Temu takes on Amazon. Can they win?

Temu now ranks as the No. 2 e-commerce website in the world, overtaking eBay in the process. News reports from China suggest that Temu has aspirations to become the No. 2 e-commerce site in the U.S. and the No. 1 in Europe. Its meteoric growth is fuelled by significant investment in advertising to drive traffic and re-engage users.

eBay lost its position to Amazon in 2015, primarily due to Amazon's strategic focus on building its own marketplace, while eBay remained focused on peer-to-peer transactions and auction-style sales. Temu is gaining market share from Amazon by consistently offering lower prices, though this is likely an unsustainable long-term strategy, especially given rising labour costs in China.

Two key differences between Temu and Amazon are gamification and scale. The Temu app incorporates gamification elements such as rewards and bonuses, creating a fun and engaging shopping experience. Additionally, Temu operates in 79 countries, compared to Amazon's 22, giving it greater access to markets with less-established marketplace offerings.

We will continue to keep a watchful eye on Temu, but for now, as most of its products are low-cost commodity items, it is not yet a marketplace for premium brands.