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Temu Seen Hitting Winning Formula of Low Prices in Time of High Inflation

Are US consumers grappling with 40-year-high inflation willing to wait for their online purchases if it meant huge savings are to be had?

That is the emerging debate sparked by the launch of Temu, a new e-commerce platform that has attracted consumer interest with its ultracompetitive prices on a wide range of daily items and household essentials. Many of the clothes sold on Temu, for example, are priced under $10. A check of delivery dates showed a typical range of five to 12 days.

To make the wait more attractive, Temu is offering free shipping on all orders for a limited period. Customers will also be given a full refund and get to keep the item if the delivery is late, according to the terms listed on Temu’s product pages.

Tara Kirkpatrick, mobile trends analyst at Apptopia, said that the longer shipping window might prove to be beneficial, citing the example of Shein, the online fashion retailer.

“Shein used to have long shipping windows, but not only did US shoppers think it was worth the wait, it encouraged them to buy more at one time,” Kirkpatrick said in comments to RetailWire. Temu is “going to be a huge competitive threat to Amazon and Walmart,” given the “static experience that we are used to” with the existing e-commerce marketplaces, she added.

Not everyone is convinced. A new e-commerce site like Temu would face early challenges in building awareness and securing a repeat customer base, according to Evan Snively, director of planning and loyalty at Moosylvania. Temu would also have to overcome the “huge hurdle” of convincing US shoppers used to “instant gratification,” Snively said.

However, with inflation continuing to rise, the conventional wisdom that US consumers would only tolerate wait times of three to five days, “could be easily proven wrong,” according to David Spear, Senior Partner at Teradata.

Meanwhile, US consumer prices unexpectedly rose in August, driven rising costs for rents and healthcare. Various surveys have shown that US households are tightening their belts as inflation eats into family budgets.

Temu would be banking on its access to a sophisticated network of suppliers and fulfilment partners built up over the years by sister company Pinduoduo, which has close to 900 million customers and more than 11 million merchants. Both companies are under Nasdaq-listed PDD, which took just five-and-a-half years to overtake market leader Alibaba in the number of active buyers.

Whether Temu can replicate its sister company’s success could come down to its ability to innovate and offer US consumers a different and better shopping experience, industry observers say.

Kirkpatrick of Apptopia pointed to how Temu’s sister company Pinduoduo popularized the idea of “social shopping” with its team purchase model. Temu’s slogan “Team up, Price down” may offer hints of its future strategy.

“Group buying enables a family unit or roommates to load up one cart from their own devices and get a discount for social shopping,” she said. “This will have a fun novelty for U.S. consumers and give them the one thing that everyone shopping is after right now: discounts.”