Temu Half Off - Just in Time For Summer: Deminimus Maximus
Since the tariff changes, the situation seems to be getting a little dire at Temu. The intelligence firm Sensor Tower reported that daily users dropped 58% in May.
Yowza.
Why Was Temu So Dependent on De Minimis?
We've always known that deminimis was a de-maximus part of Temu's business, but now we know just how much. But as much as deminimus is a part, what really is tipping things over here is something else entirely:
Is Slashing Ad Spend the Real Killer?
Temu slashing ad budgets.
You see, Temu was/is extremely reliant on performance marketing, and ad budgets seemed to have been slashed significantly. This is what happens when your business model changes overnight: your selection is cut significantly, the conversion rate is severely impacted, and now there is nothing left to fund acquisition.
What’s the Bigger Lesson in Temu’s Fall?
I've spoken here in the past about the disruptive nature of the Temu model. I think there are a lot of folks out there that are hoping that Temu is down and stays down.
Death spiral - activated.
What Does This Remind Us of on Amazon?
To draw some parallels. If you have ever competed on Amazon, you know all about these kinds of competitors. Bid themselves up only to reveal they either don't have inventory depth or profit margin to sustain the level of share they are gaining. In the event of competitors buying the market in your category, sometimes the best course of action is to wait it out.
Should You Even Try to Compete?
In other words, while it pays to monitor the competition, it does not always make sense to compete with all potential competition out there.
Overall, I am not seeing a good path for Temu recovery here.
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