to 51 million monthly active users in the US.

That's approaching the 67 million user base

that Amazon spent decades building.

Temu gained ground by selling cheap goods shipped

from China, like this $20 coat

or $9 stainless steel water bottle.

And its positioning itself

to be a bigger player in the US E-commerce landscape.

- Anybody who's not Amazon is the short answer

of who should be worried.

- [Narrator] Here's how a 1-year-old brand

is keeping the e-commerce industry on watch

and how, just like Amazon, it's redefining

what it means to shop online.

- You are an internet user, you'll see Temu everywhere.

- [Narrator] In just over a year,

the retailer has flooded social feeds

with curious consumers.

- Is Temu a scam?

- She's a serial Temu user.

- I guess I'm known as a Temu girl now.

- It aired ads at back to Back Super Bowls.

(upbeat music)

- [Narrator] And stirred up debate

on how to even pronounce the name.

They're freaking gaslighting you.

The name of the company is Temu, not Temu.

- I'm gonna be honest, I don't think I'll ever say Temu.

- [Narrator] For the record,

the company confirmed it's now Temu.

That confusion hasn't slowed the company down.

It quickly acquired over 161 million monthly app

users across the world.

- It's pretty extraordinary.

It's a speed of adoption

we really haven't seen in the past online.

- When I first wrote about Temu,

we reported that it launched very quietly,

and now Temu is the opposite of being quiet.

- [Narrator] That omnipresence is by design.

It spent $1.7 billion to advertise in 2023,

and JP Morgan analysts estimate

that Temu could spend nearly $3 billion in 2024.

It can spend that big thanks to the deep pockets

of its parent company, PINDUODUO

or PDD, the Chinese e-commerce company,

raking in billions annually.

- PDD Holdings emerged out

of nowhere when China's e-commerce industry was already

dominated by two companies, Alibaba and JD.com.

- [Narrator] So Temu's strategy

of selling extremely cheap goods from China

to build market share, isn't entirely new.

- They're just hoping to replicate its strategies

that worked very well in China.

- Other China founded companies like Shein

and TikTok are also making their mark in US e-commerce.

But Temu sets itself apart

in how it gamifies shopping online.

- You open up the app and there's like a roulette wheel

that you spend and you get a prize.

And the prize is usually here's a whole bunch

of dollars to go buy stuff.

And then as you're searching through products, first off,

you're amazed at how low the prices are

and then you see a ticker of how much time is left

before you know this offer expires

or before they're sold out of that product.

- [Narrator] That strategy has paid off.

Temu amassed more users in six months

than Shein and has in eight years.

Research firm Alliance Bernstein estimates

that $17 billion worth of goods were sold on Temu in 2023.

That helped boost PDDs market value 74%,

allowing it to briefly overtake Alibaba

as China's most valuable e-commerce company.

In the US, Temu's growth is putting e-commerce

giants on watch.

Temu and Sheins' success tells us

that consumers are willing to wait as long

as the products are really cheap.

- [Narrator] Temu says its standard shipping takes

six to 22 days,

while express shipping is four to 11 days.

- [Speaker] Temu connects factories and wholesalers

with consumers directly, cutting the middleman.

- [Narrator] Meanwhile, the biggest e-commerce companies

in the US have been betting big on faster delivery.

Amazon's delivery time has more than halved since 2022

to less than two days on average.

Other retailers are catching up,

with an average of about 4.6 days in January.

As Amazon sets the standard on speed

and Temu takes on price.

- Expect price to get more competitive.

Everybody needs to focus in the e-commerce space about

making sure that they've got a distinctive value proposition

that appeals to a consumer

and not just the first time around,

but has them coming back for more.

- [Narrator] For now, Amazon's hold on the industry

is still ironclad,

but the e-commerce giant has made some changes.

In late 2023, Amazon announced it would reduce the fees

it charges sellers for clothing under $20.

- Some analysts believe

that Amazon's move shows it's worried about losing

suppliers as well as consumers to other platforms.

- [Narrator] In a statement, an Amazon spokesperson said

that the company reduced the referral fee to help drive

and incentivize even greater selection for customers

and competitive prices.

But it's not just cheap prices and seller fees

that's putting pressure on other companies.

(upbeat music)

- [Speaker] Download the Temu app

and shop like a billionaire.

It's driving up digital ad costs.

That means it's more expensive for everybody in the space

to acquire new users.

- [Josh] There's no question that Temu

and Shein are are having an impact in the market.

I think those two players are almost single-handedly

having an impact on the cost of advertising.

- [Narrator] Those digital ads are especially important

for e-commerce companies.

- They need to be there on social media,

making sure that they're right in front of the consumer

to either purchase or to download the app

whenever they're in a mood

to go buy something or they're more intentional.

- It's like a game of chicken.

And for companies like Etsy

that are not growing as fast as Temu,

they cannot keep up with this level

of ad spending at all.

- [Narrator] An Etsy spokesperson said

that the company is seeing a strong return on investment

for its marketing costs,

and the Etsy marketplace is profitable.

That's the short term threat Temu poses to its competitors.

But in the long term,

what it's done is that it's actually changed

or is changing the economics of what it means

to run an e-commerce business.

The existing incumbents in the global e-commerce landscape

aren't just going to lie down

and say, well, I guess we've lost the sale.

They're gonna have to make some hard decisions on whether

they're okay to maintain that with lower sales volume

or whether they wanna be more aggressive in acquiring

consumers and retaining those consumers.

- [Narrator] But some analysts say,

Temu stratospheric growth isn't sustainable.

A Morgan Stanley report noted

that the company's momentum is cresting.

- So what we really now need to see is can they drive

that repeat purchasing behavior?

And that's still very much an open-ended question.

- [Narrator] Still, Temu has cash to burn.

- It's willing to lose money to exchange

for market share to acquire users.

- [Narrator] Analysts estimate the company lost

about $7 per order in 2023.

In a statement, Temu said,

"That its business model boosts efficiency

and that the idea that Temu sells at a loss

to gain market share is simply not true."

But with explosive growth comes more eyes on the company

and more controversy.

- That junk was trash, the sizing is off.

It literally looked like the pattern that I asked

for was printed on it.

I think only one thing actually looked like what I ordered.

Everything else was trash.

- Consumers have been concerned about the product

safety and quality.

I think selling really cheap products is the first step

for Temu to acquire users.

- [Narrator] Temu said in a statement that it works closely

with our independent sellers to ensure

that their products meet the required standards

and the US government is already watching the fledgling

company thanks to its Chinese ties.

A 2023 report from a congressional commission called out

Temu for concerns around data risks,

exploiting trade loopholes and use of forced labor.

The company says that in regards to the trade loopholes,

it is open to and supportive of any policy adjustments made

by legislators that align with consumer interests.

It added that it considers privacy

and security to be core functions of the platform

and that it's committed to ethical labor practices,

but the company is still primed to keep growing.

- I think that's what Temu, Shein, TikTok,

are really gonna bring to the marketplaces.

They're gonna force everybody to level up their game.

And we're gonna see who's real

and who was just a pretender.

(soft music)