In the second part of our quarterly Temu update, we examine the latest developments in Temu’s logistics, marketing & advertising strategies, competition with Amazon and the current profitability and expectations for the future. We also share some insights about the ways Temu applies AI.
Thanks for the useful update! I have a few questions I was hoping you could shed some light on:
1. You wrote "the benefits of the Temu platform are reflected in the fast turnover of goods in 15-20 days, the rapid return of funds, and comprehensive platform support." A) What's the source of this 15-20 day estimate? B) Is it that the goods sell in 15-20 days once they're shipped to Temu's China FC or that these merchants are achieving an overall inventory turnover of 15-20 days for items they sell on Temu?
2. You wrote "Temu has the lowest fulfilment costs among all platforms, and its order processing costs are only 60-70% of those of other platforms. Even if it is loss-making in logistics, its actual fulfilment costs are still lower than its competitors’." Do you know what was included in this calculation, and which other platforms the 60-70% wsa based on?
3. You wrote that the semi-managed gross margin was 33% in the second quarter, how is that calculated ecxactly? I ask because in other parts of the series the term "gross margin" is used to reference Temu's gross take as a % of GMV. If you mean to say that Temu keeps 33c per dollar of sales and pays the merchant a supply price that averages 67c per dollar, that would be incredibly high for semi-managed given that the merchants are the ones responsible for logistics/fulfillment. Merchant anecdotes reported by Tech Buzz China and others suggest an average semi-managed take rate (gap between supply and consumer price) that's way lower than Amazon for the same items. 33% for FBM would be not be consistent with that.
We use various expert interviews from the Six Degrees Intelligence network as sources. Their exact identity is not disclosed to us and we can't go back to double-check with them. Having said that, these are details I can share:
1) Source: expert interview, September 19, 2024, Former TEMU e-commerce compliance management senior operations. I can't verify B for you.
2) Also, I can't go back to this source to verify your question.
3) Different sources quote different exact figures. Percentages of GMV should always be considered to refer to total sales, not specific products. Temu's gross profit in semi-managed is lower than fully-managed. We have a few examples of breakdowns of profitability of different sales models in different regions in Temu Watch #3.
Again, we need to work with the available data from various interviewed experts that sometimes contradict. We can't give further clarification.
I saw the 40% semi-managed take rate/gross margin estimate in Temu Watch #3, and had a similar question but I figured it was easier to ask based on the most recent estimate. A better way of asking might be: is it your understanding that the average Temu semi-managed take rate (for all sales) is actually higher than Amazon? This would be a very important point in understanding the business and would contradict the prevailing narrative that semi-managed sellers pay a lower take rate when selling on Temu than they do on Amazon.
Thanks for the useful update! I have a few questions I was hoping you could shed some light on:
1. You wrote "the benefits of the Temu platform are reflected in the fast turnover of goods in 15-20 days, the rapid return of funds, and comprehensive platform support." A) What's the source of this 15-20 day estimate? B) Is it that the goods sell in 15-20 days once they're shipped to Temu's China FC or that these merchants are achieving an overall inventory turnover of 15-20 days for items they sell on Temu?
2. You wrote "Temu has the lowest fulfilment costs among all platforms, and its order processing costs are only 60-70% of those of other platforms. Even if it is loss-making in logistics, its actual fulfilment costs are still lower than its competitors’." Do you know what was included in this calculation, and which other platforms the 60-70% wsa based on?
3. You wrote that the semi-managed gross margin was 33% in the second quarter, how is that calculated ecxactly? I ask because in other parts of the series the term "gross margin" is used to reference Temu's gross take as a % of GMV. If you mean to say that Temu keeps 33c per dollar of sales and pays the merchant a supply price that averages 67c per dollar, that would be incredibly high for semi-managed given that the merchants are the ones responsible for logistics/fulfillment. Merchant anecdotes reported by Tech Buzz China and others suggest an average semi-managed take rate (gap between supply and consumer price) that's way lower than Amazon for the same items. 33% for FBM would be not be consistent with that.
Hi Graham,
We use various expert interviews from the Six Degrees Intelligence network as sources. Their exact identity is not disclosed to us and we can't go back to double-check with them. Having said that, these are details I can share:
1) Source: expert interview, September 19, 2024, Former TEMU e-commerce compliance management senior operations. I can't verify B for you.
2) Also, I can't go back to this source to verify your question.
3) Different sources quote different exact figures. Percentages of GMV should always be considered to refer to total sales, not specific products. Temu's gross profit in semi-managed is lower than fully-managed. We have a few examples of breakdowns of profitability of different sales models in different regions in Temu Watch #3.
Again, we need to work with the available data from various interviewed experts that sometimes contradict. We can't give further clarification.
Thanks!
I saw the 40% semi-managed take rate/gross margin estimate in Temu Watch #3, and had a similar question but I figured it was easier to ask based on the most recent estimate. A better way of asking might be: is it your understanding that the average Temu semi-managed take rate (for all sales) is actually higher than Amazon? This would be a very important point in understanding the business and would contradict the prevailing narrative that semi-managed sellers pay a lower take rate when selling on Temu than they do on Amazon.
Hi Graham, sorry for the late reply, been busy preparing a number of new reports.
I don't know what the take rate is on Amazon.
We have some new data in an extra report that is coming up next weekend that might answer your question. If not, let me know.
Ed