Will Temu Kill Dropshipping?
Temu, the up-and-coming challenger to Amazon and Aliexpress, is causing waves that might just redefine the future of dropshipping!
So what does that mean for dropshipping then?
Who is Temu?
Temu's Parent Company: Pinduoduo
Affordable Drone from Temu Ad
You might not be aware, but Pinduoduo, the parent company of Temu, has been running an e-commerce platform in China since 2015.
The exciting part is that they've been reinvesting the profits from this platform into Temu, fueling its growth with advertisements like these.
They're pursuing this goal for a specific reason: to attract as many customers as they can, ensuring that a wide range of people will have access to the same products, that dropshippers are selling, for a fraction of the price.
So, does this signify the end of dropshipping? Not quite!
Real Life Experience
A friend of mine recently purchased a spinner ring from a sleek, well-branded website. He thought it was an incredible find, totally worth the €99 price tag.
He's not deeply involved in e-commerce but has picked up a bit about dropshipping from our discussions. We were chatting the other day about this, and he goes,
"Hey, could that ring I bought possibly be from a dropshipping store?"
And guess what? When I checked AliExpress, I found the exact same ring for just €19 instead of the €99 he paid.
Spinner ring with a sleek branding
Spinner Ring on AliExpress
The thing is, if someone like him, who has some insight into dropshipping and doesn't bother looking elsewhere…
What are the odds that others, who might not even be aware of dropshipping, will go searching for better deals?
So far, the answer has been "not much". Few people take the initiative to explore alternative sources like AliExpress.
What Sets Temu Apart From Others?
The product pages on Temu might be a tad better than those on AliExpress, but it's not typically the first site that comes to mind for high-quality products. Many people visit because of the attractive low prices and quick shipping.
They're aware they're taking a chance on product quality due to the low prices. Their decision to buy isn't based on a belief in the product's superior quality but are willing to give it a go because of it’s cheap cost.
So, which do you think holds a higher perceived value?
The website my friend used to purchase the ring or the Temu product page?
In most cases, it's not Temu. I'd wager that if half the people stumble upon the same ring for a significantly lower price on AliExpress, with plain images and all, they might immediately dismiss it as inferior quality.
Customers might think, "I won't purchase this; it might cause skin irritation. I'll look somewhere else."
Temu's Strategy
Just like AliExpress, Temu prioritizes affordability over high-value perception. To implement this strategy, Temu claims to collaborate directly with manufacturers by eliminating intermediaries.
While they do negotiate prices with suppliers to keep costs low, it doesn't necessarily mean the supplier has to be the direct manufacturer. They only need to offer the product at the negotiated price.
Here's the catch: Temu can continue negotiating the price even after the supplier has begun selling. This often occurs as more suppliers enter the market, intensifying competition.
Temu leverages this to drive prices down as much as possible, ultimately pricing out middlemen. If you’re not the direct manufacturer, making a profit necessitates negotiating or forming an agreement with the manufacturer.
Once the price is settled between Temu and the supplier, the supplier ships their product to Temu's warehouses for logistics handling. This process leads to fast shipping times.
Similiar to AliExpress, Temu is focused on affordability while dropshippers are focused on the perception of quality. But AliExpress has never been a problem for dropshippers, so why would Temu be?
In fact, many entrepreneurs get their start this way. With the right branding and marketing, customers on your Shopify store won't typically browse AliExpress or other platforms. Otherwise, dropshipping would have fizzled out long ago, as is the case with most businesses globally.
The essence lies in exploiting information differences—leveraging knowledge that customers lack while offering what they perceive as fair value in exchange.
Often, customers might not even be aware of a product if they hadn't stumbled upon it through ads on platforms like Facebook or TikTok.
Without compelling branding, captivating marketing, or engaging copywriting, customers might not comprehend the true value of a product.
Think about the countless times you’ve scrolled through AliExpress, unable to find a product due to vague images that fail to convey the product's true value or functionality, especially for items whose use isn't apparent from the image alone.
That's why I believe high-level advertising, marketing, and branding form the core of a successful business. They act as a shield against these large platforms that primarily emphasize price over value.
Conclusion
So, if anything, Temu will be an additional resource for conducting product research, rather than a platform that completely supplants e-commerce stores. As for the initial question – will Temu kill dropshipping? I don't believe so, but I could be mistaken.
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