Temu's PR Strategy of Saying Very Little

All about Chinese Cross border e-commerce, my Elle Woods moment and musings on doing my own PR

Greetings and salutations! I hope you are relishing the beauty of fall wherever you are. The past few weeks have been a whirlwind for me personally and the world at large. I hope you are keeping your loved ones close and gathering strength from all the places you can find it.

Last week,

The Guardian

’s Helen Davidson reached out to me for a Temu story she’s writing. (The full piece is live now, and you can read it here!) In the same week, I was invited to participate in a one-hour panel discussion about cross-border commerce on Pheonix TV and contribute to an upcoming story in the Rest of the World. And in thinking about what I wanted to say, I went down the rabbit hole on all things on cross border e-commerce, and came out of these experiences thinking more about “PR best practices.”

Full disclosure: I have shopped on Temu and LOVE my $5 lavender earbuds

Temu’s PR dao of non-action 无为而治

I set out to answer these questions:

1. How does Temu benchmark against other cross-border e-commerce platforms?

2. Does Temu care about sustainable growth? And if it does, how will it ever achieve it?

3. What is the platforms’ relationship with customers and suppliers?

And in doing my research, I couldn’t help but notice Temu’s “do-nothing” approach to its external comms despite no shortage of attention from both the regulatory side and media. Granted, it’s not an easy environment to do corporate communications in this U.S.-China geopolitical climate. But that never stopped Temu from making bold moves. (remember its “Shop like a Billionaire” Super Bowl ad?)

Now, Temu is staying out of the limelight for good reasons. Temu’s Chinese parent company PDD 0.00%↑ has been on a tear and its stock has doubled in the past 12 months. The last time a Temu spokesperson commented in the news was in July when it addressed its lawsuit with Shein, a fellow Chinese cross-border e-commerce platform. While Shein is not immuned to many, if not all, of Temu’s woes, it has started investing in lobbying in response to lawmakers' calls for increased supply chain transparency. Temu has remained notably quiet on both the PR and lobbying fronts.

Not getting ahead of the issues, however, will likely backfire. Temu is facing growing supplier dissatisfaction about the platform rules and operations. On Chinese social media platforms like RED小红书, a quick search reveals U.S.-based Chinese consumers complaining about receiving mini-sized products instead of what they expected and suppliers voicing frustrations over stringent rules that eat into their already narrow margins.

Moreover, Temu currently has 1091 complaints on Better Business Bureau. In just one year Temu’s been in the U.S., it has managed to get almost as many complaints as Shein in almost three years. While BBB does not have legal enforcement powers, it can trigger further investigations that result in legal consequences if unlawful activities are uncovered.

Given that Temu is taking the proverbial “lie flat” route to PR, lobbying and consumer complaints, does Temu care about sustained growth in the U.S., and if so, how will it achieve it?

Temu is heavily investing in social media campaigns, display ads, and paid searches to grow its customer base aggressively. This marketing strategy mirrors the initial approach of its parent company, Pinduoduo (PDD): an unyielding focus on customer acquisition, viewing competitors and the market through a winner-takes-all lens, and incentivizing purchasing behaviors to boost sales in specific product categories.

Temu reportedly allocates $500 million quarterly for marketing and promotions, which is a staggering $2 billion annually. To put it in context, Amazon shelled out $20.6bn on marketing and promotion in 2022, which made up just 4% of its net sales revenue (a cool $514bn in 2022). In stark contrast, with an annual revenue estimated at $6 billion, Temu's marketing budget is off the charts.

Temu, of course, is in its early days versus Amazon. But Temu’s aggressive marketing spend on social media ads has inadvertently driven up the costs of ads inventory for everyone. And it’s not a very sustainable way to grow the business.

Cross border e-commerce companies’ relationship with suppliers

This growth-at-all-cost approach has its downsides, and the losers in this are the small and medium-sized suppliers. Shein and Temu are moving toward a “full-service model” （全托管). Under this model, sellers relinquish the right to pricing which gives the platforms an outsized power to decide the profit margin of the goods sold. If the platform can’t sell the items, it can (and does) lower prices, or threaten to remove the listing. And since sellers might have prepared inventory in advance, and would have to pay for the return shipping costs from Temu warehouse, sellers will often take the loss instead of the hassle.

As a result of these unpredictable platform risks beyond suppliers' control, they optimize where they can. This might mean compromising on product quality, “creatively” navigating de minimis custom duties, or even shrinking the size of the products.

Tiny egg whisk and trash bags source: Little Red Book小红书

The way forward for Chinese overseas cross-border companies…

…was the question my fellow panelists and I attempted to answer during the close to two hours discussion on Phoenix TV’s 一虎一席谈 (show airing in end of November).

The eventual pivot for these new e-commerce platforms like Temu, Shein, and new entrant, TikTok shops, will center on boosting conversion rates. Both Shein and Temu have around a 5% conversion rate, lagging considerably behind the market leader, Amazon, which boasts a rate close to 12%.

As U.S.-China geopolitical tensions escalate, Chinese ecommerce firms are poised to encounter intensified scrutiny. As they complete the initial customer acquisition stage, sustainable growth becomes imperative for both their parent companies and investors. Beyond reaching break-even, a solid corporate reputation is key. This “reputation” 声誉 is anchored in their dealings with suppliers, communication with external stakeholders, and balance aggressive KPIs with sustainable growth. With their expanding influence, it becomes imperative for these Chinese cross-border platforms to nurture enduring trust and consistently meet market norms and standards.

(Yes, I absolutely preached the above on Chinese TV, and channeled my inner Elle Woods while I was at it.)

Aforementioned preaching, full show will be available end of November

PR Takeaways from doing my own “PR”

Though I’m not a journalist, since starting this substack and writing an op-ed column, I have a newfound appreciation for the craft. Running Wavelet Strategy means doing reputation management for my own professional brand, so here are some recent key learnings:

Think Like a Journalist: PRs write from a different logic—it’s about sounding professional and covering all bases. But when responding to inquiries, consider the story from the journalist's viewpoint. How do they want to tell it? What angles might they be interested in? What is your value-add to the conversation?

The Triad: The reporter’s job is to synthesize different views, string a story together, and probe the reader to think deeper about a company, an issue, or an event. You have to do more than just presenting facts; reporters do not need information they can google themselves. Three words: Facts, context, insights: provide data sources, engage in analytical discussions, and present a narrative with original thoughts.

Depth Versus Brevity in Corporate Communications: There's a tendency in corporate communications to gravitate toward succinct, risk-averse responses. A prepared statement might be the default for large corporations, especially when stories break before all the information is available. However, enriching the on-the-record answers with context and detailed insights can make a big difference. It not only simplifies the journalist's task by providing them with a fuller background but also showcases the interviewee’s ability to offer well-researched perspectives. Reporters want sources that don’t waste their time. The more “meat” there is to the argument, the less back and forth during the process, the more of your words will likely be included in the piece.

And that’s all for this issue of Calling the Shots. I’d love to hear from you, too! What made you subscribe? Have you shopped on Temu? What books are you reading and would recommend? What’s your favorite season? (mine is fall)

Don’t be a stranger!

Hugs,

Ivy

(Also, let it be a reminder that eating 馒头for breakfast each morning is indeed a form of discpline. Have a wonderful week ahead.)