involves creating the illusion of scarcity through supposedly “exclusive” offers which might be time-sensitive and won’t come by again. This can trigger a fear of missing out in consumers.
Promotions which might be timed create a way of urgency; customers usually tend to pay up in the event that they’re terrified of missing out.
Shasha Wang
  • Discounts and free shipping Offering easy price reductions and really inexpensive sales is a time-honoured way of securing a loyal customer base. In addition, Temu has the allure of offering free shipping on orders with a really low minimum spend.

  • Loyalty program. Consumers can opt in to Temu’s marketing emails in exchange for receiving more promotional content, including email-only promotions. E-commerce corporations often have access to your personal information (similar to your name, address, age and phone number) and behavioural data (similar to out of your search history and online sessions). With this data, the corporate can construct your user profile and goal you with personalised promotions and content to encourage spending.

  • Search engine marketing. Many consumers will see Temu ads at the highest of their search results on Google (in the shape of “sponsored” posts) once they seek for a product.

  • An AI-powered promotional strategy. Temu’s sister company operating in China, Pinduoduo, is renowned for its AI-driven suggestion system. It’s likely Temu uses similar AI algorithms, drawing on users’ browsing and buy history to offer personalised recommendations (a practice Amazon also partakes in).

Defending against manipulation

Temu’s biggest profit to consumers lies in its offer of value. It should have lower-quality items, but that is common amongst all e-commerce platforms.

Also, Temu’s business model is built around emphasising top-selling products, which helps filter out low-quality products. Its 90-day free return policy further acts as a buffer for unsatisfactory purchases.

Nonetheless, Temu’s value-oriented approach will not be an excellent thing for consumers on all fronts. Exposed to such a big selection of promoting tactics, users might grow to be more susceptible to overconsumption – which results in environmental waste and post-purchase regret.

It’s value considering your actual needs before using an e-commerce platform similar to Temu. You must also familiarise yourself with the sales promotion tactics getting used. Research suggests understanding these tactics, in addition to advertisers’ intentions, may even empower young children to be sceptical and form a cognitive defence against them.

Also, in light of Temu’s gamified promoting strategy, consumers must temper their enthusiasm for rewards. Moving forward, one useful approach could also be for schools and governments to introduce educational programs or social marketing campaigns that teach promoting tactics, and recommend coping strategies.

This article was originally published at theconversation.com