[HN Gopher] Temu Is Losing Millions of Dollars to Send You Cheap...
___________________________________________________________________
Temu Is Losing Millions of Dollars to Send You Cheap Socks
Author : edward
Score : 38 points
Date : 2023-08-13 17:01 UTC (6 hours ago)
(HTM) web link (www.wired.com)
(TXT) w3m dump (www.wired.com)
| keiferwiseman wrote:
| I know this isn't an ad for Temu, but it makes me curious about
| it. I assumed it was a Slicker AliExpress.
| alephnerd wrote:
| > Slicker AliExpress
|
| Kinda.
|
| It's Chinese owner Pinduoduo is competing at the low value
| market with Alibaba, while JD is competing with Alibaba on the
| higher value market.
|
| Pinduoduo is going through the hypergrowth expansion phase
| right now to compete with Alibaba now that they have become
| complacent after Jack Ma did some scummy stuff at Ant Group.
| blamarvt wrote:
| It kind of is an ad for Temu. Please don't check it out. Temu
| is internet cancer. It needs to be cut out.
| AtlasBarfed wrote:
| Will it make Amazon nervous? Then I kind of like it...
|
| Also, is wish.com the same thing as temu, or basically the
| same thing? I mean, there's some tungsten ring for 50 cents
| on it that like another poster I might buy that and 20$ of
| other things just to see what actually arrives.
| Scoundreller wrote:
| Tungsten rings are a bad idea if your ring needs to be cut
| off. If you ever injure your hand/fingers wearing one,
| remove all rings immediately, but especially a tungsten or
| other hard metal ring.
| teamonkey wrote:
| Is there anything that makes it worse than AliExpress, eBay
| or Amazon?
| sottol wrote:
| They are very much (ab-)using the old get-you-hooked-by-
| loosing-money-then-slowly-crank-up-the-prices-til-it-hurts-
| when-you-have-a-monopoly trick?
|
| The others were never as aggressive in their quest for
| monopolies and made it on some other merit. Not to say the
| others are much better, but Temu will have to make that
| money back somehow, eventually.
|
| Basically price-dumping to destroy the competition and gain
| market share.
| darwinwhy wrote:
| I somehow doubt they're going to destroy Amazon anytime
| soon. The market they're in reminds me more of Blue
| Apron/Hellofresh than Uber/Lyft. May as well take
| advantage their funders' bad bet before the river.
| Scoundreller wrote:
| Don't need to "destroy" Amazon to be successful. Just
| need a few percent of sales.
|
| What I've noticed from Aliexpress reviews is that a lot
| of reviews are from places that don't have much of an
| Amazon footprint (e.g. Russia, E. Europe, Mid east).
|
| The other thing is that ship-from-China circumvents a lot
| of duties that can be hefty on some goods. And sometimes
| sales taxes (not in USA anymore, but still true
| elsewhere).
| bmitc wrote:
| Everyone is talking about the economics but ignoring the
| possibility that the goal of Temu is not strictly revenue and
| profit.
| dragontamer wrote:
| I mean, this is a Venture Capitalist forum of discussion, is it
| not? The focus on ycombinator / Hacker News is almost always
| going to be on business models and profits?
|
| What are other reasons for TEMU to be doing its actions? We've
| definitely seen dumping before in terms of a business strategy
| so its a thing we're familiar with, at least from a US-lens /
| perspective.
| deepfriedchokes wrote:
| What's the goal then?
| adoxyz wrote:
| I really don't get the appeal of Temu. I checked it out a while
| back and it's literally the lowest quality garbage at the lowest
| price possible. I was curious enough to see what I'd receive if I
| bought anything from them and spent like $10 on 7-8 products.
| They did arrive within 2 weeks but were absolute garbage that
| went straight into the recycling bin.
|
| Am I missing something?
| teruakohatu wrote:
| They don't seem a lot cheaper than Aliexpress other than the
| bundle deals with are the lowest quality stuff.
| porknubbins wrote:
| You don't indicate what you bought, but when I buy parts or
| components from Ali express its generally things where quality
| doesn't matter or where quality goods would be prohibitively
| expensive. Like a $10 sensor that just needs to be roughly
| accurate. Amazon is just as much Chinesium unless you pay way
| more for brand names so I don't see what the issue is with
| cutting about the middle man for applications where quality is
| not critical.
| rhaway84773 wrote:
| Amazon sells most of the same stuff.
|
| The appeal is that if you buy cheap stuff from Amazon you can
| get it for cheaper on Temu but have to wait 2 weeks instead of
| 2 days.
| ngokevin wrote:
| In my experience, a median item costs $15 on Amazon and $3 on
| Temu, while both being stuff manufactured in China for cheap.
| noncoml wrote:
| Amazon 2 days? I haven't seen that since before the pandemic
| Scoundreller wrote:
| Where? I'm in southern Ontario Canada, and my orders
| usually take 2-3 days and I'm not even using Prime.
|
| Turns out there's no value in holding something in a
| warehouse when you have it ordered.
|
| I think all Prime gets you is:
|
| 1. if the product is in a distant warehouse, Amazon will
| bring it over by plane instead of rail/truck.
|
| 2. Your orders are de-prioritized if they're over-
| subscribed (e.g. Christmas holidays, pandemic online
| shopping, Prime day)
| pessimizer wrote:
| My last three Amazon orders took between something like a
| week and a half and _three weeks._ They probably were
| actually my last three Amazon orders. I 'd rather go to
| the store.
| andrewia wrote:
| Some stuff, like electronics, can be petty decent from
| unbranded sellers. And some people are broke and need the
| cheapest clothes money can buy, regardless of the quality.
| coffeebeqn wrote:
| Looks like someone did a white label of Ali express . I can't
| believe these junk stores get meaningful VC money
| alephnerd wrote:
| They're public and generating billions a year in revenue.
| Check out PDD's quarterly earnings.
| LatteLazy wrote:
| >the lowest quality garbage at the lowest price possible
|
| A cynic would say you get it perfectly, and that this is the
| way retail has been since maybe the 80s?
| rsynnott wrote:
| So this is a pre-existing thing burning some money to enter a new
| market. This seems... normal? Presumably if all goes well,
| they'll build a US distribution/fulfilment network, costs fall,
| all is well.
|
| The relationships with suppliers just sound industry-normal, tbh;
| Amazon, big supermarket chains etc also have a reputation for
| being very aggressive on supplier pricing.
| dragontamer wrote:
| It worked for Jet.com.
|
| Then again, Jet.com existed when 0% interest rates were a thing.
| I don't think repeating that strategy in a 5.25%+ interest rate
| market will have the same effect.
|
| -------
|
| On the other hand, China has what? 15+% unemployment right now?
|
| Chinese companies must be dumping goods in an effort to survive,
| even if it's below profit levels. Maybe TEMU can exist in this
| market from the Chinese / low cost supply side perspective.
| alephnerd wrote:
| They raised around $1b in the secondary market on top of their
| IPO in 2018 raising around $1.6B and generate around $4-5B a
| quarter in revenue.
|
| They have a massive amount of cash on hand to allow them to
| execute their global expansion
|
| > Chinese companies must be dumping goods in an effort to
| survive, even if it's below profit levels
|
| The youth unemployment figure is largely due to a lack of white
| collar jobs, which is unrelated to industrial capacity.
|
| Low value manufacturing is still chugging along, and this is
| where PDD/Temu really shines - by providing a better
| marketplace UX for these kinds of manufacturers to sell
| globally.
|
| Medium value manufacturing would never sell via PDD/Temu,
| instead acting as a white label manufacturer or B2B.
| dragontamer wrote:
| You've got my argument backwards.
|
| Unemployment is good for manufacturing.
|
| Unemployment means that factories have their pick of workers
| and are free to fire low performers. This tends to lead to
| better performance for export driven economies (and TEMU is
| an exporter).
|
| -------
|
| High interest rates is bad for companies with (presumably)
| short term money losing / dumping strategies. It means that
| everyone's runway is proportionally less.
|
| $2.6 Billion in raised money means that the company needs to
| make $136 Million in profits PER YEAR to be comparable to a
| risk-free money market fund like VMFXX.
|
| The more money you raise, the more money you have to make to
| be comparable to the risk-free rate. It's a loadstone above
| and beyond.
|
| Jet.com had basically $0 vs MMFs because risk-free MMFs had
| nearly no money growth in 2016.
|
| ---------
|
| If your investors are willing to dump $2 Billion before
| turning a profit, your runway is far longer at 0% interest
| rates than at 5.25% interest rates.
| alephnerd wrote:
| The kind of person in the 16-24 bracket that is
| un/underemployed in the Chinese market is much more
| educated and unwilling to work in unskilled manufacturing.
|
| If you have a Bachelor degree it's a tough pill to swallow
| to work on an assembly line when your entire life you were
| told that a Bachelors degree would guarantee you a white
| collar job.
|
| Earning $5-6k working on an assembly line in a city where
| rent is around $200-300/month isn't worth it, so people
| decide to quit the job market to either take competitive
| civil service exams, studying to apply for grad school, or
| start small businesses (eg. Street vending, dropshipping,
| influencers) while staying with parents.
|
| We saw the same thing in the US after 2008 with skilled
| workers not as open to working service jobs.
|
| _________________
|
| > If your investors are willing to dump $2 Billion before
| turning a profit, your runway is far longer at 0% interest
| rates than at 5.25% interest rates.
|
| Ok. Fair point. That said, PDD's stock has held pretty
| stable following their COVID era peak. They're still
| trading 4-5x above their listing price, which was what was
| used to raise the equity round, so they have a pretty
| healthy bottom line.
| galuggus wrote:
| You are correct but it should be noted that most
| factories in China provide food and a dorm so rent is not
| an issue.
| n_ary wrote:
| Slight nit-pick
|
| > Earning $5-6k working on an assembly line in a city
| where rent is around $200-300/month isn't worth it...
|
| Did you mean 2000-3000/month? Even in beautiful heavenly
| EU, majority of the people I know, pays between 33-45% of
| their net-income as rent.
|
| Compared to that, 300/5000 = 6%, unless you mean there is
| some seriously heavy tax or other cost of living
| involved.
| dragontamer wrote:
| I see what you mean.
|
| I don't live in China so I'd be blind to an issue like
| that.
| rhaway84773 wrote:
| We hear about the graduates in the news especially since
| Xi told them to go work on farms, but what percentage of
| Chinese youth get a degree (I genuinely don't know). If
| it's anything like the US the majority of people entering
| the workforce don't have a degree. And manufacturing in
| China has really downsized over the past year. I suspect
| it isn't easy for them to find jobs either.
| alephnerd wrote:
| Based on released govt and market data, the early career
| white collar market has bottomed out.
|
| Approximately 25% of 16-24 yr old jobseekers are college
| graduates (this is probably overstated as China recently
| began treating both Vocational Institutes and 4 year
| programs as colleges in statistics), but only around
| 15-18% of college graduates end up signing an offer by
| graduation, and most industries have seen around 50%-66%
| of companies reduce NCG hiring. [0]
|
| By most standards this is absolutely a skilled jobs or
| white collar recession.
|
| Manufacturing downsizing has happened, but that was done
| by Chinese companies either moving factories abroad to
| Vietnam, Laos, Cambodia, India, etc or begin automating
| manufacturing [1]
|
| Note: treat college in above as any post-secondary
| program (eg. Vocational school, 4 year degrees, graduate
| degrees) as all 3 types of programs are merged as a
| single bracket in Chinese govt statistics.
|
| [0] -
| https://pdf.dfcfw.com/pdf/H301_AP202305151586638633_1.pdf
|
| [1] - https://www.mfat.govt.nz/assets/Trade-
| General/Trade-stats-an...
| Scoundreller wrote:
| But they are turning currency-controlled Chinese Yuan/Renminbi
| into US$.
|
| Surely that's worth losing a few percent on each sale?
|
| Anyways, just bought some bike lights from there for the first
| time that were cheaper than aliexpress (I buy quite a few to
| donate to my bike co-op).
|
| Got a too-good-to-refuse offer at payment window for 150 6" zip
| ties for CAD$1.79.
|
| Impressed that they offer a $5 credit if my order arrives after
| 11 calendar days.
|
| Wouldn't touch the app though.
___________________________________________________________________
(page generated 2023-08-13 23:02 UTC)