Why, wherever they invade, they expand the market rapidly and affect their market leadership in that country?

We have seen that a major e-commerce, a new player from China, has been operating for a few years. It took a quick time to break into the American market. A country that has been dominated by Amazon, which has been occupying the E-Commerce beach for decades, has lost market share in a way that no competitor has ever been able to do in this market.

Temu's success did not happen by chance, but as a result of a well-planned strategy.

Fierce competition in the United States

• Amazon Primeday for 2 days has the heaviest price reduction ever, up to more than 70%.
• But Temu has a heavy discount of more than 90%.
• It is not the fault of the consumer who chooses a product with a lower price with comparable quality, or even worse quality, but it is acceptable.
• With the economic downturn and inflation, consumers around the world are swayed by cheap products.

Behind the Success

We see outside, maybe we only see price reductions and dumping to compete for market share and fierce competition.

But there are many other strategies behind the use of Temu, which as a business person, which is a case worth studying and learning.

Even though I can't fight, I know that to be able to do this. How to plan, think, and do it, it should be useful and can be applied in our own business.

Background ของ Temu

• It is a subsidiary of PDD Holdings, which has subsidiaries such as Pinduoduo, an e-commerce giant from China.
• PDD Holdings is listed on the NASDAQ stock market, under the ticker symbol PDD, has a market cap of about $180 billion.
• Pinduoduo is ranked as China's fastest-growing E-Commerce, founded in 2015 (the same year as OpenAI) and uses a lot of AI and Machine Learning technologies. When PDD came to make Temu, it also used AI technology as the core.

Let's take a look at some of the strategies that Temu uses.

Temu's main strategy

1. Business Model : Direct-to-Consumer (DTC)

• Temu's business was designed as a DTC from the beginning, which is the sale of goods online without intermediaries (merchants, middlemen). Orders from customers are sent directly to the production facility. Cutting the Intermediate Out of the Equation Cut out the addition from the intermediary. Brokers and stores help Temu sell cheaper products, up to more than 90%.
• There is a high volume of order commits, allowing manufacturers to reduce prices low (they are not free shipping. If you buy one ten baht thing, but you have to buy several pieces, then collect the same order, the total volume is very high.)

2. Efficient Supply Chain Management

• Use a large number of bulk shipping methods.
• Direct Shipping cuts the cost of having a warehouse for storing stock and does not cost transportation from the factory to the warehouse.
• Shipping costs are optimized by selecting the cheapest delivery. By agreeing to trade for something, such as the package that comes wrapped may not look good.
• Using the tax gap, orders for products with a total value of less than 800 dollars do not have to pay import tax (tariff), so they divide the order according to this.
• Using the Smart Warehourse system with automation and robots to help work in the warehouse, the operation is streamlined, fast, and without bottlenecks, including automatic sorting and automatic packing.

3. ระบบ Logistic

• Temu has a parent company, PDD Holdings, to help manage the logistics side, which they do not invest in building themselves, both transportation and warehouses, but use the method of partnering with others so that they do not have to spend a lot of money on these investments.
• The logistics companies that are partners in China are SF Express, YTO Express, ZTO Express, and Cainiao Network (a subsidiary of Alibaba).
• Use 4 to compete with each other. Whoever does well gets a lot of orders.

4. Pricing Strategy แบบ Loss Leader

• Competitive Pricing: Temu uses the slogan "Shop Like a Billionaire" to attract customers who like cheap products. Create a sense of being able to buy a lot of products at an affordable price.
• Free Shipping & Return Policy: Reduce customer hesitancy to order. Increase confidence in product trials and create satisfaction for service users.
• Increase Average Basket Size (ABS): Set a minimum order amount to get free shipping. Encourage customers to buy more products at a time, which is a key metric of Temu.
• Use upsell and cross-sell techniques: Offer higher-priced or related items to increase purchase value.
• Ongoing promotions: Promotional activities such as special discounts, coupon giveaways, or festive campaigns are organized to drive sales and attract new customers.
• "Loss Leader" Strategy: Accept losses on certain products to attract customers and build a user base. It hopes for long-term profits from repeat purchases and brand loyalty.
• Using data and AI in pricing: Analyze customer buying behavior and dynamically adjust prices to increase leads.
• Create a sense of urgency (Fomo): Use psychological techniques such as showing the number of products left or the remaining time of the promotion. To stimulate purchase decisions.

This pricing strategy is popular in the e-commerce industry to compete for market share, but it also presents challenges in terms of long-term business sustainability and can affect the brand image if the quality of products and services cannot be maintained.

5. Influencer Partnership

• Partnering with influencers creates reach and awareness for many people to see, and also helps build credibility for the platform.
• Throw in ads At home, we probably see ads a lot on IG and Facebook, but in the United States, they also have ads during the Super Bowl.

6. AI technology on the platform

• Temu's platform is packed with technology and AI intelligence that is embedded in every molecity of the platform.
• All back-end systems are automated to optimize operational expenses to the minimum, from stock management to customer service.
• Use machine learning to create a personalized recommendation system that is used to analyze and get to know each user. From the purchase history Visiting each page and optimizing access to see products that users think are likely to be interested in buying.

This is also Amazon's Key Success Factor, and most e-commerce platforms have it.

• ใช้ Gamification เพิ่มเพิ่ม User retention & Engagement
• In the app, it is similar to Shopee and Lazada, which uses gamification to increase time spent and user retention.
• Using AI to create product advertising campaigns by using user data to help create ads that are optimized for consumers, whether it is Social Media or Search Engines, it is called Dynamic Advertising Strategies.
• Real-time Demand Synchonization is carried out by using customer feedback data from in-app trading, product interests, adjusting product displays, and then sending this information back to the supplier or production facility.

Therefore, the factory will already know what kind of product the customer wants. Whatever is a hit, make that one. Anything that is unlikely to be a hit, doing little or not doing it at all, is called reverse-manufactoring where the factory originally sells the product and then hopes that it will sell without knowing the demand of the buyer in real-time before.

• Temu uses Predictive AI to predict market demand.

Did Temu's strategy really work? Do you have to follow up in the long term?

I can't answer it at the moment because they have just started, but I have a similar case to tell you about.

When I was in the United States (2015), there was an e-commerce service called Wish that was growing very fast and using the Temu method to compete with Amazon.

As a new challenger, Wish sells cheaper products. Shipping costs are cheaper than Amazon and faster shipping. I've ordered a lot of things from Wish. A real Amazon challenger

But at the beginning of 2024, Wish sold the business for more than 100 million dollars. It ended in failure.

The problem that Wish encountered that day was the same problem that Temu encountered today:

Product Quality Finding a fake product until there is a lawsuit.

Brand image is damaged. Lack of reliability

and the business world: using pricing strategies. It does not always lead to a win or a handicap on others.

Profitability และ Sustainability สำคัญสุดๆ

Challenges and Risks of Temu

Despite Temu's rapid growth, it faces several challenges and weaknesses:

• Product Quality Control: Temu has been criticized for selling low-quality products, including defective electronics, unsafe toys, and counterfeit products.
• Customer Service Issues: Temu has received a lot of complaints about unresponsive customer service. Undelivered parcels and suspicious charges.
• Sustainability Concerns: Temu's business model relies on reverse manufacturing and the mass launch of new products. Causing environmental sustainability concerns.
• Regulatory Audits: Temu faces scrutiny from regulators in the UK (both in the UK and not just in the UK) and the US for its supply chain practices.
• Profitability Challenges: Although Temu is focused on rapid growth and expanding its market share, there are doubts about the long-term sustainability of its business model.
• Reputation and Trust Issues: Temu's aggressive marketing strategy, including constant advertising and partnerships with influencers, has raised doubts about the platform's credibility.
  (Influencers also face credibility problems. If you happen to review a product that is not of good quality or fake.)
  

Perspective from the consumer

Temu has received both praise and reviews from users:

Positive aspects:

• The price of the product is very cheap. This allows consumers to buy a variety of products on a limited budget.
• Variety of goods There is a huge selection in all categories.
• Ease of use of apps and websites

Negative sides:

• Uneven product quality. Sometimes it doesn't exactly as advertised.
• Relatively long delivery times, especially compared to Amazon Prime.
• Problems with returns and refunds Sometimes it takes a long time or does not receive a response.

Operations in other markets

Despite Temu's success in the United States, it is expanding in other markets. With:

• Europe: Temu began entering the European market in 2023, starting with the UK, Germany, and France, but faced stricter regulatory challenges in the US.
• Asia: In China, Temu uses the name Pinduoduo, which is one of the largest E-commerce platforms, but has not yet expanded to other Asian markets. Starting to come to Thailand. After the Philippines and Malaysia.
• Latin America: Temu is considering entering the market in the region, especially in Brazil and Mexico.

In each market, Temu must adapt its strategy to suit consumer behavior and local regulations.

Temu Future Predictions

1. Market expansion: Temu is expected to continue to expand into new markets, especially in Southeast Asia and Latin America.
2. Technology development: Temu may further invest in AI and machine learning technologies to improve its product introduction and supply chain management systems.
3. Adding product categories: This may expand into new product categories, such as food and beverage or digital services.
4. Specific Brand Development: Temu may develop its own product brand to increase profit margins and differentiate.
5. Sustainability Improvements: Due to environmental pressures, Temu may need to improve its sustainability and social responsibility policies.
6. Regulatory Response: Temu is expected to have to adapt to stricter regulations in many countries. Especially in the areas of consumer protection and trade competition.

As an SME business owner, competing with e-commerce giants like Temu may seem difficult, but it is not impossible. It's important to understand your strengths and find different ways to gain a competitive advantage.

Strategies that SMEs can implement:

1. Focus on quality and differentiation: Create a brand identity and story.
2. Superior Customer Service: Provide a good experience from advice to after-sales service.
3. Use Social Commerce and Build Community: Reach Customers Through Social Media Build a loyal customer base
4. Collaborate with business partners: exchange resources and create opportunities together.
5. Use technology wisely: Leverage CRM, digital marketing tools to increase efficiency.
6. Avoid price competition: Focus on value and quality over cheap prices.
7. Look for gaps in the market: Find a niche market that Temu hasn't reached yet.

IMPORTANT:

• Don't see Temu as just an enemy.

But let's look at Temu as an opportunity to learn and develop our own business.

• Don't be discouraged.

It may be easier said than done because it is really difficult to compete with the giants, but we must be confident in the strengths of our business and not stop developing.

There is a giant killer Jack that is constantly seen in the business world.

Interesting and addictive things to continue

1. How effective will Temu's price war strategy be in the long run? Most of the time, few people succeed because they get customers who are price-sensitive, lack loyalty to the platform, and have low switching costs, and are always ready to switch to something cheaper or better.
2. Small SMEs will definitely be affected by the price war. It is not the first time in the world that people use price strategies. It is not always a winner.
3. How should Thai SMEs adapt to the competition? I think many people have very good perspectives and methods to prepare for it. Adapt and compete If we can share these knowledge and experiences, there is nothing to be afraid of.

Temu's Advantages and Challenges for Thai SMEs in the E-Commerce Era

Temu Advantage:

1. Support from the Chinese government:

• Huge funding for technological development and marketing.
• Policies to promote overseas expansion, including tax benefits.
• modern technological and logistics infrastructure;

2. Size and Resources:

• It is a subsidiary of PDD Holdings, an e-commerce giant.
• It has a large network of suppliers, making it a good bargain.
• Access to the latest technologies and innovations

3. Cost Advantage:

• Produce products in China with low labor and raw material costs.
• High-efficiency logistics system Reduce transportation costs

The situation of Thai SMEs:

• Lack of strong policy support from the government
• Limited resources and capital make it difficult to invest in technology and marketing.
• Delayed digital adaptation Lack of knowledge and skills in using technology.

Approach for Thai SMEs:

1. Create Differentiation and Value:

• Focus on quality Uniqueness and excellent service.
• Develop products that meet the needs of niche markets

2. Develop a strong brand:

• Create a brand story and identity
• Use content marketing to build awareness

3. Take advantage of technology:

• Adopt technology to improve operational efficiency.
• Increase online sales channels through social media and e-commerce platforms.

4. Collaborate with the public and private sectors:

• Calling for policy support from the government
• Forming partnerships with the private sector to access new resources and markets.

5. Build networks and alliances:

• Collaborate with other SMEs to exchange knowledge and resources.
• Build bargaining power in procurement and market access

Role of the Thai Government:

1. Issue policies to support SMEs:

• Provides low-interest financing and tax benefits.
• Support export and access to international markets.
• Organized training to develop digital skills and business administration.

2. Promote the use of E-Commerce:

• Raise awareness of the benefits of E-Commerce
• Develop Thailand's E-Commerce platform to be competitive.
• Improve digital and payments infrastructure

3. Establish a fair playing field and protect consumers:

• Supervise foreign platforms to comply with Thai laws.
• Promote fair competition between Thai SMEs and foreign platforms.
• Developing Consumer Protection Laws in the Digital Age

By implementing the above guidelines, Thai SMEs will be able to increase their competitiveness and adapt to survive in the highly competitive era of E-Commerce.

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