Americans are flocking to Temu, but they trust Amazon so much more

How far can ultralow prices carry Temu amid scrutiny? Read More...

One factor, above all else, helps explain the sensational rise of the online shopping marketplace Temu since its founding in 2022: ultralow prices. As a result, nearly six out of 10 U.S. online shoppers have made a purchase through the shopping marketplace in the past year, according to a recent survey commissioned by e-commerce marketing firm Omnisend.

But if Temu’s going to continue to win the wallets of U.S. shoppers in the years to come, it’s going to have to build something that its giant competitor Amazon has in spades: customer trust. Only 6% of Americans surveyed said they trust Temu more than Amazon.

Those results, based on a survey of 1,000 online shoppers in the U.S., crystallize both the remarkable ascent of Temu, which launched in the U.S. less than two years ago, as well as the steep climb it still faces in building enough trust to keep U.S. customers coming back again and again for years to come.

Backed by its Chinese e-commerce parent company, PDD Holdings, Temu has won the wallets of U.S. shoppers through a combination of ultralow prices, massive ad spending, and prolific use of coupons and gamification tactics. This strategy has enabled the app to continue to grow in the U.S. despite long delivery times, questionable product quality, and relentless marketing that can border on spamming.

Under a PDD subsidiary legally known as WhaleCo, Temu claims a Boston office as its global headquarters. But as Fortune reported exclusively in April, Temu employs few employees there and counts on large product and technology teams based in China to operate.

That strong China connection—coupled with questions about whether any of its merchants use forced labor as well as its dependence on a century-old trade rule that eliminates duties on many shipments to U.S. shoppers—has led to increased scrutiny from U.S. lawmakers and agencies alike. The U.S. House Select Committee on the Chinese Communist Party and some Senate Republicans have been pushing for probes into Temu.

The Department of Homeland Security has also recently said it will step up scrutiny of packages that fall under the “de minimis” trade program that is favored by overseas e-commerce giants such as Temu and Shein, as well as some U.S. merchants who utilize overseas suppliers and manufacturers. (Proponents of the trade rule say it helps keep prices low for U.S. consumers.)

As a result of scrutiny in the U.S., Temu is increasingly eyeing new geographies for future growth, the Wall Street Journal reported recently. Much of this might be welcome news inside Amazon, the dominant online retailer in the U.S. with about 40% market share. Company leaders have been paying increasing attention to Temu as well as its fast-fashion rival Shein. Though Amazon has cut some merchant listing fees for lower-priced apparel to help attract sellers that may sell through these low-priced marketplaces, the tech giant is also doubling down on the advantages it believes it already has: rapid delivery speed and strong brand awareness and consumer trust.

And based on these survey results, that looks like a smart bet.

This story was originally featured on Fortune.com

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