What's Next for Temu’s Global Expansion?

Dear friends,

I just came back from a two-month trip to China and will be sharing my learnings in the coming weeks.

But first, I recently wrote an op-ed piece for Tech in Asia on Temu, following its disappointing earnings results, along with some thoughts on what the next step in its globalization strategy might be. Spoiler alert: it’s not Southeast Asia.

Here’s why Southeast Asia isn't the focus: SEA is too crowded a market to be profitable, with several factors working against Temu:
🚫 Fierce competition from Shopee, Lazada, and TikTok Shop.
🚫 Complex logistics and diverse regulatory environments in each country.
🚫 Regulatory crackdowns, such as Thailand's recent investigation into Temu's compliance practices.

The real battle is deciding how to allocate resources between Europe and the US—something Temu must do quickly.

Temu currently holds the most inventory in the US market, but it’s keen to increase its market share in Europe, according to company insiders. The first step is to continue investing heavily in subsidies and driving traffic to attract consumers, which will, in turn, bring more quality sellers onto the platform. However, recent supplier protests over Temu's "fully managed" model have raised concerns. On top of that, growing scrutiny over Chinese e-commerce practices and potential changes to the de minimis tax exemption could hit profitability.

Compared to the US, European markets have higher compliance standards, longer certification processes, and longer cash flow cycles—setting a higher bar for sellers. Despite these challenges, Temu has already launched in Germany, France, Italy, Spain, the UK, and the Netherlands, signaling its commitment to Europe.

I also hear from sources that Temu will focus on higher value and product categories such as furniture and home goods. I’m already visualizing the return nightmares that will ensue.

Grateful for Peter Cowan's excellent editing. To read the piece in full: https://lnkd.in/e8r6MsRs