PDD Holdings’ Temu Starts Internal Testing in Canada
More than half of the products offered by Temu, a shopping app owned by Shanghai-based internet giant PDD Holdings, have started internal testing in Canada. Boston-based Temu’s impending foray into Canada comes on the heels of the platform’s arrival in the United States in September of last year.
One merchant said that Temu’s goal is to gradually expand into more domestic markets. According to Jiemian News, as early as two months ago, some buyers indicated that they were going to explore the Canadian market in the first half of 2023, giving sellers the chance to actively prepare. Still, they heard that the threshold might be raised.
With ultra-low discounts once as high as 90% off, Temu successfully topped the Google Play software download list in the US in just a couple weeks. In November, Temu surpassed Amazon, SHEIN and Walmart to win the top spot in the list of all apps downloaded from the iOS App Store in the US.
Temu’s popularity was no accident. Advertising on major social platforms in North America and inviting KOLs for product evaluations cannot be separated from Temu’s aggressive spending on marketing. According to a report by LatePost, Temu had already invested about 14 billion yuan ($2 billion) in marketing expenses two months after it went online. High investment has indeed brought customers to Temu. According to Similarweb’s data, social media traffic accounts for 21.5% of Temu’s total traffic, among which Facebook and YouTube are the most important.
After successfully pioneering the US market, Temu is adopting the same approach in Canada. As a world-famous trading country and the 10th largest e-commerce market in the world, Canada’s per capita GDP reached $52,000 in 2021, ranking among developed countries with a high internet penetration rate. According to data from eMarketer, the sales of e-commerce in Canada will increase by 15% in 2022, reaching 109.28 billion Canadian dollars ($81.54 billion), and it will continue to grow throughout the next few years.
The impacts of the pandemic spurred rapid growth of the Canadian e-commerce market. The country, which has similar consumption habits and levels to the US, might be the next promising market with great potential.
Judging from the platform’s experience in the US, cost control and integration of resources are the reasons why Temu can maintain low prices and guarantee timeliness. First of all, merchants need to send goods to the firm’s Guangzhou warehouse first, then Temu distributes them uniformly from the point of departure to the delivery address through international shipping. From mid-December, Temu and sellers have borne 50% of the cost of transportation at the point of departure, while the platform has taken the costs of the latter two parts.
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Haitong Securities estimated that the distribution cost of Temu’s international transportation and the place of receipt was $8 to $9 per order, which was far lower than usual, due to subsidies from firm partner J&T Express. At present, J&T Express and YunExpress are the service providers of Temu in the US. They are not setting up an independent network in the country, but are purchasing services from local logistics providers. However, Canada’s long navigation cycle and relatively small population lead to longer logistics timelines, presenting a challenge for Temu.
According to a report by Alpha Works, one PDD investor said, “PDD has contributed most of my profits this year. Although I have adjusted my positions several times, I earned lots of money. At present, 40% of my total profits come from PDD since investing in US stocks.”