In brief
- Temu is a global online megastore operated by the Chinese e-commerce company PDD Holdings. You can get nearly anything and everything, from a hiking tent to bike parts to an outfit for your dog. Items are shipped directly from China.
- This is a review of the shoppers who purchased from Temu during March 2024. The idea is to describe who these customers are, and where they’re not shopping now that they’re shopping at Temu. Since we only have one month of data, it must be stressed that these are initial insights.
- From a standing start in January 2024, our analysis shows that spending at Temu has accelerated exponentially. In March, more users shopped at Temu than at Shein, the Chinese apparel merchant.
- The data shows that these ‘early adopters’ are older and higher-earning than typical online shoppers in South Africa
- Who is losing out to Temu’s wins? Takealot’s spending share has decreased significantly and Superbalist’s share is half of what it was a year ago.
It has been a tumultuous few years for South African retailers. Brands in almost all sectors are under attack from Chinese sites that advertise aggressively on social media, undercut on pricing and ship directly. We have already shown how Shein, the Chinese fashion site, has claimed a significant share of the local apparel market.
Now we have Temu – a more general marketplace site in the mould of Amazon or Takealot. Temu is inescapable. Of late, you can hardly scroll through Facebook or Instagram without being bombarded by adverts. In the US, they bought a prime-time slot during the Superbowl, which led to the Temu app rising to second most downloaded on Apple devices.
In the most recent edition of Shop Talk, we highlighted the explosive growth of Temu in South Africa. During March 2024, more users bought from Temu than they did from Shein.
The purpose of this note is to understand more about the Temu shopper in this country. Who are they? And which online competitors are these shoppers shunning when they elect to buy from China?
A caveat before we get going: This is only one month of data. Although our sample is healthy (>2,000 users), the short time frame limits the extent of the analysis.
Still, it’s abundantly clear that Temu, and other sites like it, are here is here to stay. Consumers are not put off by the logistical challenges of using such sites, and their numbers are growing.
The big spike in March
The chart below shows the speed at which Temu customer numbers in South Africa have grown. During March, more users bought from Temu than from Shein.
At the time of writing, there was no spending threshold for free delivery at Temu, which is unusual for online retailers. Most local companies, including Takealot, have a threshold of around R500. Shein’s is a bit higher at R600. Normally, the threshold informs the average transaction value on a particular site as customers try to qualify for free delivery.
Temu’s average transaction value is around R500, which is high considering that customers need not spend that much for free delivery.
TEMU: CUSTOMER GROWTH AND AVERAGE TRANSACTION VALUE
Who are Temu’s customers?
In order to analyse spending at Temu, we first looked at all the users in our sample who shopped online, at a long list of online retailers including Takealot, Makro, Shein, Bash, Dis-Chem, Temu (obviously) and many others. Then we compared the Temu shopper and the average online shopper to all users with purchases in the Home and Apparel categories. We segmented the analysis by income bracket and age. Since Shein operates in a similar mode to Temu, we included it as a barometer.
In general, our data shows that wealthier customers tend to shop online more frequently than customers with lower incomes. This seems logical. When it comes to Temu, the ‘early adopters’ are even more likely to be on the wealthier end of the income spectrum. Since Temu is new in South Africa, users might be experimenting with a few inexpensive purchases. As higher earners, they’re prepared to take the risk of not receiving the product and/or receiving something of an inferior standard.
Interestingly, Shein shoppers are more likely be middle-income users. In that sense, the Shein shopper demographic more closely resembles that of the ‘average’ online shopper.
When it comes to age, the average online shopper closely matches the demographic of the average general consumer. In other words, online shoppers are less likely to be very old or very young – they’re mostly in the same demographic as the people who use brick-and-mortar stores.
The early Temu shoppers are different, however, with a marked trend towards the older side of the spectrum. This differs from the average Shein shopper, too, who is more likely to be in the 26–35 age category.
In summary: Online shoppers in general are typically from higher-income bands across the age spectrum. Early adopters of Temu exaggerate his trend: they’re more likely to be older and earning in the highest bracket. In contrast, Shein attracts a younger, middle-income shopper.
LIKELIHOOD OF USERS SHOPPING AT ONLINE RETAILERS RELATIVE TO USERS SHOPPING INSTORE, SEGMENTED BY INCOME AND AGE
What is Temu’s market share?
Now that we have an idea of who is shopping at Temu, how has their spending impacted the general merchandise market in South Africa?
To answer this question, we identified a sample of 1,990 Temu customers with uninterrupted transaction data from January 2024. Doing so allowed us to draw a direct comparison with spending in the first three months of 2023.
For the users in this sample, in March 2024, we estimate that their Temu spend accounted for c30% of the total amount they spent on Home and Apparel that month. In Reveal parlance, the ‘Home’ category encapsulates General Merchandise (e.g. Takealot, Makro), Furniture (e.g. MRP Home, @Home) and DIY & Garden (e.g. Builders Warehouse, Mica).
Since Temu attracted 0% of Home spend a year ago, there have been significant shifts in how spending is allocated. Indeed, our analysis shows that the impact of Temu’s rise has been felt by most retailers in the category. In general, online-only retailers in the GM and Apparel categories, and DIY retailers, have been hardest hit.
The five retailers that have experienced the largest shifts in spending are shown in the chart on the following page. Takealot has lost the greatest spending share by far: four times the next largest.
It should be noted that Takealot attracts a significant chunk of this cohort’s spending, so it had more to lose. To accommodate this, and to give a better indication of Temu’s impact, we have also shown the percentage change in spending share between March 2023 and March 2024.
Takealot’s spending share has fallen nearly 12% – a decline of ~35% compared to a year earlier. This decline is in line with the other five retailers who all lost share to Temu
(–20–56% ). Superbalist has cause to worry: its spending share is half of what it was a year ago.
SHIFT IN SPENDING FOR TEMU SHOPPERS: DIFFERENCE AND % CHANGE IN SPENDING SHARE
(MARCH 2023–MARCH 2024)
What have we learnt?
- The number of Temu shoppers is rising exponentially.
- Early data shows that Temu shoppers are older and earn more than typical online shoppers.
- In Home and Apparel during March, Temu shoppers allocated c30% of their total spending in these categories to the Chinese retailer.
- Of all the major retailers we track, Takealot suffered the highest spending share decrease in March (–12%).
- Superbalist’s spending share is half of what it was in March 2023.
