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Is China’s Temu a Threat to Amazon?

The E-Commerce Landscape Today

Over the past two decades, e-commerce has revolutionised the conventional retail landscape, reshaped worldwide supply networks and introduced a new way for billions of people to purchase goods and services. In 2023, global e-commerce sales were $6 trillion, and US e-commerce sales exceeded $1 trillion, roughly 12% of all retail sales. This was 1% in the year 2000 when Amazon, one of the largest drivers and beneficiaries of e-commerce growth, launched its online marketplace. Amazon changed the products available to consumers, the cost, and time available to purchase. Today, it has 37% e-commerce market share in the US.

Why is this important? In just 4 years, the total number of people who make one purchase online in the US is forecast to reach 316 million, an 18% increase or 50 million more people. In our opinion, any rising threat or disruption to Amazon’s dominance in America has the potential to influence so much of commerce. What may have seemed unlikely – challenging Amazon’s market leading position – could be a possibility, as Chinese online retailer Temu was the most downloaded shopping app globally, including #1 on the US App Store in 2023.

Most Downloaded Apps on the US App Store (2023) 

Source: Apple, 2023. Data as at 13/12/2023. Temu was the most downloaded app by global app store downloaded and US app store downloads. Logos are for illustrative purposes only and are protected by trademarks. Infusive disclaims any association with them and any rights associated with the trademarks. Any references to third parties outside of Infusive is for information purposes only. References to third parties should not be constructed as an endorsement by Infusive. There is no assurance that trends will continue.

Temu's Rapid Expansion

Temu has become a formidable player in the e-commerce arena, since their relatively recent launch in September 2022. A subsidiary of PDD Holdings, a $190 billion Chinese e-commerce conglomerate listed on the Nasdaq, Temu sells a diverse range of over 1 million products, including clothes, household appliances, electronics, and cosmetics, available in 47 countries. Their tagline ‘Shop Like a Billionaire’, embodies their reputation for low prices and value for money. In their first year of operations, 9% of Americans purchased from the platform, and 70% of were are aware of the Temu. This awareness underscores their rapid growth, as they are forecasted to exceed $34 billion in sales in 2024. Temu’s progress garnered praise from Alibaba founder Jack Ma in December, and the following day, PDD Holdings surpassed Alibaba in market capitalisation. It’s success, in our opinion, comes down to their manufacturing to consumer distribution model and aggressive marketing campaign. 

Temu’s business operations and how this differs to Amazon. 

Temu is a direct offshoot Chinese e-Commerce giant Pinduoduo, part of the PDD Holdings. Pinduoduo was founded in 2015 by Colin Huang, a former Google employee and entrepreneur with ventures including a gaming company. Initially specializing in affordable fresh groceries, the online retailer quickly expanded its offerings to encompass various low-cost product categories. Pinduoduo is to be one of the  largest Chinese eCommerce company measured by monthly active users. Pinduoduo operates a ‘Manufacturer to Consumer’ (M2C) model that sources products directly from manufactures, eliminating middlemen including distributors and retailers. This model is particularly appealing for lesser-known manufacturers and brands who can reach a large audience without the need for significant marketing budgets.

Similarly, Temu also runs an M2C model and does not own any physical stores or courier services. The way it manages logistics plays a pivotal role in attracting vendors to join its platform. Upon receiving approval for sellers' products, items are sent to a designated warehouse located in China's southern Guangdong province. From this point onward, Temu assumes full responsibility, overseeing everything from international shipping to after-sales services. This approach, as described by a Temu spokesperson, “creates a digitized flexible global supply chain that reduces the usual inefficiencies and extra costs that are often found in traditional retail.”

This differs from Amazon’s model that includes both ‘Business to Consumer’ (B2C) and ‘Consumer to Consumer’ Marketplace (C2C) models. In the B2C aspect, Amazon directly sells products to consumers, often under its own brand or through acquisitions of other brands. The Marketplace model allows third-party sellers to list and sell their products on Amazon's platform, making it a facilitator between sellers and buyers.

While it's important to note that Temu still operates unprofitably, they remain resolute in their commitment to prioritize market share expansion over immediate profitability, similar to Amazon's growth strategy over decades.

The shopping experience

Temu strives to “reinvent the online shopping experience to be more interactive and engaging” – according to a company spokesperson. To do this, Temu incentives its users to participate in games, collect coupons and share deals with friends throughout the shopping experience. Alongside their large product offering, this gamified approach creates a treasure trove-like shopping experience, reminiscent of what is often found in dollar stores.

In App Temu Game

This approach has resonated with younger, price conscious consumers. With an average customer age of 39 and from lower-income households, Temu has tapped into significant market segment. In the US, 75% of their customers are from a household making less than $100k. (62% of households in the US make < 100k). The demographic of this customer is closely aligned to those shoppers’ income characteristics at Dollar Stores, Walmart and Amazon. Cross-shopping behaviour with Temu is most common for shoppers at discount retailers, Ollies and Shein

Household Income Breakdown of US Retailers' Customers

Source: UBS Evidence Lab, 2023. Data as at 08/2023. For illustrative purposes only. There are no assurances trends depicted or described will continue.

Percentage of US Retail Customers that Shop at Temu

Source: UBS Evidence Lab, 2023. Data as at 08/2023. For illustrative purposes only. There are no assurances trends depicted or described will continue.

Advertising Spend and Market Impact

A key factor in Temu's rapid growth has been their significant investment in advertising, estimated at $10 million per day. In 2023, Temu accounted for 11% of all digital retail ad spend in the US and in December, their website surpassed US 160 million visits. This aggressive advertising so significant that it has pushed the overall cost of digital advertising in the US. E-Commerce platform Etsy’s CEO Joshua Silverman underscored this in his 2023 Q3 earnings call: “[Shein and Temu] are almost single-handedly having an impact on the cost of advertising, particularly in some paid channels in Google and in Meta.” Their campaign directs users to download and shop on their mobile app, earning tens of millions of downloads each month.

Temu Global App Downloads in Their First Operating Year


Source: Statista, 2023. Data as at 30/09/2023. For illustrative purposes only. There are no assurances trends depicted or described will continue.

Our View

With respect to Amazon, our view is that Temu is a risk we are monitoring closely, yet at this stage, it appears contained.

  • From a scale perspective, Temu is still a small player compared to Amazon. Next year Amazon Gross Merchandise Value (GMV) will estimated at ~$916B, vs Temu $34B.

2024 Estimated E-Commerce GMV

($Billion USD)

Source: Goldman Sachs Global Investment Research. Data as at 11/12/2023. For illustrative purposes only. There is no assurance that trends will continue.

  • Amazon’s fast, free shipping is the top reason internet U.S. users shop on Amazon. Their same day and one day shipping capability is a key differentiation from the ~7-15 day shipping time offered on Temu.

  • Despite Temu’s success in driving internet traffic to their platforms, they have low visitor to sales conversion rates. Only 4.5% of visits to their website or app resulted in transactions, compared to 56% on Amazon. Similarly, 17% of customers shop at Temu once a month or more, compared to 59% at Walmart and 55% at Amazon.

  • Pricing gaps may not be as large as people think. While the price differential for Temu’s best sellers to an equivalent Amazon item are large, many other product categories, including clothing, home and electronics have a much smaller price differential.

Using price filters, shoppers can find goods on Amazon that are not meaningfully more expensive versus Temu prices

Source: Deutche Bank Research. Data as at 17/10/2023. For illustrative purposes only. There is no assurance that trends will continue.

  • Temu’s offering is mostly low priced, unbranded, discretionary goods and they do not sell products from known brands to Western consumers such as Apple or Nike. Amazon users can buy branded and non-discretionary items on the platform.

  • Prime membership does create some loyalty / flywheel from consumer behaviour. The average prime customer on Amazon spends $110 per month, in addition to an annual subscription of ~$140 per year. 59% of US households have at least one Prime subscription.

  • As Temu has gained prominence, there has been a decline in the stock prices of both Ebay and Etsy since May 2023. Conversely, Amazon's share price has surged by 50% during the same period. This trend suggests that Temu may pose a more substantial competitive challenge to Ebay and Etsy than Amazon.


THIS ARTICLE IS FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE RELIED UPON AS INVESTMENT ADVICE. This article has been prepared by Infusive and is not intended to be (and may not be relied on in any manner as) legal, tax, investment, accounting or other advice or as an offer to sell or a solicitation of an offer to buy any securities of any investment product or any investment advisory service. The information contained in this document is superseded by, and is qualified in its entirety by, such offering materials. This document may contain proprietary, trade-secret, confidential and commercially sensitive information. U.S. federal securities laws prohibit you and your organization from trading in any public security or making investment decisions about any public security on the basis of information included in these materials. Any reference to third parties outside of Infusive is for informational purposes only. References to third parties should not be construed as endorsements by Infusive or its personnel.


THIS ARTICLE IS NOT A RECOMMENDATION FOR ANY SECURITY OR INVESTMENT. References to any portfolio investment are intended to illustrate the application of Infusive’s investment process only and should not be used as the basis for making any decision about purchasing, holding or selling any securities. Nothing herein should be interpreted or used in any manner as investment advice. The information provided about these portfolio investments is intended to be illustrative and it is not intended to be used as an indication of the current or future performance of Infusive’s portfolio investments.


DO NOT RELY ON ANY OPINIONS, PREDICTIONS, PROJECTIONS OR FORWARD-LOOKING STATEMENTS CONTAINED HEREIN. Certain information contained in this document constitutes “forward-looking statements” that are inherently unreliable and actual events or results may differ materially from those reflected or contemplated herein. Infusive does not make any assurance as to the accuracy of those predictions or forward-looking statements. Infusive expressly disclaims any obligation or undertaking to update or revise any such forward-looking statements. The views and opinions expressed herein are those of Infusive as of the date hereof and are subject to change based on prevailing market and economic conditions and will not be updated or supplemented. There is no assurance that any trends referenced will continue.


EXTERNAL SOURCES. The data points and other information regarding the companies discussed herein are from research sources and tools believed to be reliable, including public company filings. Although Infusive believes the information from such sources to be reliable, Infusive makes no representation as to its accuracy or completeness. Any logos in the presentation is for illustrative purposes only. Logos are protected by trademarks. Infusive disclaims any association with them and any rights associated with the trademarks.


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