Imagine carefully selecting products, preparing inventory, and eagerly joining Temu with high hopes, only to find the platform's rules changing as unpredictably as June weather. The once attractive free shipping policy now reportedly requires merchants to share the costs. For sellers relying on low prices to drive volume, this represents a significant blow. Where is Temu's "unpredictable wind" blowing, and how can merchants adjust their strategies to maintain stability in this fierce competition?
As the cross-border e-commerce platform under Pinduoduo, Temu has rapidly gained traction in the U.S. market since its launch. Leveraging Pinduoduo's domestic supply chain advantages and e-commerce expertise, Temu aims to provide Chinese suppliers with an efficient channel to reach overseas consumers and expand brand influence. However, as platform policies continue to evolve, merchants face new challenges.
To help sellers better understand Temu's latest developments, this article analyzes its operational models, cost structures, and recent policy changes based on information from Temu's first merchant conference and official sources. It also provides tailored strategies for different types of sellers.
Temu's Operational Models: VMI and JIT
Before examining recent policy shifts, let's review Temu's two primary operational models.
1. VMI Model (Vendor Managed Inventory)
This was Temu's initial primary model and remains familiar to most sellers. Under VMI:
- Merchants pre-stock products in Pinduoduo's designated domestic warehouses.
- The platform handles listing, sales, marketing, overseas warehousing, and logistics.
- Advantages: Sellers avoid overseas logistics and storage costs, focusing only on production and supply.
- Risks: Potential inventory stagnation leading to overstock and cash flow pressure.
VMI Process and Cost Responsibilities:
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Logistics and Returns:
- Products aren't returned to domestic warehouses; returned items are resold from overseas warehouses to reduce costs.
- Quality-related returns are partially borne by sellers, with the rest covered by the platform.
- Products failing quality checks are returned at the seller's expense.
- Slow-moving inventory costs fall on sellers, though the platform may suggest price reductions to boost sales.
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Cost Calculation:
- The platform sets retail prices; sellers only determine wholesale prices covering costs and profit.
- Sellers must maintain 5-7 days of inventory in Pinduoduo warehouses.
- The platform covers marketing, warehousing, overseas logistics, and currency exchange.
2. JIT Model (Just In Time)
To reduce seller inventory pressure, Temu recently introduced JIT:
- Sellers don't pre-stock but upload product information; goods are shipped to Guangdong warehouses only after orders are placed.
- Advantages: Zero inventory operation minimizes risk.
- Challenges: Strict 24-hour shipping requirement to avoid penalties (1x product value after 24 hours; 5x after 48 hours).
- Currently, only VMI sellers with proven bestsellers qualify for JIT.
Is the Free Shipping Benefit Ending?
The most significant recent change involves Temu's reported adjustment to its free shipping policy. Rumors suggest non-JIT shipping costs will be split 50-50 between sellers and the platform, potentially increasing financial pressure. Some speculate platform subsidies might disappear entirely.
According to one sourcing manager, the change is expected to take effect in December, creating uncertainty about Temu's future direction.
Adapting to Temu's New Policies
Should sellers continue with Temu amid these changes? The answer depends on their circumstances. Two types of sellers may benefit most:
- Inventory Clearance: Sellers with unsold but quality stock can use Temu's low-price strategy for quick liquidation.
- Excess Inventory Resources: Those with access to bulk overstock can leverage Temu's platform effectively.
Additional Recommendations:
- Refine product selection based on market demand and competitive differentiation.
- Optimize supply chains to reduce production and logistics costs.
- Enhance quality control to minimize returns and penalties.
- Monitor policy updates closely to adapt strategies.
- Maintain proactive communication with platform managers.
Temu's rapid growth presents both opportunities and challenges. As policies evolve, sellers must stay agile to remain competitive. Whether the free shipping benefit will truly disappear—and where Temu is headed—remains to be seen.