{"id":1550405,"date":"2025-03-09T05:00:13","date_gmt":"2025-03-09T09:00:13","guid":{"rendered":"https:\/\/www.practicalecommerce.com\/?p=1550405"},"modified":"2025-03-11T10:19:56","modified_gmt":"2025-03-11T14:19:56","slug":"the-pricing-strategy-of-temu-sellers","status":"publish","type":"post","link":"https:\/\/www.practicalecommerce.com\/the-pricing-strategy-of-temu-sellers","title":{"rendered":"The Pricing Strategy of Temu Sellers"},"content":{"rendered":"

Temu sellers show massive discounts to boost perceived savings and win customers. The strategy is working.<\/p>\n

Launched in September of 2022, Temu has grown rapidly. By December 2023, Temu had captured 17% of the U.S. dollar store market \u2014 Five Below, Dollar General, more \u2014 according to Reuters<\/a>.<\/p>\n

Certainly Temu’s prices are low. A recent comparison<\/a> from Omnisend showed shoppers can often save 40% on Temu versus similar products on Amazon (but not Amazon Haul<\/a>).<\/p>\n

However, seller success on Temu<\/a> relies as much on discount psychology as the savings.<\/p>\n

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Temu’s success relies in part on the psychology of discounts.<\/p><\/div>\n

Cheap Headphones<\/h3>\n

Consider a hypothetical contract manufacturer that sells on Temu. Among the many products the company produces for various brands are noise-canceling, over-the-ear headphones that retail for $99.<\/p>\n

This manufacturer-turned-Temu seller has the materials, models, and expertise to build a nearly identical set of headphones. Stopping short of using the original brand’s patented and expensive noise-canceling technology, the company tweaks the earpieces.<\/p>\n

The “nearly identical” headphones cost $5 to manufacture. This company lists the headphones on Temu at a regular price of $99, with a 75% discount. That $24.75 net price could produce more profit than it gets from building the client’s high-end version.<\/p>\n

This made-up scenario is extreme but instructive.<\/p>\n

Temu Prices<\/h3>\n

Remember that Temu is a marketplace with thousands of sellers. Temu does not buy and sell inventory. It connects manufacturers and brands to shoppers.<\/p>\n

Thus the prices are not Temu’s but those of sellers. Yet Temu’s success relies on low-cost and, perhaps, low-quality alternatives to popular and brand-name products.<\/p>\n

For example, the Omnisend comparison found that Temu listed an item that “matched” a product in Amazon’s camera and photo category about 96% of the time. But none \u2014 0.0% \u2014 of those Temu items were the same brand or known quality as on Amazon. Instead, the items were unbranded and generic and “closely resemble well-known brands, often with blurred logos or modified packaging,” per Omnisend.<\/p>\n

For identical items and brands, Temu’s prices are roughly the same as Amazon’s.<\/p>\n

Temu Discounts<\/h3>\n

Sellers on Amazon and Temu differ significantly on the frequency and amount of discounts.<\/p>\n

“While Amazon offers discounts<\/a> on around 47% of its products, 65% of Temu’s listings are marked down. In addition, some items on Temu see discounts as high as 98%, compared to Amazon’s highest discount being 67%,” according to Omnisend.<\/p>\n

Collectively, Temu’s deep discounts make products feel significantly cheaper. This is the psychology part.<\/p>\n

For example, a February 2018 study<\/a> in the academic journal “Fashion and Textiles” found that deep discounts can enhance shoppers’ perception of savings, making them feel like they are getting a better deal.<\/p>\n

The study noted that discounts elicit an emotional response impacting shoppers’ perception of savings, quality, and value.<\/p>\n

These findings are more or less common sense to seasoned marketers and precisely what is happening with Temu.<\/p>\n

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Product Perception<\/h3>\n

Yet deep and frequent discounting can be dangerous. Substantial markdowns may lead to doubts about product quality or authenticity, and rightly so.<\/p>\n

Imagine a machine with three dials:<\/p>\n