TEMU ALLOWS A DROPSHIPPING-LIKE MODEL FOR THE US

Since Temu launched in the US, it has implemented various e-commerce models.

▶️ The fully-managed model in which merchants only have to ship to a Temu warehouse in China. Temu takes care of logistics and pricing, but is never the owner of the goods.

▶️ The semi-managed model, in which merchants ship goods to overseas warehouses and are also responsible for last-mile delivery. Temu still handles pricing, marketing, and other aspects.

▶️ Local-to-local. Local brands selling to local consumers.

▶️ Fully-managed model + forward warehouses, in which Temu puts the merchant’s goods in overseas warehouses and is responsible for last-mile delivery.

▶️ Third-party (a.k.a. POP) in which brands/merchants fully control logistics, pricing and promotion.

As such, I have expected Temu to keep adding new options, but I didn’t see this one coming …

From April 27th, Temu will launch the "domestic shipping semi-managed" model. It is similar to the semi-managed model, but instead of asking merchants to store goods in overseas warehouses, it will enable Chinese merchants to ship directly from China to US consumers. This basically is the old ‘drop shipment’ model. Merchants will be responsible for customs clearance and compliance.

Temu has been struggling to attract enough merchants to take the risk of storing goods in overseas warehouses, so this opens up new possibilities for Temu to attract more merchants to join its semi-managed program and keep its own logistical costs low. Merchants won’t run the financial risks of overseas inventory and can ship on demand.

Temu does not offer the option to existing semi-managed merchants; they would need to apply to open a new store, a request that Temu will review. Merchants will need to have capabilities for logistics and customs clearance. Temu has not yet released pricing and fulfilment rules, but it is likely to retain pricing power and will be strict about delivery times. According to Paidai Cross-Border, Temu will demand an ambitious 9-day delivery, which might be a challenge considering the current US import climate. Late delivery will result in fines for the merchants. Temu may facilitate (but not cover the costs of) some of the logistics with third-party partners.

While Temu’s business has never utilised the preferential postal rates of the Universal Postal Union (although many people mistakenly believe it does). However, it is now likely that merchants who mail directly to US consumers will use these rates. Still, many Chinese merchants no longer want to send packages directly to the US because of the cancellation of the de minimis tax exemption on May 2nd.

By offering this model, Temu essentially makes the US tariffs, customs clearance challenges, and rising logistics costs the merchants' problem. As such, it’s no surprise that the reception among many merchants has been lukewarm. 

-Ed