This was one of Newshub's top stories of 2023. It was originally published on July 6.
If you found yourself wondering if a mass-hacking had taken place when Temu bulldozed its way into the New Zealand market in March, you're not alone. The then relatively unknown shopping app seemed to take over every Instagram Story, as Kiwis keen for a bargain urged others to join up in the hope of scoring discounts.
To some, Temu looked about as safe as a bowl of used tissues. To others curious enough to click, it opened up a world of possibilities. Amid a cost of living crisis, it may have seemed like an answer to a prayer: clothing, homeware, toys and tech - every kind of product imaginable, all for bargain prices.
Socks for 89 cents? A posture-correcting belt for $4.98? A fast-charging station for $25? And of course, a window groove cleaning brush for a budget-friendly $2.58.
But is Temu too good to be true? Is it a savvy way to save some extra cash, or a scam? The Project spoke to Ian Howard, the co-founder of Auckland-based brand strategy business Bright Street Studio, to get the lowdown.
"In April and May, Temu was the number one downloaded app in New Zealand. It's got a huge foothold. It's doing everything it can to grow those users as well," Howard said.
What is Temu?
Like Ali Express and Shein, Temu is a Chinese-owned e-commerce giant tapping into the western market. It has thousands of suppliers but no physical stores. In countries like Aotearoa - where prices are becoming increasingly high - the allure of a good bargain seems too good to pass up, with Temu offering a plethora of goods at heavily discounted prices.
The platform allows China-based vendors to sell and ship directly to customers, meaning there's no reliance on warehouses. In other words, it's not a retailer - it's a marketplace. A bit like Trade Me, in the way it connects buyers to sellers: which gives Temu itself much less responsibility.
Temu, currently headquartered in Boston, US, is owned by its parent company PDD Holdings. Although listed on the US stock market, PDD Holdings is a Chinese company - its flagship product being the Chinese e-commerce platform Pinduoduo Inc. It was founded in 2015 by billionaire businessman Colin Haung and initially based in Shanghai, but relocated its main offices this year to Dublin - a corporate tax mecca for tech giants like Meta and Apple.
Temu first went live in the United States in September 2022 before launching in Canada, Australia and New Zealand earlier this year. In April it arrived in France, Italy, Germany, the Netherlands, Spain and the UK.
However, the reviews are a mixed bag. Customers have complained of damaged, delayed or undelivered packages, incorrect orders, a lack of or unresponsive customer service, and mysterious charges.
Users are incentivised to get as many people on the Temu train as possible, with free goods or further discounts offered to those who successfully refer new customers to sign up via affiliate codes and social media. It's also accused of using casino-esque gamification tactics to encourage new customers and further spending. This has rung alarm bells for many, with the tech-savvy citing privacy concerns.
"You're incentivised to refer other people to the platform. So it's a lot like the old style of pyramid selling," Howard said.
"It's taken a slightly strange strategy for a retailer... by just focusing on bringing in as many users as it possibly can, as quickly as possible, without really worrying about whether people spend much money on the platform."
Is it safe to use?
Like many other apps on the market, downloading Temu gives it the ability to analyse and track your online behaviour. This personal information can then be mined, and potentially sold to the highest bidder.
"The evidence would suggest that Temu are scraping data, and probably aren't just a retailer - I think they're also a data trader," Howard added.
"It's giving away products pretty much for free, which is why you suspect it's less of a retailer than it is someone trying to grab as much data as they possibly can, and that makes you think they're monetising that data somehow."
While the true cost behind the low prices isn't currently clear - such as its manufacturing processes and working conditions - Howard said the call of a good bargain is overriding our interest in ethics.
"You're buying from a factory in China that you don't really know anything about. You don't know about their workers, you don't know how much they're paying their workers, you don't know where they're sourcing their materials from, you don't know how they're creating those materials. So there's a lot of risk and a lot of unknowns there.
"Ultimately consumers want to get a bargain, and so I don't think anyone's really incentivised to get to the bottom of the manufacturing processes or the working arrangements."
Overall, Howard's verdict is mixed: "It'd be hard not to call it legitimate. I think what they're doing is legal. Whether we should be using it or not is another question."
Watch the video above.
