By Bloomberg Financial Insights
In a bold strategic pivot, Temu has rapidly embraced a semi-fulfillment model, reshaping its business ecosystem and disrupting its merchant landscape. The shift, which commenced three months ago, is accelerating a significant transformation among Temu’s seller base.
The End of Easy Gains for Small Sellers
For smaller merchants like Gao Le, the days of easy profits on Temu are over. “A year ago, we could find hit products by simply uploading images from supply sites and using software to list them,” Gao lamented. However, this scattergun approach is now obsolete. His “Temu Early Bird Group,” once bustling with activity, has quieted down, reflecting the broader struggles of small sellers with limited risk tolerance.
A Boon for Larger Merchants
Conversely, larger merchants are thriving under the new semi-fulfillment model. With their ability to manage after-sales rates and maintain a steady flow of new products, these sellers are leveraging their experience from platforms like Amazon FBA to maximize profits on Temu. An electric tool seller revealed plans to transition entirely to semi-fulfillment, citing lucrative margins and higher transaction volumes as key motivators.
Rapid Expansion and Strategic Realignment
Temu’s aggressive shift to semi-fulfillment is not just a minor adjustment; it’s a comprehensive overhaul aimed at aligning with local inventories. A Temu insider disclosed that within just two months, the semi-fulfillment model has been implemented across nine major markets including the US, Canada, UK, Germany, and Australia. This swift deployment starkly contrasts with the slower rollout of the full-fulfillment model two years ago.
Capital Market Optimism
The financial community has responded positively to Temu’s strategic pivot. Brokerages such as First Shanghai, Great Wall Securities, and Zheshang Securities have lauded the move, suggesting it will enhance Temu’s operational efficiency and reduce fulfillment pressures. This optimism has been reflected in Pinduoduo’s rising stock price, soaring from 110 to 150 yuan in recent months.
Diversification of Product Categories
As Temu evolves, its product offerings are also diversifying. High-value items like furniture, appliances, and industrial goods now feature prominently on the platform. Interestingly, Chinese products such as Daoxiangcun pastries and Wangzai milk are gaining popularity among overseas consumers. Particularly noteworthy is the rise of the BISS category—Business, Industrial, and Scientific Supplies—which includes items like commercial kitchen equipment and scientific apparatus.
The Pressure on Full-Fulfillment Merchants
With the rise of semi-fulfillment, full-fulfillment merchants face increasing challenges. The influx of semi-fulfillment merchants has intensified competition, making it harder for full-fulfillment sellers to maintain their market positions. The saturation of similar products has further compressed their margins.
Logistics and customs uncertainties add another layer of complexity for full-fulfillment merchants. The surge in volume has strained Temu’s direct mail capacity, leading to potential delays, especially during peak sales seasons.
Survival of the Fittest
As Temu undergoes this transformation, the market is witnessing a natural selection process. Merchants relying solely on product selection without robust supply chain capabilities are struggling. In contrast, those with strong supply chains and rapid product iteration are poised to thrive.
The road ahead may be challenging, but Temu’s relentless pursuit of innovation and efficiency continues to reshape its market dynamics. As the platform evolves, merchants must adapt or risk being left behind.
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