How Temu Makes Money From $10 Smartwatches From China

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Published 2023-08-14
Bargain e-commerce company Temu has had a whirlwind 2023.

Quietly launching its app in September 2022, it only took the company a few weeks to top app store charts, edging out Amazon, Walmart and even fast-fashion brand Shein. By February 2023, the 5-month-old company made its TV debut during Super Bowl LVII, airing two commercial spots totaling an estimated $14 million. With an annual advertising budget of about $1.4 billion, Temu is focused on aggregating a user base of nearly 100 million people by year-end.

Temu's popularity is largely due to its ultra-cheap knockoffs. Users can get an Apple Watch dupe for $10, Yeezy knockoffs for $4.99 and gaming consoles for $20. On top of the steep discounts, users are bombarded by coupons, free shipping countdowns, flash sales and discount wheels.
While on its face the company looks to be a Boston-based startup, it is actually backed by a well-known name in the Chinese retail space, Pinduoduo.

"China is really the linchpin in Temu's strategy," said Neil Saunders, managing director of GlobalData Retail. "A lot of the products that are sold on Temu are manufactured in China. They're shipped directly from China to the U.S. So those labor costs compared to manufacturing in the U.S. and elsewhere are really low."

Temu's rise in popularity has also courted scrutiny from the U.S. government, accusing the website of exploiting de minimis shipping rules to undercut U.S. retailers. Under de minimis rules, shipments valued under $800 are not subject to duty taxes and undergo minimal customs checks.
Beyond that, a U.S. House committee accused the retailer of violating U.S. import law by using forced labor to supply its products.

Temu and Pinduoduo did not respond to CNBC's request for comment.

Watch the video above to learn what's behind Temu's success and what could disrupt the retailer's massive growth in the U.S.

Chapters:
00:00 — Introduction
01:47 — What is Temu?
06:40 — Your package is on its way!
11:59 — Your order has been delivered
13:48 — What’s next?

Produced by: Devan Burris
Edited by: Kevin Heinz
Camera by: Brad Howard
Graphics by: Alex Wood
Supervising Producer: Jeff Morganteen

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How Temu Makes Money From $10 Smartwatches From China

All Comments (21)
  • @bhushaaa4244
    Looks like CNBC bought their mic from Temu too
  • @xtos2001
    I didn't get the slogan "shop like a billionaire", but then i kept watching and they said how Temu breaks laws and doesnt pay taxes. Now it totally makes sense 🤣
  • @BTWang1234
    How a 16 min video fails to answer the question in title
  • @Mike-xn9ho
    Audio is awful, it sounds like it was recorded with a laptop built in mic. I would expect better from a major network
  • @MakZor
    "So that 10$ smart watch is most likely to come from a factory in China" Like every other smartwatch on the market...
  • @lIREADYIl
    this was just the best Temu ad to date. im ordering a smartwatch now
  • @iamnormal8648
    I had never heard of Temu before watching this video. You guys have given Temu an additional 1.1M new users. I hope they paid you for this free extensive advertising.
  • @jesseinfinite
    The fact that China can produce an actually functioning smart watch for less than 10$ is absolutely insane. That's the price of a handheld toy, not something with a microprocessor inside it. It could be the worst smartwatch ever. But for 10$? It's a tech marvel.
  • @alanwong8307
    If an American company did this, they would be on tv saying: “we optimized our operations to maximize shareholder value and believe that small government and fewer regulatory hurdles are the key enablers for value creation. Our mission is to bring the lowest prices to the consumer market place. Tariffs create an unnecessary hurdle that presents friction for the consumer and we strategically have bypass this and return value to our clients in the form of savings.”😂
  • @lostnotfoundyet
    It’s interesting how the government keeps saying companies like shein and temu have an unfair advantage over other COMPANIES by shipping things under 800$ to avoid paying tariffs BUT they don’t say that it’s the CONSUMERS who benefit from this since these companies are able to make things more affordable for the everyday people, WHILE abiding by the law. If the government has problem with this, then hey just lower the cutoff! They write the game rules anyways. It’s very easy to see whose interests they have in mind 😃😃
  • @pondurosa3792
    They just single-handedly gave Temu at least a million new users.
  • @yukie_tn
    The thing is, the average consumer do not care about tariffs or politics if they can save some money. If you want people to stop shopping there, you need to make a more convincing case.
  • @PlittHD
    I like that for immersion you used a microphone from Temu
  • @dyf8ib
    The secret of temu's cheap goods is that they directly establish a relationship between factories and consumers without intermediaries to make price differences. And the same products can only reach consumers through multi-level dealers and retailers on Amazon.
  • @paulkingeu
    Temu is doing to the USA what Amazon has done to the rest of the world
  • The more interesting question is "How does Apple convince consumers to purchase $400 Smartwatches that cost the firm $26 to produce?"
  • @hungphutr
    🎯 Key Takeaways for quick navigation: 00:00 🏈 Introduction to Teemu's Super Bowl Ad Debut 01:10 📱 Teemu's Aggressive Promotions and Low Prices 02:37 🛒 Teemu's Rapid Rise and Advertising Budget 04:55 🌐 Teemu's Connection to Chinese E-commerce Giant Penduo 06:17 🏭 Supply Chain Advantage and Low-Cost Model 07:42 🚫 Challenges with Xinjiang Region and Import Laws 09:26 📦 Exploiting De Minimis Rule and Customs Control 11:15 🌐 Concerns About Teemu's Cybersecurity and Data Usage 12:30 ⌚ Review of a Teemu-Purchased Smartwatch 14:22 🛍️ Teemu's Potential for Social Shopping 15:42 📜 Teemu's Future Amid Regulatory Scrutiny Made wi
  • @FuglyStick
    Aggressive advertising is a warning sign for me. I don't like being assaulted with marketing.