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Author | Zhang Ziyi

Editor | Yuan Silai

Recently, foreign media reported that Temu was officially launched in Thailand on July 29, officially entering its third market in Southeast Asia. At that time, it had been a year since Temu entered the Malaysian and Philippine markets.

Temu's global growth rate is amazing. 36Kr previously reported that Temu's GMV in the first half of 2024 will reach about 20 billion US dollars, exceeding the full-year sales in 2023. As of July this year, Temu has entered more than 70 countries and regions around the world.

However, Temu does not seem to have applied the high-profile and fast-moving strategy in the Southeast Asian market. According to statistics from Momentum Works, Temu's GMV in Southeast Asia last year was US$100 million, far lower than TikTok Shop's US$16.3 billion.

Temu's slow pace of development in the Southeast Asian market seems unreasonable, but it is extremely consistent with the reality.

Low-priced goods have a broad space in the Southeast Asian market, which is Temu's best area and a competitive point for TikTok, Lazada, and Shopee. As a latecomer, Temu does not have a price advantage over other platforms.

Southeast Asia's young population structure and low e-commerce penetration rate have also led many e-commerce platforms to enter the market early. In addition, the economic levels and logistics infrastructure construction of Southeast Asian countries are different, which also requires segmented operations.

01 Problems beyond high discounts

Although the action is slow, Temu’s efforts in offering discounts remain unabated.

When Temu was first launched in Thailand, it offered a 90% opening discount. Currently, the website offers a variety of cross-border products and provides global reviews and ratings for popular products.

The Southeast Asia E-commerce Report 2024 released by Momentum Works shows that Thailand is the second largest e-commerce market in Southeast Asia after Indonesia, and its growth rate ranks second (after Vietnam), with a year-on-year growth of 34.1%. At the same time, Indonesia remains the largest e-commerce market in Southeast Asia, contributing 46.9% to the region's GMV.

Temu has not yet expanded to Indonesia, and judging from the competitive landscape, there is not much room for Temu in the Thai market. In 2023, the Thai e-commerce platform market will be dominated by Shopee (49% market share), Lazada (30%) and TikTok Shop (21%).

To address these challenges, Temu has developed its own logistics system to fulfill orders in different locations, and sellers can ship goods from Guangzhou to Bangkok by truck. It takes less than 5 days to deliver goods to the door, which is shorter than sea freight but slightly more expensive, according to Momentum Works.

A five-day delivery cycle is a huge improvement in efficiency for Temu. However, platforms such as Shopee and Lazada, which have been in the Southeast Asian market for a long time, have built their own logistics systems, which has greatly improved logistics efficiency.

The address systems, road planning, and transportation tools of Southeast Asian countries vary greatly. Indonesia is a "country of ten thousand islands" with 17,508 islands, and the Philippines also has similar problems with inter-island shipping. Vietnam and Thailand also have serious problems with urban road congestion. At the same time, the imperfect hard infrastructure such as roads and railways, and the low efficiency of labor in the last-mile delivery are all logistics difficulties. The logistics problems in Southeast Asia have not been improved by e-commerce platforms that have been developed for many years. Temu, which currently focuses on small parcels and adopts international logistics methods, will encounter many challenges if it wants to continue to expand into the Southeast Asian market in the future.

Payment is also one of the difficulties Temu encountered. Temu's mainstream payment methods are mainly international credit cards and PayPal, but the credit card coverage rate in Southeast Asia is not as high as that in China, Japan and South Korea, and it is even less likely to exceed that in North America.

According to the Global Consumer Trends White Paper Southeast Asia released by TikTok, cash on delivery will account for 2% of global e-commerce transactions in 2023. The proportion of cash on delivery as the main e-commerce payment method in Southeast Asian countries is generally higher than the global average, with Indonesia at 11%, the Philippines at 14%, and Vietnam at 17%.

In comparison, Shopee supports Jiekou payment in Southeast Asia and Lazada allows cash on delivery, which are more in line with local consumption habits.

02 It’s not just about the low price

Pinduoduo and Temu have swept across China, Europe and the United States with their low prices and the ability to tap into lower-tier market users. However, these strategies seem to be somewhat ineffective in the Southeast Asian market.

The "low price" knife is still sharp, but it is no longer a new trick in Southeast Asia.

A report on Southeast Asian consumer behavior and e-commerce strategies released by Shopify shows that with the rapid development of e-commerce in Southeast Asia, price has become one of the primary factors consumers consider when shopping. As inflation leads to reduced consumer spending, 83% of Southeast Asians cut spending they consider unnecessary; 39% of them plan to choose cheaper goods when purchasing goods.

Since the per capita GDP of most Southeast Asian countries has a higher room for growth compared with developed countries such as Europe and the United States, coupled with the impact of inflation, Southeast Asian consumers are increasingly paying more attention to the cost-effectiveness of products and are highly price sensitive.

Image source: "Global Consumer Trends White Paper Southeast Asia" released by TikTok

Lazada, which is positioned similarly to JD.com and Tmall in Southeast Asia, has already begun to bend over and become the first e-commerce platform in Southeast Asia to introduce a full-hosting model, mainly for extremely cost-effective goods. Unlike TikTok, Temu and other platforms, Lazada's full-hosting model has both cross-border sellers and local sellers, and sellers can choose to operate their own business or fully-hosted at the same time, and will use the full-hosting model for cost-effective and high-volume goods.

Shopee is also carrying out various discount activities, and the prices of goods are constantly falling. Pinwan found that, taking the women's clothing area of ​​Shopee Philippines as an example, there are a lot of clothes with free shipping for one peso. The highest unit price of the same category of goods not participating in the event is unlikely to exceed 120 pesos (just over 2 US dollars); the unit price of the same category of Temu is about 160-200 pesos, which is not much of an advantage in comparison.

For Southeast Asian consumers, there are too many choices of e-commerce platforms for low-priced goods. Temu's low prices are drowned in the flood of "value for money".

What's more, today's Southeast Asian e-commerce platforms are in a stage of chaos. TikTok Shop is overtaking quickly, Shopee occupies half of the market, and Temu is far behind them.

The "2024 Southeast Asia E-commerce Report" released by Momentum Works Ventures shows that last year, the total transaction volume of e-commerce platforms in Southeast Asia reached US$114.6 billion, with Shopee ranking first with a market share of 48%; followed by Lazada, accounting for 16.4%; TikTok and Tokopedia each accounted for 14.2%, ranking third.

In addition, last year TikTok acquired a controlling stake in Tokopedia, Indonesia's largest e-commerce platform, and held a majority stake. The combined market share of the two reached 28.4%, making TikTok Shop the second largest player in Southeast Asia.

In addition to the growth in market share, the young population structure in Southeast Asia has led to a high penetration rate of social media in the region, a high degree of acceptance of live e-commerce and social e-commerce, and a greater influence of KOLs on consumers. According to statistics from Statista, social media has become one of the main shopping channels for Southeast Asian consumers, and only 4% of consumers in Vietnam have never used social media networks for shopping. Tik Tok has inherent advantages in doing e-commerce in Southeast Asia.

Moreover, more traditional shelf e-commerce companies such as Shopee and Lazada have also followed the trend and adopted the live streaming e-commerce model in the Southeast Asian market. This is of course a new challenge for Temu.

Back to Temu itself, its development focus is still on the European and American markets. Last year, it vigorously promoted the full trusteeship model, and this year it is fully promoting the semi-trusteeship model, all of which are aimed at continuously increasing the market share in Europe and the United States and acquiring more customers. Moreover, Temu's return rules and low-price strategy in the European and American markets have made many sellers dissatisfied. After entering the Southeast Asian market, it is still unknown how many sellers are willing and able to participate.