In September 2022, Pinduoduo launched the Temu platform, and its rapid rise in the e-commerce sector is remarkable. Temu has steadily expanded to Japan, South Korea, and Southeast Asia, starting in the European and American markets. It has entered over 40 countries in just over a year, capturing consumers’ attention with low prices. The app has been downloaded more than 223 million times, with over 100 million monthly active users in the US alone, demonstrating its strong growth resilience.
While expanding its business footprint, Temu has faced the high cost of cross-border logistics, which is a significant challenge. To address this, Temu has established solid partnerships with leading logistics companies and introduced maritime logistics, aiming for a new round of low-cost expansion.
Partners
To build an efficient logistics system, Temu has established solid partnerships with leading logistics companies, including well-known third-party logistics service providers like J&T Express, YunExpress, and 4PX and international logistics giants such as UPS, USPS, and DHL. This robust logistics alliance provides a strong backbone for Temu’s global business expansion.
Logistics Process
In terms of logistics operations, process design is straightforward and efficient. Merchants send their goods to Guangzhou, Dongguan, and Foshan domestic transit warehouses. From there, Temu or its logistics partners handle the cross-border direct mail service, delivering goods to overseas transit centres. Ultimately, these goods are promptly and accurately delivered to overseas consumers by local logistics companies.
The cross-border order fulfilment process is carefully planned, covering multiple stages such as order receipt, item sorting, packaging, distribution, and order status updates. Notably, Temu intelligently selects the optimal shipping warehouse based on order information and warehouse inventory, ensuring the best fulfilment efficiency.
Cross-Border Logistics Network
Temu employs a segmented transportation strategy, which includes domestic first-leg transportation, international trunk transportation, and last-mile delivery.
The first-leg transportation primarily involves consolidating merchants’ goods to Temu’s domestic warehouses, handled by courier and express companies.
International trunk transportation relies mainly on air freight and cross-border small parcels, collaborating with critical logistics providers like J&T Express and YunExpress.
Last-mile delivery is managed by international logistics companies such as UPS and USPS, ensuring rapid and accurate delivery from the destination airport to the consumer.
Overseas Warehouse Layout
In response to the US government’s measures against the low-price competition on e-commerce platforms, Temu strategically established a warehouse in Mexico to reduce long-term storage and transfer costs.
Additionally, Temu plans to set up warehouses on both the East and West coasts of the US and partner with several renowned international shipping companies to launch fast-ship services. This move aims to enhance logistics fulfilment capabilities further and reduce cross-border logistics costs.
Maritime Logistics
Since 2023, Temu has collaborated with world-renowned shipping companies, such as Matson, ZIM, CMA CGM, Maersk, and COSCO, to implement cross-continental cargo transportation via fast ships. This strategy significantly reduces logistics costs.
Before this, Temu primarily used air freight, which was 6-8 times more expensive than maritime shipping. Switching to maritime shipping can reduce logistics costs by 30%-60%. Moreover, naval shipping can transport more significant bulk goods, such as furniture and home appliances, more efficiently than air freight.
Another Wave of Price Cuts Approaching？
The transformation of Temu’s logistics system has substantially impacted its pricing strategy. By reducing logistics costs through partnerships and adopting maritime shipping, Temu has maintained and even lowered its product prices, making it more competitive in the global market. This cost-efficiency allows Temu to offer consumers unbeatable prices, which is a significant factor in its rapid expansion and high user engagement.
The introduction of maritime logistics, in particular, has enabled Temu to transport bulk goods at a fraction of the cost of air freight. This not only reduces the overall cost per item but also allows for greater flexibility in pricing. Consequently, Temu can pass on these savings to consumers, reinforcing its reputation for low prices and attracting a broader customer base.
Despite Temu’s remarkable achievements in a short time, it still faces challenges in building a comprehensive logistics supply chain network. Logistics remains a critical challenge for development.
However, optimizing logistics is essential for further expanding market share, reducing costs, and improving profitability. Temu fully recognizes this and is taking swift action to make necessary improvements.
Therefore, Temu’s logistics improvements may usher in a new wave of low prices.
