If there were a label most applicable to slapping enthusiastically on to the South African market in 2024, it would probably be one along the lines of “Best Place to Set Up Shop”.
Believe it or not, despite the obvious logistical headaches that the local economy offers, it’s one of the most desirable regions for global brands to prospect for new customers.
Don’t hold your breath, but yes… Amazon is supposedly still coming this year. The Dubai-based Millat Group has already brought the Canadian convenience store brand, Circle K, here, and plans to introduce the swanky, quick-service restaurant brand Pret a Manger shortly.
Coca-Cola is opening more and more Costa Coffee outlets and the number of new and old car brands, including the likes of GAC and MG, now knocking on the South African buyer’s door, is encouraging.
Along with Shein and TikTok, there is yet another new Chinese brand that is already having a big impact on the country.
Launched in mid-January this year and already the #1 most downloaded app in South Africa, Temu is “an e-commerce platform that was founded in 2022” that sells incredibly cheap goods (often of questionable quality), very aggressively.
With the catchy slogan, “Shop like a billionaire”, the brand has leapt seemingly from nowhere and become astoundingly popular almost overnight.
Some analysts estimate that Temu will generate a global gross merchandise value of more than $30-billion this year thanks to enthusiastic demand from more than 350 million users.
How did Temu go from zero to hero?
The strategy seems simple enough.
First, it’s important to point out that it has invested a shocking amount of money on advertising. Last year alone, it spent more than $3-billion on promoting the brand; a mountain of money that is equivalent to the entire market capitalisation of Old Mutual.
It was spent on things like multiple Super Bowl ads in the US, subsidising sales on the site itself, and helping Mark Zuckerberg buy yet another superyacht.
Then there is the shopping experience. What Temu has managed to successfully pull off is a gamification of the mind-numbing process of buying stuff online.
The enormous number of “shoppers” it acquires then psychologically disassociate the spending of their money with actually spending money. Crafty, right?
Instead of the usual endless searching and clicking, the app is littered with games of chance. You can buy things together with your friends in a kind of virtual shopping club, and everything is hyped with surprise discounts and gimmicks lifted straight from a casino’s playbook.
A stylish men’s workwear jacket will only cost you R308… hold on, what’s this? A drone for only 500 bucks? People tend to stay on the app longer because of the mental enjoyment it offers and spend more money on stuff to further soothe themselves.
What they are doing very well is training consumers to be better consumers of value. They are reframing the consumption of value as a form of entertainment, much like playing a couple of rounds of Candy Crush.
Users aren’t buying things to get things – they’re playing a game and getting a dopamine hit by finding bargains. The quality of whatever arrives at the front door a few days later then almost becomes irrelevant.
It’s a classic case study of disruption by serving mass market consumers who are predictably overlooked by traditional e-commerce brands. The twist in the tail is that the lured market is then introduced to a brand-new category of gamified e-commerce that Temu alone owns.
A key part of the business model then comes into play.
What Pinduoduo – the holding company that owns the brand – has set out to achieve with Temu is to take better advantage of the vast ecosystem of merchants it represents by levelling the commercial playing field for all of them through the design and framing of its approach.
The intention is to “democratise success” for its many merchants, regardless of the quality of their products.
By offering things to buy, as a game, the focus falls away from the product itself. Users are incentivised to buy volume, not brands.
Now what?
Temu may appear to be yet another international brand coming to South Africa on a hunt for new customers, but don’t be fooled by the deceptive innocence of its childlike interface.
Its debut should be seen as part of the dawn of a new era in consumerism; one where giant marketing megalodons unleash a firehose of propaganda at a region to capture an outsized wallet share for as long as possible.
This is not just the capturing of a marketplace by a single company, but rather a tectonic shift in the structure of an economy conducted by a coordinated ecosystem of value teleported in from abroad.
It is not just retailers that should be taking note of this trend, but business South Africa as a collective should be paying very close attention to what is happening here, and making sense of just how its popularity will affect trading forecasts over the medium to long term.
Categorising Temu as simply an e-commerce business is woefully inaccurate. Its value proposition is more in line with Fortnite than it is with Amazon.
Discounting its impact by labelling the products that it sells as crap isn’t helpful either.
Because of its almost infinite capability to scale, its impact on consumer behaviour as it grows– as well as others just like it that are still on the way – will be unexpected if simply viewed in a traditional way.
In the US, authorities are responding to the threat with regulation, but companies like Pinduoduo move way quicker than policymakers.
A better countermove would be to understand more deeply exactly what it is that these strategies are offering people, and then to solve that in a more constructive way.
For now, though, the conditions are just right for “the Temu approach” to dominate. DM
The new era is breeding new players. It is always wise for the old ones to study and understand them before trying to destroy them
Sure the prices are way lower than any other place. Had one experience buying from them. None of the clothes that look beautiful on a picture were properly made. Bad material and none fitted, although I order a larger size. Then one has to pay import tax. Still cheap. Since then I cannot get on the web, but to be inundaunted with Temu ads. Buyer beware is very appropriate here.
I had the same experience. The shirts I ordered looked nothing like the pictures! And although I was assured that the fabric of one of them was linen, it turned out to be 100% polyester.
Thank you for this very valuable insight into the workings of marketing and psychological mind games the guys with the right bank accounts and the patience to do proper research can do.
I just eagerly hope and trust that all our business people are watching and learning more about what is really needed and important to open and run a successful business.
Temu is a pain you open your gmail its there, you go onto X its there and not just one advert but often 6 one after the other, they are like an invasive weed.
I agree. Everything I open has a Temu Ad and I have relentlessly blocked & blocked but to no avail. I have never downloaded the App nor have I ever bought anything. Have not even googled them, yet I get bombarded on a daily basis with their Ad’s. I even reported them to Google to no avail. Temu is like an invasive alien plant that one cannot get rid of!!
Agreed, I have also tried every sveI know but the rubbish stays, same as the unwanted political crap being spread over the news for free advertising…..
You took the words right out of my mouth. Couldn’t agree more.
Temu is conducting fraud and VAT fraud: Our company tried to purchase from Temu. Although the website purchase showed free shipping, we were sent a payment link by Buffalo, their clearing agent for 50% of the purchase value for duties and taxes while we know that the product is duty free. We requested an invoice or pro forma in order to see what the charges were for but neither Temu nor Buffalo would provide it. Buffalo did not respond via email and the phone number goes to a call center which never came back to us. Temu insisted that we pay the 50% charge in order to receive the goods without an invoice. In order to receive an invoice, we needed to pay an additional 15% up front. This is fraud and VAT fraud. They still have not refunded us. Beware of Temu.
Don’t forget, customs charge a basic “handling” fee irrespective of the items duty free status, I in my experience there is no logic to this “variable” charge other than it lines the anc’s pocket as yet another form of “taxation by stealth”.
I tried them out as the free shipping angle was hard to resist. Bought around a grands worth of small workshop items including drill jigs, a three way square, a set of all in one drill/tap/countersinks and a set of ceramic tile hole cutters. All in with duty it came to just shy of R1200. Every item is of perfectly serviceable quality and the whole kaboodle cost less than original copies of the drill jigs that they shamelessly ripped off would have. I have no idea how you compete with something like this and can only imagine that it means very hard time for local incumbents.
I’m so glad to have seen this. The recent deluge of temu on all advertising sites has alarmed me as an effective takeover. I move been refusing to open any links on principle, now I know why.
Hopefully someone at SARS is reading this article!
The uneven playing field compromises local competition – goods manufactured elsewhere, no warehousing, logistics or retail rentals means less for our Fiscus and no job opportunities for our people with no recourse if goods provided are inferior or damaged. Being fooled by mass marketing and pretty pictures is the same as early settlers fooling the indigenous people with shiny objects….history repeats itself it seems!
Quick, put up some more protectionist walls to defend our hopelessly uncompetitive manufacturing sector, that’ll work. Playing fields are uneven because some countries are less useful than others.
I would like to know about the environmental impact and the labor conditions of these cheap crappy products.
I too fell for the whole shopping experience and wasted R 1800 on trash and then they charged me approx 30% so called taxes and refuse of course to give you the goods without this extra payment. Everything I ordered in terms of kitchen stuff, should be in a dollhouse its so miniature. The dress I ordered is completely different to that which is on the website. Their stuff is the cheapest Chinese trash you could buy anywhere. DONT BUY FROM THEM!!!!!!!! Furthermore there is no doubt in my mind there will be repercussions regarding our data, credit card info that they now have access to. THEIR PRODUCTS ARE SHOCKING, PLEASE DONT SUPPORT THEM!!!!!
The quality of all 7 orders so far has been fantastic. It’s bizarre to target the quality aspect when literally everything you buy from the mall is ‘made in China’ as well just that it’s insanely marked up and the consumer is being taken advantage of by middle men. Now they can buy the same thing direct.
Business owners are just upset they’re losing revenue now because they didn’t keep with technology and marketing their brand.
My Temu order was surprisingly good. Two pairs of shoes were less than half the price of Woolies and better quality; the same with sunglasses and caps. The two cheapest items I bought were child sizes instead of adult so had to be thrown away. Overall, if the passmark is 5, I would give Temu 7 out of 10.
What a great article Mr Cherry, thank you.
Although Temu, Shein and Ali Express are a awake up call to the west domination of world commerce, we need to understand the implications of quick fashion and cheap fast delivery goods .
One documentary mentioned the mountains of these cloths that are disposed of in third world countries. Not to be used by these countries or resold but dumped as waste.
I read an article this morning mentioning the need for more transportation needed for moving these goods faster to end users,electric vehicles will now flood the markets.
What will happen to those when they flood the markets and we dont have electricity to recharge them nor recycling capacity.
I find it absurd that the developed world preachers global warming and yet we use resources to flood the markets with goods that nobody needs except for a temporary dopamine fix.
Some critics say the global warming preaching is nothing more than brakes on the third world, to prevent development.
I am so appreciative of Daily Maverick covering questionable Businesses such as these.
DUTIES – The average import duties are 20%, being way below the 45% many of us are paying elsewhere for same Category goods. Ask any Shipping Company.
SARS Approval – Please investigate and confirm who at the anc and SARS have allowed this to transpire and escalate. Please help find the friends of China that are clearly receiving corrupt bribes for incorrect Excise duties being collected.
INTRUSIVE MARKETING – Their aggressive advertising is more like spam and needs to be addressed. I am unable to search the Internet without these cheap labour products blocking my search results.
PROUDLY SA
SA is in a dire, failed economic state. We need our own people employed and manufacturing same products – just good quality required.
By allowing temu’s communist community to dominate our online economy, it seems that the anc have backtracked on their questionable BEE & local workforce agendas?
I look forward to investigative results soon. Thank you.
Apparently they don’t deliver good. Late and issues with refunds.
Had a really bad experience with Deal Hub. Based on the Temu reviews on Hell0 Peter , I checked following my experience with Deal Hub, seems like they are having the same issues.
And what of the SA Consumer laws? CPA? To ensure South Africans do not get ripped off with sub standard merchandise. Whoever delivers substandard merchandise in SA could find themselves being held liable in a Consumer Court. The entire chain is potentially liable.
I’ve had good experience with Temu. But I’ve need caught out before and I’m much wiser now. I have had experience with these sites before such as Wish, Banggood etc they all the same except Temu have big ad budget. They are all exactly the same basically selling junk with fake pictures at ridiculously low prices. but there are gems to be found in all the mess. These sites are the worst place to buy clothes from. Having said that I have a few nice jackets and very good waterproof jacket hanging in my cupboard…I only really buy gadgets, tools and pc stuff that are hard to find here or just too expensive here. Good quality too but you have to do your homework on each item. And managed your expectations. Not everything is cheaper than in SA either.
What does set Temu apart is the return policy. Issue with anything they collect it from you return it to china and give you a refund
You can’t be naive when shopping on any Chinese sites/apps you will land up with a ton of junk and empty pockets.