A Business Analysis of Temu: The Rock-Bottom Pricing Strategy and Its Associated Risks

Abstract

Leveraging China’s vast manufacturing base, customer-to-manufacturer direct production (C2M), consignment inventory, and a factory-to-consumer operating model, Temu achieves exceptionally low prices. This paper analyzes the business model, growth drivers, and risks of Temu, a rapidly expanding cross-border e-commerce platform. The paper also highlights how a user growth flywheel, driven by targeted marketing, amplifies economies of scale. However, its aggressive price competition strategy has given rise to structural vulnerabilities, including supply chain instability, inconsistent product quality, and heavy after-sales burdens. Simultaneously, the platform faces intensifying regulatory scrutiny from the United States and the European Union and fierce market competition. Based on these findings, the paper offers strategic suggestions for Temu, aiming to transition it from a price-driven model to a value-driven growth model. Specific actions include strengthening supplier partnerships, enhancing quality control, improving compliance capabilities, and building long-term brand loyalty to ensure sustainability in global markets.