Bernstein’s recent report sheds light on Temu’s remarkable trajectory, projecting a staggering US$54 billion Gross Merchandise Value (GMV) for 2024, accompanied by a modest annual profit. This forecast not only highlights Temu’s explosive growth but also underscores its potential to reshape the e-commerce landscape.
In Q2 2023, Temu demonstrated its market strength with a GMV of US$11-12 billion, showcasing improved margins driven by the innovative semi-consignment model in the US. This model, accounting for over 25% of US GMV and a third of global GMV, has been a game-changer. It allows Temu to expand into higher-value categories like appliances and furniture, optimize fulfillment times, and reduce reliance on long-haul shipping and the De Minimis provision.
Temu’s strategic approach extends beyond the US, with the semi-consignment model recently introduced in Europe. This expansion, coupled with strong performance in markets like the UK, Canada, and Australia, positions Temu for global dominance.
Despite potential tariff threats and geopolitical concerns, Temu appears well-equipped to maintain its competitive edge. The company’s ability to remain price-competitive even with potential 20-25% tariffs speaks volumes about its efficient business model and sourcing capabilities. Moreover, the increasing adoption of the semi-consignment model further insulates Temu from potential tariff impacts.
Perhaps most impressive is Temu’s rapid march towards profitability. Already profitable in the US, with non-GAAP operating profits of approximately US$90 million in Q1 and US$150 million in Q2, Temu is expected to achieve profitability in other markets within 6-12 months. This financial performance, coupled with its projected GMV, paints a picture of a company on an extraordinary growth trajectory.
While comparisons with Amazon are inevitable, the report suggests that such comparisons may underestimate Temu’s true market potential. With a total addressable retail market of over US$7 trillion in the US alone, and additional trillions in Europe, the UK, and the rest of the world, Temu’s opportunity extends far beyond competing with Amazon. By tapping into the vast market currently served by traditional retailers and leveraging its efficient supply chain, Temu is poised to capture a significant share of the global retail landscape.
As Temu continues its ascent, it’s clear that we’re witnessing the rise of a new e-commerce powerhouse, one that’s redefining the rules of global retail and setting new benchmarks for growth and efficiency in the digital age.