A few years ago I would have laughed at anyone telling me that there is a serious market for ten-dollar drills, two-dollar dresses, and one-dollar pairs of shoes shipped from a warehouse on the other side of the planet.
TEMU doesn't sell those things. They're more expensive than that, but subsidised by VC capital from PDD Holdings, Blackrock, Vanguard, etc. It's a very boring 'spend the VC bucks to get the customers' play, and when they've got the customers they'll jack up the prices and lose the customers again. It's Uber-for-cheap-stuff basically.
Maybe there's some loss leader going on, but comparing it to "VC capital" (venture capital... capital?) doesn't make much sense, any more than calling costco's rotisserie chicken and hotdogs "subsidised by VC capital" doesn't make much sense.
Yeah, parent's comment doesn't make any sense. Temu is a marketplace, they aren't manufacturing these products. I doubt Blackrock is investing in random bottom-tier manufacturers in Yongkang.
Temu was hardly the first online store for cheap Chinese goods of varying or dubious quality either. Does anyone remember DealExtreme.com? They were around before Aliexpress.
I'm not 100% sure but I also heard China subsidizes shipping of packages, to boost their economy.
I worked as a mailman a while back, most days there would be more packages in grey plastic wrap (from China) than actual mail. And you could tell that the stuff that was inside usually cost less than the shipping would have cost if you paid full price.
Shipping is also subsidized by all of us on this end. International postage agreements were never intended to cover a massive unidirectional deluge of low-value packages. The costs of all the additional logistics are ultimately externalized to the taxpayer, and China totally exploits this. It’s exactly the reason the EU set a tariff for low-value parcels in particular.
This 2026, PRC small parcels been routing through local EU warehouses for years now. Guess what, IT'S STILL CHEAP. This isn't complicated, mainland PRC has efficient logistics, they can haul shit from any producer to bulk air freight, for pennies per package, and then local distribution and last mile delivery also aggressively costs optimized globally. Like any competent country can do cheap last mile. The public's not subsidizing shit anymore. It should cost basically nothing to ship small parcel from Chinese factory to your door. The difference is intra EU logistics is captured by state and private interests who want their cut. Even with less efficient first mile, there is no reason any small parcel should cost more than a few euros to ship door to door within EU, outside of regulatory bloat. But bloat is exactly why EU needs to tariff small parcels, because even san-subsidy there's shit EU can do except to be competitive except raise costs.
No, it's self destructive that the government takes my money to pay for your cheap crap, creating a game where everyone individually benefits from buying cheap crap but everyone else suffers from it, creating a race to the bottom.
Subsidizing giant Chinese webshops over local vendors and supporting unsustainable consumption of single-use plastic garbage is not exactly the sort of public service that governments are supposed to provide.
And that's exactly how we use USPS to subsidize amazon. Or did for a long time, anyway.
To be clear, this is the smart thing to do—package delivery SHOULD be subsidized. Amazon should pay into this disproportionately through taxes, though.
I think the parent comment is incorrect, however this is true for some products. Solar panels being the one I know for a fact, because we buy them at work. We pay less than it costs them to manufacture them because the Chinese government subsidizes it. (Granted, after tariffs we're probably hitting that manufacture price again, but that money doesn't go to them obviously.)
Why on earth would anyone be surprised that this market exists? I can understand being surprised that it's possible to deliver those items at the stated price, but the market's always been there.
I seem to remember “assume the customer will always want better prices” to be one of the few ironclad axioms that Jeff Bezos oriented early Amazon around.
If you're in construction then you need a quality drill that will carry you from one job to the next reliably. If you're just trying to do a one-off drywall repair in your house that you hope never to need to do again, maybe the $10 drill is precisely what you'd buy, if you could find it.
If someone says to you "You can buy this widget that costs $10 to make for $5" that doesn't mean they they're selling it for $5. It means there's more going on and that the $5 price take is not the full story.
You may choose to ignore that and believe someone is selling you something for $5 but that doesn't make it true.
In the case of Temu, they're selling it for $5 of your money, and $5 of someone else's money, in order to capture you as a customer in the hope that you continue to buy things when they increase the price to $6, then $8, then $10, $15, $30 and so on in the future.
This is the Uber playbook, and if you have a solid product that people want and you can spend VC money long enough to build a trusted brand (or ideally keep prices artificially low until the competition gives up and you have a monopoly) it's very lucrative. I don't see it working for Temu myself. They sell things people don't need so as soon as the prices go up they'll probably fail. That said, Amazon see them as enough of a threat to launch Haul, so what do I know?
> You may choose to ignore that and believe someone is selling you something for $5 but that doesn't make it true.
Sir, I suggest you use the word "sell" in its usual way, not your own definition of it. If someone takes $5 and gives you in exchange the merchandise and right of ownership on it, then that indeed does mean they "sell it for $5". The fact that something else is going on doesn't make it false.
I suggest that the passage that you read begins with a claim that seems unreasonable ("but I've bought a $2 dress from Temu!"), and then explains its thesis in order to make you view that claim in a different way ("VC capital paid for half of that dress!") I also would like to mention that this is a very common and unremarkable way to begin an argument.
All that aside, I’m happy that VCs are paying for my stuff! I have no idea why they keep doing that. They’ve studied my behaviour so they should already know I’ll delete {app_name} as soon as I get a better deal elsewhere. (Better yet, I’ll keep both and let them fight!)
Maybe they can capture the market for a brief moment, but if they do have a long term strategy, I’m not seeing one.
I'm not? It drowns out any competition and all we are left with is a single company with a monopoly that speed runs enshitification where consumers lose.
This can briefly happen, but until VCs run out of money we’ll get competitors about as soon as the enshittification starts. Well, at least in theory, regulatory caprure is a thing, so it doesn’t always work out.
This also doesn’t work when there’s network effects at play. I believe this is why Grab (Southeast Asian Uber/UberEats) is adding social features like a whole fucking messenger into the app. Didn’t help: Bolt has launched there as well and is often cheaper and faster so I usually check both.
(Now, Grab is publicly traded, and maybe it’s profitable, which would undermine my whole argument. But I’m still getting cheap transportation and discounted food. Maybe they externalize the costs somewhere else which indeed also sucks.)
Illegal? Hell no. Spending VC money to capture a market and drive out the inefficient incumbents is a genuinely good plan. Market disruption is a massive net benefit. I just don't think it'll work in the case of Temu, and anyone who looks at the prices and think "Wow, that's cheap!" isn't including where a chunk of the money is coming from.
I guess the same people were surprised when Uber started raising their prices too.
TEMU doesn't sell those things. They're more expensive than that, but subsidised by VC capital from PDD Holdings, Blackrock, Vanguard, etc. It's a very boring 'spend the VC bucks to get the customers' play, and when they've got the customers they'll jack up the prices and lose the customers again. It's Uber-for-cheap-stuff basically.