Temu, the e-commerce platform celebrated for its cut-rate prices, has launched a legal offensive against fraudsters who masquerade as the company. These imposters lure customers into downloading bogus apps that infest devices with malware and pilfer personal data, according to lawsuits filed in the US in the past two weeks.

Boston-based Temu, operating under its legal name Whaleco, has filed suit against seven websites accused of deceptively prompting visitors to download a counterfeit app. The aim, the lawsuit claims, is to snatch personal details from Whaleco’s clients, slip malware onto their devices, or hack into them. This legal move, initiated on November 7 in a U.S. court, comes on the heels of Temu’s earlier legal action against twenty websites for trademark violation and orchestrating internet phishing scams to defraud consumers.

“Fraudsters are posing as Temu on fake apps and websites to scam consumers. This not only damages our reputation but also hurts consumers who were deceived into believing they were engaging with genuine Temu platforms,” said a Temu spokesman.” We will take swift legal action to defend our rights and shield our customers from such malicious and unlawful activities.” 

In the year since Temu launched in the US, it has soared in popularity, propelled in part by its “Shop Like A Billionaire” Super Bowl commercial. Now, the e-commerce contender has broadened its reach, serving customers in 48 countries, from the UK to Malaysia.

Sensor Tower data reveals that Temu broke into the global top 10 most downloaded apps list in the second quarter of 2023, surpassing both its rival Shein and the American titan Amazon in downloads. Further, a data.ai analysis reported by CNBC shows that Temu has outstripped Shein in Japan and South Korea, clinching the top spot in shopping app rankings over an extended stretch.

Wendy Chen, a GAM Investments senior investment analyst, points to Temu’s innovative “fully entrusted business model” as the engine of its meteoric rise. This model blends direct retail sales with a marketplace for third-party vendors, drawing on the strengths of both. Temu streamlines its operations by sourcing directly from manufacturers, who are tasked merely with shipping to Temu’s global warehouses. The company then takes the reins, overseeing customer acquisition, pricing, logistics, and customer service.

This strategy affords Temu the quality control, timely delivery, and customer satisfaction of a first-party model, while it still benefits from the extensive selection and scalability of a third-party model. By connecting factories directly with consumers, Temu not only slashes middlemen expenses but also sidesteps the hazards of overstocking, Chen explains.

According to a recent report by Chinese tech media outlet 36 Kr, the US market, the first destination Temu entered, currently contributes 60% of the platform’s overall sales. The same report stated that the platform’s third quarter sales surpassed $5 billion, and the extraordinary pace of growth may allow Temu to exceed its annual GMV target of $15 billion this year.

“We are in a cost-of-living crisis and people are looking for anything to save a bit of money,” Miya Knights, the publisher of Retail Technology magazine, told the Guardian. “Everyone likes a bargain and Temu ticks those boxes.”

To be sure, Temu’s popularity has come at a price, with a small group of scammers capitalizing on the company’s reputation to launch phishing schemes and install malware, according to its lawsuit. Critics have also accused Temu of intrusive data practices, allegations that Temu has sought to dispel by prominently listing the permissions that it seeks from users. 

In its latest lawsuit, Temu accuses websites such as Dltemuapp.com and temudl.net of mimicking Temu’s domain name and describes them as primarily designed to lure consumers into making purchases or to mislead unsuspecting consumers.

“Bogus websites like these serve as a platform for various cybercrimes. They could be used to extract sensitive and financial information from duped consumers. They could be used to install malware on people’s sites (and/or those of their employers) to steal information or install viruses and serve as leverage for large ransoms,” Temu said in its lawsuit.

“In any of these scenarios, the results would be devastating—and the harm irreparable–to (Temu) and the public alike,” according to the lawsuit.

Meanwhile, Temu has intensified efforts to warn consumers about fake Temu promotions and scams. The company has also advised users of the importance of downloading the official Temu app from the Apple Store and Google Play Store, which have stringent vetting controls.

PDD Holdings, owner of Pinduoduo and Temu, recently reported a 58% yearly increase in revenue for the first quarter of 2023. The company attributed the better-than-expectation performance to online retail recovery in China.

10 Billion Ecosystem Initiative

Along with the announcement of quarterly earnings, PDD also unveiled its latest major program, “10 Billion Ecosystem Initiative,” marking the company’s third initiative worth RMB 10 billion ($1.4 billion) following the “10 Billion Subsidy” and “10 Billion Agriculture” initiatives. The primary objective of this plan is to allocate additional resources to high-quality sellers, aiming to enhance the overall service efficiency and quality of the platform’s merchants.

This move aligns with the comments made by Chen Lei, PDD’s co-CEO, during the earnings conference call. He emphasized the company has been steadily shifting its strategic focus from pursuing rapid growth to emphasizing the quality of growth.

“Under our long-term strategies, we are continuously strengthening our supply chain capabilities and expanding the supply of high-quality merchandise. We will further increase our support for quality sellers by launching our 10 Billion Ecosystem Initiative and further improve the quality of our service while continuing to optimize our platform ecosystem.” Chen said.

Started as a platform for selling agricultural products, PDD is known for its stable and efficient supply chain. The company continues to uphold its policy of zero commission on agricultural products. As a result, agricultural merchants spends about only one-third to one-half on Pinduoduo than on other platforms. In early April, the company appointed co-founder Zhao Jiazhen as co-CEO. Zhao, with extensive experience in supply chains, focuses more on supply chain management and domestic business operations, while Chen Lei leads global expansions.

The co-CEO lineup highlights the company’s commitment to advancing supply chain expansion and optimization. During the early days of the company, Zhao played a key role in overall operations and supply chain development in the agricultural business. In 2020, he successfully led the Duoduo Maicai team in pioneering the community group-buying business model in Jiangxi province.

According to various reports, under Zhao’s leadership, PDD’s specialized teams will progressively explore 100 high-quality industrial hubs across at least 10 provinces in China this year.

A mature and robust supply chain relies on diverse and high-quality sources of goods. Pinduoduo’s new major initiative seeks to uphold the company’s position as a crucial source of goods in the e-commerce industry. The company promises this program not only involves providing financial support of billions of dollars to high-quality merchants, brands, and small and medium-sized enterprises but also assisting these merchants in expanding into international markets.

Extra subsidy for 618

Ahead of this year’s mid-year 618 shopping festival, PDD launched its 10 billion yuan subsidy program on April 6th, specifically targeting home appliances and consumer electronics. In addition to the existing subsidy, they will invest another to provide extra 10 billion yuan in subsidies for a wide range of digital home appliances, including smartphones, tablets, refrigerators, air conditioners, and others.

Major domestic and international brands such as Apple, Huawei, Honor, Xiaomi, Midea, Haier, Sony, TCL, Nintendo, Dyson, and Vivo have already participated in the program.

PDD will also collaborate with brands like Midea, Haier, Xiaomi, Vivo, Asus, TCL, and Hisense to launch a series of factory-direct products. Combining subsidies with direct sales to provide better discounts and benefits to consumers.

By promoting the direct connection between popular factory products and consumers through subsidies and direct sales, this approach benefits both the supply and demand sides. This initiative aims to offer consumers competitive prices and boost the manufacturing sector’s recovery.

Pinduoduo, one of China’s largest e-commerce companies, is hosting the third Smart Agriculture Competition on Chongming Island in Shanghai. The competition challenges four finalist teams to grow high-quality lettuce in 90 days without sunlight or soil.

Each team is comprised of agriculturalists, data scientists, and plant engineering scientists who will employ interdisciplinary technologies such as artificial intelligence and agricultural planting to cultivate Crunchy lettuce, a variety known for its crispy and sweet taste, within a closed container environment.

The winning team will be judged by their ability to produce higher yields of better lettuce while using lower energy consumption, earning them the championship title.

Planting lettuce via AI

Lettuce is one of the most popular and widely consumed green leafy vegetables. However, in China, the wholesale price of lettuce is significantly affected by seasons. Data from the Ministry of Commerce showed that lettuce prices are higher during the Spring Festival period and early autumn while a bit lower in summer.

From 2019 to 2021, the wholesale price of lettuce recorded the highest price of RMB 6.81 (about $1) per kilogram in November 2021, which is near twice the lowest price of RMB 3.62 during this period.

It generally costs between RMB 4 and RMB 8 to produce one kilogram of ordinary lettuce. Still, some plant factories will consume 10 degrees of electricity to produce a kilogram, which makes the cost goes up to RMB 20.

In contrast to traditional outdoor planting, the four outstanding teams are practicing “vertical farming,” which refers to simulating the growing environment of water, sunlight, and temperature required by agricultural plants via AI algorithms to improve crop growth land utilization.

CyberFarmer, a team of six members from a key laboratory of China Agricultural University, revealed their idea of fine-tuned management based on feedback obtained from real-time monitoring of lettuce growth conditions and then transforming the growing experience into a decision-making algorithm. This team won the AI category in the first Pinduoduo Smart Agricultural Competition.

“The future of facility agriculture should be a cross-disciplinary complex, which is supported by a large number of sensors and big data algorithms, thus changing the mainstream experience-based agricultural guidance at this stage,” said Xu Dan, the leader of LettUs Grow, one of the teams that entered the final round of the competition.

Megacities like Beijing and Shanghai have more developed agricultural and logistical infrastructure, but a variety of factors can still constrain vegetable supply. Vertical farming, which is favored by tech companies as well as venture capitalists in past years, could lead to a stable and sustainable food supply if it is eventually commercialized.

However, vertical farming in containers currently requires excessive energy consumption. In this competition, the energy consumption for regulating each environmental element will be reflected in the numbers on water and electricity meters. The most important criterion is to reduce energy consumption as much as possible while maintaining lettuce yield and quality.

The Shanghai Jiao Tong University team said their goal is to find the ideal conditions for plant growth while increasing production by more than 40% and reducing energy consumption by over 25% compared to conventional plant factories.

Pinduoduo’s agricultural efforts

Pinduoduo has hosted the Smart Agriculture Competition since 2020, hoping to drive innovation and sustainability in China’s agricultural sector. The winning team has to prove that the management model they developed is commercially viable.

An intelligent decision strategy for growing strawberries, created by teams from past competitions has already been successfully applied to actual agricultural production in China’s southwestern Yunnan province.

According to published reports, a farmer in Yunnan achieved an RMB 30,000 to 40,000 yield increase per season and saved nearly RMB 4,000 in fertilizer costs through an artificial intelligence farming system developed by the team. In the northern province of Liaoning, a person can manage 7-8 barns while doubling the yield with the help of the system.

Over the years, the Shanghai-based firm has continued to invest heavily in agriculture – one of the most fundamental sectors of the country’s economy.

Agriculture touches everyone’s life, yet it is still low in digitization. Therefore, the company’s effort to digitize this sector may bring itself more opportunities. The company also sees it as a way to give back to society by empowering agriculture with digital technology and artificial intelligence in the long run.

PDD Holdings’ Temu made a big splash with its first-ever Super Bowl commercial on Feb. 12, “Shop Like a Billionaire.” The ad, which aired during the first and third quarters of the game, showcased Temu’s mission to help consumers to live their best lives by offering quality goods at affordable prices. The upbeat jingle in the commercial, with the lyrics “I’m shopping like a billionaire,” emphasized Temu’s focus on making shopping accessible to everyone.

A Temu spokesman explained the decision to run the commercial on arguably the biggest stage in US advertising: “It’s our first time, and we are thrilled to be part of the 2023 Big Game lineup to share Temu’s mission of quality at affordable prices. Through the largest stage possible, we want to share with our consumers that they can shop with a sense of freedom because of the price we offer. ‘Shop Like a Billionaire’ is no longer a dream because of Temu.”

The Super Bowl is one of the biggest events in the United States, not just in terms of sports but also as a cultural touchstone. Each year, millions of viewers tune in to watch the game, and the advertisements that air during the event are some of the most highly anticipated and discussed. The Super Bowl is thus an opportunity for companies to reach a massive audience and make a big impact.

To celebrate its Super Bowl debut, Temu is also holding a $10 million “Shake & Cheer” giveaway to show appreciation for its customers and reach out to potential new customers, the first of its kind in the industry.

The Super Bowl debut and $10 million giveaway took place a week after Temu announced its expansion into Canada, with shipping set to begin this month. This will bring its quality, affordable goods to a new market and marks another significant milestone.

The story of Temu has been one of rapid expansion and scaling up. Since its introduction last September by PDD Holdings, Temu has broken records in expanding product offerings (at last count, it had 29 major categories and more than 250 subcategories of merchandise), onboarding merchants, and attracting consumers to download and use its app. Temu has been the top daily downloaded app on major US app stores since late 2022.

Unlike other startups, Temu is backed by a multinational company with abundant funding. Temu’s parent organization, the Nasdaq-listed PDD Holdings Inc., is also behind another successful e-commerce startup, Pinduoduo, growing it from an online fruit distributor to one of the major e-commerce platforms. PDD Holdings’ extensive network of merchants and shipping partners has helped Temu to jumpstart its business in the US and attract quality sellers to list their products on the platform, a crucial first step to attracting customers.

What lies ahead for Temu now that it has advertised at the Super Bowl? The attention from the high-profile event is likely to drive more consumers to try the platform.

PDD Holdings, the owner of the Pinduoduo and Temu e-commerce platforms, reported higher revenue in the third quarter and said it will increase spending on research and development to enhance its core capabilities. The Nasdaq-listed company reported total quarterly revenues of RMB 35.5 billion ($4.99 billion), up 65% from last year, while operating profit was RMB 10.4 billion.

“We need to continue to deepen our value creation, increase our R&D investment to help further improve the supply chain efficiency,” Chen Lei, Chairman and CEO of PDD, said during a Monday earnings call.

In the earnings call, Chen was asked about the progress of Temu — the US online marketplace launched in September. Based in Boston, Temu has sought to differentiate itself in the US e-commerce industry as a destination for value-savvy consumers.

With Temu, the group will “start from the fundamental needs of consumers and apply the operations and supply chain know-how that we have gained over the years, and strive to create our own unique value,” Chen said.

“We also understand the need to constantly experiment and expect the process to be full of challenges. We will be patient and work toward creating long-term value for consumers and our partners,” he added.

Temu advertises that it can offer prices closer to the cost of production because of its access to manufacturers keen to bypass traditional stores and market directly to consumers. Many of these factories produce merchandise to specification for global brand names, while others offer their designs to be relabeled and sold by global brand names.

“Temu has entered the North America market, and it will continue to leverage the operation and supply chain know-how it has accumulated over the past few years to provide long-term value for users,” Goldman Sachs analysts wrote in a research note.

PDD Holdings pioneered the use of the “team purchase” — in which consumers can band together to purchase items at a lower price — to quickly and directly connect demand and supply. The group also incubated nearly 1,000 factory brands since its founding in 2015.

“We have leveraged digital technology to shorten the product development cycle and help manufacturers create products that closely match market needs. This can help manufacturers to build their brands,” Chen said.

Temu may be able to carve out a niche for itself in the competitive US e-commerce industry if it can offer new value-for-money brands to consumers. But it would first have to overcome the lack of brand recognition and earn consumers’ trust as a legitimate and trustworthy e-commerce site.

Online sales during Black Friday, the biggest shopping day in the US, climbed 2.3% to $9.12 billion, Adobe Analytics said on Nov. 26. Consumers mainly spent on electronics, smart-home items, and audio equipment, while toys and sporting goods also performed well. The National Retail Federation, an industry trade group, is forecasting a jump of 6% to 8% over the $890 billion consumers spent online and in stores in November and December of 2021.

To grab a slice of this retail pie, Temu would have to offer something new and better than what’s available in the market. Winning consumers’ trust in the US could open the door for forays into other markets.

“We are still in the early stage of exploration, and we have many areas to improve in terms of the services we provide,” Chen said of the group’s expansion into North America. “The process of learning and optimizing will take time, but I’m certain the experience we gain along the way will be very valuable for our company and our team.”

From Walmart’s “Save Money. Live Better” to Amazon’s “Spend Less. Smile More” to Costco’s vision statement on “unmatched savings,” one can tell from the slogans of top US retailers that Americans love deals and expect to get the most value out of shopping dollars.

Now the battle to attract these value-seeking consumers is intensified with a new e-commerce site called Temu, launched in September 2022 offering a wide range of merchandise at ultra-low prices.

“When I say cheap, I’m talking about the prices, not the items!”, Tammy Henry, a Temu user, recently commented on the review site Trustpilot, giving Temu a five-star rating, adding that he honestly can’t believe how cheap everything is.

Temu is owned by the Nasdaq-listed PDD Holdings, a multinational conglomerate that holds and operates a portfolio of businesses, including Pinduoduo, an agriculture-focused e-commerce platform. Listed in 2018, PDD has built a vast network of sourcing, logistics, and fulfillment capabilities and shares them with its various businesses worldwide.

PDD is known for pioneering “next-generation manufacturing,” channeling consumer insights to manufacturers to help shorten the product development cycle and create products that closely match market demand. In 2021, PDD handled 61 billion orders from more than 11 million suppliers, generating $14.7 billion in revenue and $2.2 billion in net income last year.

It remains to be seen whether offering quality products at competitively low prices is enough for Temu to gain a foothold in the US market. As a newcomer, Temu will have to build trust and recognition among consumers, no easy feat competing with dozens of established e-commerce sites and brick-and-mortar retailers.

With rising inflation putting pressure on household budgets, more consumers are expected to look for ways to stretch their dollars without compromising their lifestyles.

Temu has said that it can balance quality and price because of its access to the vast network of manufacturers and logistics partners built up over the years by its parent, PDD Holdings. The platform also said it plans to work closely with manufacturers to curate and create products that suit the tastes and needs of consumers.

As Temu put it, the goal is to give “retail buyers access to wholesale prices for the widest range of products anytime, anywhere, in any quantity,” without the drawbacks of minimum order sizes or other restrictions associated with wholesale clubs.

“Temu is the type of app you open when you feel like buying something, with nothing specific in mind. And it’s so cheap, you end up shopping,” said Connie Chan, a general partner with Andreesen Horowitz, the venture capital firm, on Twitter. At the same time, “the products are curated, the baseline quality meets a certain bar.”

Many direct-from-factory brands have signed up to the Temu platform to sell to American consumers. LovelyWholesale, an international e-commerce clothing brand, launched its store on Temu last week with more than 150 styles. The store received 38 shop reviews and a 4.7 rating out of 5 in the first three days. 

“For the past 11 years, we have built a strong garment production line and have advantages in garment fabric. We hope our affordable and practical clothes can benefit more customers through the Temu platform,” the company said in a release.

For now, Temu is ramping up its product offerings and focusing on refining the customer experience. The site recently introduced an express shipment option free for orders above $99 and a $5 credit if deliveries run late.

Juozas Kaziukenas, the founder of Marketplace Pulse, which collects data on e-commerce marketplaces, noted that Temu is starting its US rollout by showcasing its network of more than 11 million suppliers to prospective customers. “The goal is likely loftier than that,” he wrote in a blog post.