How Temu Makes Money From $10 Smartwatches From China

Bargain e-commerce company Temu has had a whirlwind 2023.

Quietly launching its app in September 2022, it only took the company a few weeks to top app store charts, edging out Amazon, Walmart and even fast-fashion brand Shein. By February 2023, the 5-month-old company made its TV debut during Super Bowl LVII, airing two commercial spots totaling an estimated $14 million. With an annual advertising budget of about $1.4 billion, Temu is focused on aggregating a user base of nearly 100 million people by year-end.

Temu's popularity is largely due to its ultra-cheap knockoffs. Users can get an Apple Watch dupe for $10, Yeezy knockoffs for $4.99 and gaming consoles for $20. On top of the steep discounts, users are bombarded by coupons, free shipping countdowns, flash sales and discount wheels.
While on its face the company looks to be a Boston-based startup, it is actually backed by a well-known name in the Chinese retail space, Pinduoduo.

"China is really the linchpin in Temu's strategy," said Neil Saunders, managing director of GlobalData Retail. "A lot of the products that are sold on Temu are manufactured in China. They're shipped directly from China to the U.S. So those labor costs compared to manufacturing in the U.S. and elsewhere are really low."

Temu's rise in popularity has also courted scrutiny from the U.S. government, accusing the website of exploiting de minimis shipping rules to undercut U.S. retailers. Under de minimis rules, shipments valued under $800 are not subject to duty taxes and undergo minimal customs checks.
Beyond that, a U.S. House committee accused the retailer of violating U.S. import law by using forced labor to supply its products.

Temu and Pinduoduo did not respond to CNBC's request for comment.

Watch the video above to learn what's behind Temu's success and what could disrupt the retailer's massive growth in the U.S.

Chapters:
00:00 — Introduction
01:47 — What is Temu?
06:40 — Your package is on its way!
11:59 — Your order has been delivered
13:48 — What’s next?

Produced by: Devan Burris
Edited by: Kevin Heinz
Camera by: Brad Howard
Graphics by: Alex Wood
Supervising Producer: Jeff Morganteen

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How Temu Makes Money From $10 Smartwatches From China

[bhushaaa]

Looks like CNBC bought their mic from Temu too

[xtos]

I didn't get the slogan "shop like a billionaire", but then i kept watching and they said how Temu breaks laws and doesnt pay taxes. Now it totally makes sense 🤣

[BTWang]

How a 16 min video fails to answer the question in title

[jesseinfinite]

The fact that China can produce an actually functioning smart watch for less than 10$ is absolutely insane.
That's the price of a handheld toy, not something with a microprocessor inside it.
It could be the worst smartwatch ever. But for 10$? It's a tech marvel.

[andresjaramillo]

The irony of getting a two Temu adds while watching how Temu works

[iamnormal]

I had never heard of Temu before watching this video. You guys have given Temu an additional 1.1M new users. I hope they paid you for this free extensive advertising.

[MakZor]

"So that 10$ smart watch is most likely to come from a factory in China"
Like every other smartwatch on the market...

[alanwong]

If an American company did this, they would be on tv saying: “we optimized our operations to maximize shareholder value and believe that small government and fewer regulatory hurdles are the key enablers for value creation. Our mission is to bring the lowest prices to the consumer market place. Tariffs create an unnecessary hurdle that presents friction for the consumer and we strategically have bypass this and return value to our clients in the form of savings.”😂

[Mike-xnho]

Audio is awful, it sounds like it was recorded with a laptop built in mic. I would expect better from a major network

[pondurosa]

They just single-handedly gave Temu at least a million new users.

[paulkingeu]

Temu is doing to the USA what Amazon has done to the rest of the world

[lIREADYIl]

this was just the best Temu ad to date. im ordering a smartwatch now

[cratecruncher]

The more interesting question is "How does Apple convince consumers to purchase $400 Smartwatches that cost the firm $26 to produce?"

[yukie_tn]

The thing is, the average consumer do not care about tariffs or politics if they can save some money. If you want people to stop shopping there, you need to make a more convincing case.

[dyfib]

The secret of temu's cheap goods is that they directly establish a relationship between factories and consumers without intermediaries to make price differences. And the same products can only reach consumers through multi-level dealers and retailers on Amazon.

[jeffpotter]

Where do you think Amazon and Walmart get their products from? Same place

[cleoc]

Okay, but as someone who buys from both Amazon and Temu- everything sold on Temu is also sold on Amazon for double the money. Just sayin’

[PlittHD]

I like that for immersion you used a microphone from Temu

[imonbanerjee]

Just to note, although it says "based out of Boston" in their website, Temu is actually a fully owned subsidiary of PDD which is legally in Ireland and registered in Cayman Islands.

CNBC should be more careful with their research

[dd-ddco]

Goes to show how much brands and companies fleece us with their regular prices. The profit margins they make is outrageous.