Chinese online store Temu has significantly reduced its advertising spending in the United States due to Trump’s new tariffs.
At the same time, the app has fallen from the top of the App Store download charts to position 69. Temu plans to raise its prices, and its website traffic through paid advertisements has decreased by as much as 77 percent. The company is shifting its marketing to other countries, such as the UK.
"Key Points
Temu has pulled back on its online ad spending in the U.S. in the wake of President Donald Trump’s sweeping tariffs.
The Chinese online retailer has also fallen swiftly from the top ranks of Apple’s app store.
Temu and rival discount retailer Shein have exploded in the U.S. by going on a marketing blitz."
Temu has ceased direct shipment of products from China to the United States because the Trump administration removed the so-called de minimis tariff exemption.
Temu has shifted sales to warehouses located in the United States and has increased the prices of products previously shipped from China by up to 150% with additional charges. Temu is now actively seeking US sellers for its platform and emphasizes that products shipped domestically are not subject to import duties.
I asked AI about that concept, which was somewhat unfamiliar to me:
De minimis tariff exemption refers to a customs rule according to which low-value shipments can be imported into a country without customs duties and taxes.
In the United States, this previously meant that shipments from abroad, with a value of less than $800, could enter the country duty-free and tax-free. This allowed companies like Temu and Shein, for example, to sell cheap products directly to consumers in the United States without additional costs.
Here’s an article about how Temu and Shein are falling victim to significant tariffs in the United States, as the previously existing de minimis exemption was removed.
This has raised product prices, but experts believe the companies will remain competitive because they have invested in local supply chains, strong marketing, app ‘gamification,’ and dynamic price management.
"Key Points
On Friday, the de minimis rule — a policy that had exempted U.S. imports worth $800 from tariffs — officially closed for shipments from China, exposing Temu and Shein to high duties.
But “don’t count them out … Not at all,” said Deborah Weinswig, CEO and founder of Coresight Research, who believes the apps are still capable of competing in the U.S."
The first quarter results significantly missed expectations, revenue remained weak, and earnings per share were also weaker than expected. The stock is falling sharply (I had to double-check a few times as I was so surprised by the strong reaction), on the other hand, the stock cannot be considered expensive in a way, but then again, the China risk is considerable, and the overall global situation is challenging, so it could be expensive looking to the future.
Temu and Shein are shifting more of their operations to Europe due to US tariffs, but according to the article below, they might face strict regulation here.
Both companies’ spending in the US decreased significantly in May, while growth was strong in the EU and the UK. However, these companies are criticized for, among other things, misleading practices, environmental harm from fast fashion, and working conditions. Additionally, the EU is planning new rules and fees, which could limit their growth.
The company is growing its market share at the expense of large competitors, especially thanks to its AI-powered “group buying model”. Additionally, PDD is doing well financially, with ample cash reserves and excellent profitability.
On the other hand, not everything has been easy; for example, Temu’s growth has been hampered by US tariffs and legislative changes. However, if tariff pressures ease, growth could accelerate further.
Analysts are generally still optimistic about the company, and according to the tweet, PDD appears to be an attractive buying opportunity at its current valuation… especially if the aforementioned pressures ease.
PDD’s revenue increased, but profitability lagged behind the comparison period. Specifically, the share of online advertising and other services grew significantly, while the development of transaction services was more moderate. Business profitability indeed weakened, even though revenue exceeded forecasts.
Costs increased in several areas, such as research and development and marketing, which explains the profitability issues.
Management emphasized investments in directly supporting merchants and building long-term competitiveness, which negatively impact short-term results. Growth continued despite competitive pressures, and the company prioritized long-term value creation.
Temu has risen to become Mexico’s largest e-commerce player, surpassing MercadoLibre and Amazon.
According to a tweet, its success is based on China’s cost-effective production, a growing online market, and price-conscious consumers. Additionally, Temu attracts local sellers with low requirements, meaning sellers can easily join, and Temu also manages an effective user experience through marketing and logistics.
According to the tweet, Pinduoduo could be the next rising star in the Chinese market; even though its revenue is smaller than JD.com’s, the company generates more margin thanks to its efficient advertising-based business model.
The model has also worked well in the United States, and China’s investment in AI supports Temu’s growth with even more effective advertising platforms.
PDD’s growth slowed significantly, as revenue and profit advanced more sluggishly than before and costs rose significantly. On the other hand, the company has a strong cash buffer and product development is being significantly increased, but competition is intensifying and the pace of the core business is slowing down.
Pinpinduo is quite an e-commerce giant, which will probably overtake Amazon at some point, but those Chinese companies really dominate the tweet’s list quite heavily.
I quickly checked and it seems things didn’t go so well for them; revenue growth picked up a bit from before, but profitability clearly weakened. The reason for this weaker profitability, on the other hand, was management’s conscious decision to invest heavily in developing the merchant network and supply chain, as well as in marketing. So, expenses grew faster than income, which naturally weighed on the results.
Management emphasized a cautious approach in their words; long-term competitiveness and an uncertain operating environment require continuous investments, even if they weaken short-term results, but in the longer term, we will see things turn green.
