Could online shopping giant Temu transform Czech e-commerce?

Temu, a Chinese e-commerce platform, has been making waves in Czechia with ultra-competitive prices and aggressive massive marketing campaigns. Czech economic news outlet E15.cz describes how Temu’s arrival in Czechia may reshape the country’s e-commerce market.

In the last 12 months, the platform has been dominating search results on Google and has expanded into a range of Western markets, including France, Germany, Italy, the Netherlands, Spain, the UK, and now Czechia. 

According to David Antoš, a consultant from the Boston Consulting Group, the rapid growth of Temu is driven by a massive global marketing campaign. It is willing to operate at a loss in hopes of gaining customer loyalty and reducing marketing expenses in the future, Antoš says. Temu made an estimated loss of a whopping USD 3.2 billion (CZK 72.5 billion) in 2023.

Despite a lack of specific data for the Czech market, there are indications that Temu has been successful in attracting the attention of Czech consumers. The platform has a strong presence on social media, with several Czech Facebook groups dedicated to discussing their experiences with shopping at Temu. Some Czech YouTubers have also shared their experiences with the platform, with videos garnering tens to hundreds of thousands of views, E15.cz writes.

Ivy Yang, a Chinese business expert, told British news site The Guardian that Temu's main competitive advantage is its ability to offer products at the lowest possible prices. This is due to its unique business model, where customers buy directly from manufacturers, allowing Temu to control prices and keep them low in the long run. This strategy is now putting pressure on competitors in Czechia.

However, there are concerns about how Temu handles the data of its Western users. According to analytical company Grizzly Research, there is a strong suspicion that Temu is illegally selling or planning to sell stolen data of its Western customers. With hundreds of millions of users, this raises significant privacy concerns.

While Temu's success in Czechia remains to be seen, experts believe that its low prices pose a significant challenge for established players. Amazon, for example, has already lowered fees in some categories to increase competitiveness with new stores like Shein and Temu. As for Temu's parent company, Pinduoduo (another online retailer), it reports annual profits in the billions of dollars and is listed on the US Nasdaq stock exchange, where its stock value has tripled in the past year.

Temu's expansion into Czechia and Western markets has been met with both excitement and scrutiny. While its low prices and aggressive marketing have allowed it to gain a large customer base, concerns about its long-term profitability and handling of user data remain. 

Temu has responded to claims of misusing customers' data.

"The allegations in the [Grizzly Research] report are totally baseless. The report was published with the intent to create panic and drive down stock prices. Even though the report was completely groundless, we recognize the need to communicate our data practices and security protocols to users in an open and transparent manner and have taken steps to improve communication," Temu told Expats.cz.

"We have included prominent explanations on our website and app of the data that we collect and their usage. Every single user can view the permissions that Temu seeks on its website. At Temu, we prioritize the protection of privacy and are transparent about our data practices. We collect information with a clear and singular purpose: to provide and continually enhance our products and services for our users," Temu added.