While Temu thrives in the Western markets, its progress in Southeast Asia has been much slower.
Temu’s first attempt to enter Southeast Asia began in the Philippines, which had the world’s highest e-commerce growth rate of 24.1% in 2023 and is the region’s second-most populous country, with about 114 million people, 60% of whom are under 30.
Despite this potential, Temu has struggled to gain traction, with the Philippines contributing only 0.3% of its global traffic. With Temu’s global monthly traffic estimated at 446 million, the Philippines site gets around 1.338 million, comparable to a large-scale independent online seller, making it hard for Temu to sustain a platform that attracts many sellers.
Similarly, the Malaysian site has also seen little activity, and the planned launch of the Thailand site in January 2024 has not materialized.
So, what problems is Temu encountering in Southeast Asia? Why is its performance in this region so underwhelming, even reaching a standstill state?
Shopee and Lazada’s Strong Defense Against Temu
According to a Momentum report, Shopee and Lazada dominate the market share in most Southeast Asian countries, with both platforms consistently ranking in the top two regarding GMV.
On the one hand, Shopee and Lazada boast massive and stable traffic, with a significant portion coming from accessible organic sources (direct visits and organic searches). For example, in Temu’s first Southeast Asian market, the Philippines, Shopee and Lazada hold a crushing lead over Temu in traffic. Shopee Philippines had an average monthly visit count of 50.77 million in the past three months, and Lazada had 25.91 million, surpassing Temu’s 1.338 million.
On the other hand, Shopee and Lazada also excel in various metrics that measure user engagement (time spent on the site, pages visited per session, and bounce rate), outperforming Temu’s global averages.
For instance, in terms of average visit duration, Shopee Philippines reached 6 minutes and 58 seconds, while Temu only managed 5 minutes and 29 seconds. Regarding bounce rate, Shopee leads with 37.55%, compared to Temu’s 38.9%.
Shopee has pulled significantly ahead of Temu in average visit duration, pages visited per session, and bounce rate in Malaysia. Lazada also holds its ground well compared to Temu, showing no significant disadvantages.
Temu’s Low-Price Strategy Fails in Southeast Asia
Temu’s most significant advantage has always been its low prices. However, the e-commerce market in Southeast Asia is already characterized by low prices, with consumers accustomed to such bargains, especially with Shopee and Lazada dominating the scene. This makes Temu’s low-price advantage less noticeable.
Random searches for some product categories on Temu and Shopee’s Philippine sites show that Temu’s prices are not significantly lower and, in many cases, are even higher than Shopee’s. For example, a search for women’s swimsuits reveals that Temu’s prices generally range from 270 to 689 PHP, while Shopee frequently offers swimsuits at 120 PHP, 140 PHP, or even 88 PHP.
Moreover, Shopee and Lazada have launched their full-service models, driving prices down even further. This has intensified the price war in the Southeast Asian e-commerce market, which was already at low price levels.
As a result, Temu’s low prices, which have helped it outcompete many discount stores in the Western market, are not as effective in Southeast Asia.
On Lazada Philippines’ Choice page, many extremely low-priced items range from 4.3 PHP (0.077 USD) to 159 PHP (2.84 USD). Shopee’s third-party sellers and full-service models have sparked a whirlwind of low prices. Offers such as “new users get one item for 1 PHP with free shipping”, and various rock-bottom prices are often more appealing than many of Temu’s products.
Temu’s low-price strategy appears weak and ineffective in this context.
Southeast Asian Policies Resist Low Prices from Foreign Platforms
Southeast Asia’s industrial systems are still developing, making them highly sensitive to the impact of low-priced foreign goods on local industries.
In 2023, TikTok Shop’s operations in Indonesia were temporarily shut down due to the “concentrated promotion” model used by Chinese sellers during live broadcasts. These promotions, offering the lowest prices online, attracted numerous Indonesian consumers to TikTok, leaving local brick-and-mortar businesses struggling for survival.
Against this backdrop, local Indonesian merchants and industry associations continuously voiced their concerns and dissatisfaction to the authorities. As a result, the Indonesian government eventually announced the closure of TikTok Shop. Similarly, countries like Thailand and Malaysia are also becoming less tolerant of low prices from foreign platforms.
In October 2023, Thailand’s Ministry of Industry announced the establishment of a new regulatory body to address the influx of cheap imported goods, aiming to protect local businesses and safeguard consumer rights.
Temu, as a foreign platform prominently featuring low prices, is likely to face significant obstacles in further expanding into Southeast Asian countries. In contrast, Western governments have already undergone industrial upgrades, with much of their manufacturing shifted overseas. With its low-price strategy, Temu can thrive in Western markets but lacks the same environment for success in Southeast Asia.
After facing a temporary crisis in Indonesia, TikTok secured a partnership with Tokopedia, a local platform under GoTo, becoming its majority shareholder. Together, they are poised to capture 40% of the Indonesian e-commerce market. TikTok Shop’s Indonesian operations have resumed normalcy.
Temu, on the other hand, currently has a shallow foothold in Southeast Asia and will find it challenging to secure a similar local partner like Tokopedia for a safe landing.
Low Seller Interest in Joining Temu
Shopee and Lazada already have a low-price DNA ingrained in their platforms. Many sellers have already driven their prices down significantly on these platforms. As a newcomer constantly pushing for even lower prices, Temu finds it challenging to attract sellers.
From an operational standpoint, Shopee and Lazada have established mature ecosystems, including robust promotional systems and live shopping features. In contrast, Temu operates under a simpler model where sellers have a supply partnership with limited autonomy. Temu’s platform features are essential, lacking functionalities like live streaming, making it less appealing to many sellers.
In addition to Shopee, Lazada, and TikTok, Southeast Asia has other active local platforms like Blibli, Tiki, JusTalk, Zalora, Qoo10, Goshop, and ezbuy. This fragmented market means Temu will face numerous competitors, making its Southeast Asian path even more challenging.
In summary, Temu’s path in Southeast Asia is long and fraught with obstacles, making its journey challenging and uncertain.