Why Is Temu So Cheap? An Inside Look At Next-Gen Manufacturing

Temu is an e-commerce platform that connects customers to affordable merchandise sourced from top manufacturers and brands. Founded in Boston in September 2022, the company has quickly gained users, becoming the most downloaded app in the U.S. and even featuring a prominent Super Bowl ad encouraging customers to “Shop Like a Billionaire.”

 Items on Temu’s platform often approach wholesale costs, and these prices are a huge part of the platform’s appeal. But as more users flock to Temu, many are wondering: Why is Temu so cheap? How can it offer quality products at such low prices?

 Why Is Temu So Cheap? 

Temu is so cheap because of its next-generation manufacturing model. The model involves Temu sharing consumer insights with manufacturers to ensure that they design and produce products that consumers want without incurring the expenditure of excess inventory. 

Temu helps manufacturers design products to meet demand while reducing overhead inventory and marketing spending. In exchange, Temu asks its partners to pass on these cost savings to consumers in the form of lower prices. 

How Next-Generation Manufacturing Works 

The next-generation manufacturing model involves integrating real-time insights on consumer preferences with streamlined manufacturing and shipping practices.

 Temu’s goal is to help its partner brands and sellers design products that consumers want, leading to more sales and less waste. While other e-commerce platforms have streamlined supply chains downstream of product design, the innovation behind the next-gen model is to engage directly with manufacturers at the earliest stages of the design process. Temu provides both a robust shipping infrastructure and informed direction on which and how many products manufacturers should focus on.

 In other words, next-gen manufacturing relies on real-time demand forecasting. Temu’s advanced data analytics capabilities can predict where shopping trends are going as they evolve. The goal is to eliminate problematic lags between the time the product is being developed and the moment when it hits the market. Advanced demand forecasting helps manufacturers know that the products they’re making will be the ones that consumers want to buy on the platform.

 This approach benefits the consumer in addition to the manufacturer. While the seller saves on the manufacturing costs of wasted inventory, consumers are rewarded with merchandise that is customized based on their preferences. Temu features standard articles in categories such as electronics, cleaning material, and fashion, but it’s also known for offering niche commodities. A recent list of top-selling goods on the platform included both a bath mat for under $5 and firework garden lights for under $5.

 “Consumers can enjoy affordable prices with the flexibility of buying just what they need while having access to the widest available choice of products that meet their different needs. They can shop from more than 250 product categories available on the platform, from fashion and beauty to pet supplies and home improvement tools,” said a Temu spokesperson. 

“At the same time, consumers can find unique products developed by manufacturers enabled by Temu’s next-gen manufacturing business model. These in-trend products are developed with the benefit of real-time insights into consumer preferences, resulting in a closer match to what consumers want.”

 While the products offered on Temu speak to consumer demand, some shoppers may still be skeptical of the low prices on the platform. Price is often associated with quality, but the next-generation manufacturing model may simply be shining a light on how the costs of manufacturing inefficiencies are passed on to the consumer. The model is built on the idea that sellers can make quality goods for less if they’re informed with the right insights and have access to an efficient supply chain. 

“Temu might be exposing a white space in the market wherein brands have been producing at extreme low cost, and along the value chain there’s been so much bloated cost passed on for margin,” said Michael Felice, an associate partner at management consulting firm Kearney, in a recent CNN article on Temu’s growing popularity. 

The Future of Manufacturing: Personalization and Sustainability 

Temu’s emphasis on more personalized products allows it to reach a diverse customer base. 

While esoteric or niche interests may not be as well served by mainstream retailers or traditional e-commerce platforms, Temu is trying to empower consumers with niche needs and wants by matching those needs to manufacturers with the capabilities to meet them.

 The company’s name comes from its motto: “Team Up, Price Down.” This phrase sums up Temu’s effort to use next-gen manufacturing to create a mutually beneficial e-commerce ecosystem for consumers, brands, and sellers. Consumers benefit from tailor-made items offered at the best prices, and sellers benefit from reduced manufacturing costs and higher sales thanks to popular merchandise.

 Crucially, this mutually beneficial system doesn’t have to sacrifice quality to offer consumers lower prices, as Temu’s insights and sellers’ expertise combine to streamline the production of quality goods. 

“Many of the sellers in our global network have accrued years of experience and expertise in supplying products to global brands and consumers. They can produce quality prices at the most efficient costs as a result of the economies of scale and technological innovation they have built up over the years,” said the Temu spokesperson.

 And the benefits are not merely about quality products and economical rates. One of the key drivers of lower prices from the next-generation manufacturing model is the reduction of unnecessary inventory and production processes. But this reduction doesn’t only lower prices. It also decreases waste, making the next-generation manufacturing process more sustainable than standard methods. Temu provides manufacturers with detailed information on what consumers actually want, so the manufacturers don’t create waste by producing excess inventory. 

Shoppers may initially wonder why Temu is so inexpensive, but a closer look at the platform’s next-generation manufacturing model suggests that the answer is due to informed product design and efficient supply chains, not low-quality products. This new approach to manufacturing has the potential to make Temu an innovator in an efficient and inclusive retail industry that offers affordable products that truly reflect the diverse needs and preferences of consumers.