How Temu Accelerates Growth and Retains Customers in the U.S. Market

In just over a year, Temu has achieved rapid growth in both traffic and sales, with the U.S. market standing out as particularly impressive.

In this article, we’ll delve into Temu’s online data to uncover the strategies and tactics that have led to its success in such a short period.

We’ll analyze the following four aspects:

  1. Continuous and Uninterrupted Promotional Marketing:
    This strategy helped Temu attract over 43 million website visitors in the U.S. market in less than 12 months.
  2. Significant Increase in Online Traffic and App Downloads:
    Their online traffic grew by 17% in February 2023, and app downloads surged by 40%.
  3. Consumer Behavior Research:
    Understanding consumer behavior has been the cornerstone of Temu’s progress.
  4. Traffic Sources and Specific Strategies:
    We’ll explore where Temu’s traffic comes from and the specific strategies they employ.

But first, let’s take a look at their website traffic and app download growth.

Rapid Growth in Website Traffic and App Downloads

Temu is an online retail e-commerce platform founded in July 2022. The company’s U.S. headquarters is located in Boston, Massachusetts, but it is operated by the Chinese e-commerce company PDD Holdings.

Just a few months after its launch, Temu had already garnered 172 million app users, making it as popular as TikTok and Facebook.

Let’s take a look at Temu’s website Traffic. As shown in the chart below, Temu’s monthly webpage visits in the U.S. have experienced exponential growth.

Why Did Temu Target the U.S. Market?

According to data from Similarweb, global e-commerce websites have maintained strong market growth over the past year.

The U.S. online e-commerce market accounts for over 20% of global traffic, and it continues to grow.

This stable and significant market share makes the U.S. a lucrative target for emerging e-commerce companies.

Before diving into Temu’s strategies, let’s first take a look at its competitors.

Who Competes with Temu?

By closely examining the audience overlap report, we can see the extent to which Temu’s unique visitors overlap with those of its competitors.

  • Temu’s target audience overlaps significantly with Amazon and Walmart.
  • There is no significant overlap between Temu’s audience and that of AliExpress.
  • Temu’s audience has a slight overlap with SHEIN and eBay.

Compared to e-commerce giant Amazon, Temu is still a relatively small competitor. 47% of Temu users also visited Amazon on the same day. However, only 2% of Amazon users visited Temu on the same day. This indicates that Temu is not yet a major competitor to Amazon.

Despite having a business model similar to AliExpress, Temu’s audience does not significantly overlap with AliExpress’s. There is some overlap between Temu’s audience and SHEIN’s because both brands compete for users on social media platforms.

Temu has a significant audience overlap with Walmart and eBay: Currently, Temu shares 8.1% of its audience with Walmart and 8.2% with eBay.

Having understood the audience overlap between Temu and its competitors, let’s now explore how Temu attracts consumers.

User Acquisition – Temu’s Massive Advertising Investment

Have you ever dreamed of becoming a billionaire? This was the concept behind Temu’s $14 million marketing campaign during the 2023 Super Bowl. Temu’s ads claimed that with Temu, you can shop without limits, just like a billionaire. Why? Because you can buy high-quality products at the lowest prices globally.

Directly measuring the impact of a Super Bowl ad is challenging, but within a week after the Super Bowl, Temu’s website traffic increased by 17%, and app downloads grew by 40% week over week.

Following the Super Bowl ad, Temu continued to promote its business by investing heavily in online advertising, spending over $200 million in the first quarter alone. Its online ad spending was second only to Amazon.

Temu has shown strong performance in terms of cost-effectiveness. While its spending was slightly higher than Walmart’s, its growth rate was six times that of Walmart.

Driving growth in registered users through online advertising is crucial for Temu. Strategically, Temu needs to acquire a large user base quickly to optimize its algorithms, which will be used later for user growth and purchase behavior analysis.

The result of this massive advertising investment was that Temu’s growth rate in unique visitors during the quarter outpaced all other competitors.

It’s Worth Noting: This type of marketing strategy is similar to the one SHEIN and TikTok employed when entering the U.S. market.

However, for long-term business success, user growth is not the only metric that matters. But for Temu, which is currently in the early stages of market entry, rapidly acquiring users and reducing user acquisition costs is a matter of survival.

User Retention – Temu’s Business Model: Algorithm-Based Recommendation Shopping + User Referrals

Improving retention rates is crucial for Temu, not only because higher retention increases a user’s lifetime value, but also because of Temu’s business model: algorithm-based recommendation shopping.

Traditional shopping relies on users searching for specific queries, while recommendation shopping uses algorithms to suggest products based on users’ interests and behaviors. This is similar to how social media platforms present relevant content based on user interaction data.

In other words, once a user searches for or purchases something, the platform will provide tailored product recommendations based on those search results. Moreover, since Temu collects a large amount of user data, its machine learning algorithms can accurately predict user needs and immediately reach out with more relevant product recommendations.

However, as of now, Temu’s retention rates are relatively low across the market, both on its website and app.

To gradually address the retention issue, Temu has adopted a viral marketing strategy. This strategy involves rewarding users for referring Temu to others, encouraging them to use the platform for a longer period. According to data, this approach has led to significant traffic growth and a notable increase in user retention over the past few months.

Temu’s Secret Weapon: The Supply Chain

Temu sells high-quality products at extremely low prices, promoting the concept of “shopping like a billionaire” to overseas consumers. When consumers see these astonishingly low prices, they might wonder: Why are the prices so low? Is the quality poor?

How does Temu respond? By optimizing the supply chain.

In the manufacturing, shipping, and storage processes, many hidden costs contribute to the final price. For example, when the exact demand for a product cannot be predicted, manufacturers might produce more than necessary, leading to additional manufacturing, shipping, and storage costs, which in turn raise the final price of goods.

Temu has perfected the solution to this problem. It all comes down to one tool: data.

Temu collects vast amounts of consumer data through its platform, helping them accurately understand and predict real consumer demand based on factors like consumer pain points, general needs, and external environmental impacts. Temu shares this data with suppliers at no cost, giving them a clear understanding of industry demand and consumer trends. This allows suppliers to quickly test new products with smaller order quantities, reducing waste in the supply chain and, consequently, lowering prices for consumers.

The same products at lower prices lead to increased customer satisfaction, which in turn encourages users to share Temu with others. This drives more active users to the platform, allowing Temu to accumulate more user data. With this data, suppliers gain deeper insights, creating a positive feedback loop that further enhances the process.

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