Rock-bottom prices on a variety of clothes and household goods has helped e-commerce marketplace Temu surge in popularity with Canadians as many continue to struggle with the cost of living, according to retail analysts.
But there are privacy and environmental concerns tied to “ultra consumption” that experts warn shoppers ought to keep in mind before downloading and checking out from the app and others like it.
Temu’s website says the company was founded in Boston last year, though it’s a subsidiary of Shanghai-based PDD Holdings, a multinational commerce group established in 2015 in China.
Both the app and online storefront bring shoppers to a marketplace that allows consumers to buy directly from factories, primarily in China, “at very, very, very low prices,” says retail analyst and author Bruce Winder.
The app made a splash with an ad at the Super Bowl this past year that urged users to “shop like a billionaire.” As of Aug. 18, it was the No. 2 free application on the Apple App Store in Canada, behind only a B.C. Wildfire Services app. Market intelligence firm GWS estimates Temu has added nearly 10 million daily users in the U.S. since the start of the year.
The app has earned comparisons to China’s ultra-fast-fashion giant Shein among industry observers for its factory-to-consumer business model, but Winder notes the breadth of products available on the marketplace go beyond apparel, giving it more similarities to Amazon.
Like Shein, however, Temu’s real selling point is the prices. A back-to-school sale in mid-August for instance advertised sunglasses for under $4, shaving blade refills for less than $5, and a smart watch for $28.
Winder says Temu has “taken the world by storm” with prices that look like they’re “from another century.”
That’s especially alluring right now as Canadians struggle with rising interest rates and persistent inflation at the grocery store and at the gas pumps, he says.
“It resonates very well with people right now because interest rates are five per cent and might be going up. Inflation is still sticky,” Winder says.
“People are paying attention. People are looking for any way they can to save money. You look at the success of Shein, you look at the early success of Temu, and it’s not a surprise that consumers are flocking to these types of apps.”
Like Shein, Winder says Temu likely appeals to younger consumers who are comfortable shopping on apps.
Other selling points are the urgency of time-limited sales and an incentive-based model that sees Temu offer discounts to shoppers who encourage others to download the app, Winder says, creating a “pyramid of users.”
Temu leans into the so-called gamification of retail, giving away free products and prizes to shoppers who play games on its app and refer new users.
“Retailers and brands are developing their own apps, which have become like the new front door of a retailer,” said Tamara Szames, executive director and industry advisor of Canadian retail for Circana.
“It’s become increasingly about discovery and entertainment rather than a need,” she told the Canadian Press earlier this year. “Impulse purchases are an extension of that.”
Scrutiny from U.S. lawmakers
Both Shein and Temu have come under scrutiny from regulators and industry observers.
An April report from the U.S.-China Economic and Security Review Commission flagged privacy risks and production concerns tied to both Shein and Temu.
The report outlines controversies tied to Shein’s ultra-fast fashion model including accusations of copyright infringement and forced labour practices in its production processes. Shein has previously denied such allegations in statements to Global News.
But the U.S. regulators go on to say Temu’s business model has “replicated” Shein’s model, raising concerns about the quality of Temu’s own practices. The report includes accusations of copyright infringement against Temu and cites hundreds of complaints the company has received from the Better Business Bureau.
Temu has not publicly addressed the accusations outlined in the report. Global News reached out to the company Thursday for an opportunity to respond to the allegations but has yet to hear back.
A Wired article from July included allegations that Temu has cloned Amazon storefronts, including original photography, from sellers and put up similar products at reduced costs.
Temu has not publicly responded to the allegations made in the Wired article.
The U.S. report also noted that Temu’s sister company, Pinduoduo, has faced scrutiny for its labour practices and fielded accusations of containing malware, leading to the app’s suspension on the Google Play Store in March 2023.
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The company told CNN at that time that it strongly rejected “the speculation and accusation that Pinduoduo app is malicious.”
A separate June report from the House Select Committee on the Chinese Communist Party also highlighted Temu as part of an ongoing investigation into companies possibly using forced labour in China. Lawmakers accused Temu of obfuscating its labour practices to avoid complying with U.S. law.
“American consumers should know that there is an extremely high risk that Temu’s supply chains are contaminated with forced labor,” the report said.
On Thursday, Global News also gave Temu a chance to respond to concerns raised in the June report that its labour practices may violate U.S. law, as well as allegations that its app has copied some Amazon storefronts. The company did not return requests for comment.
Cybersecurity expert and author Brennen Schmidt says that the concerns around Temu’s privacy policies are natural given the extreme affordability the marketplace appears to offer.
“As the adage goes, if something is free or at a reduced cost, you, in effect, become the product,” tells told Global News.
“I think what we’re finding here is that the short term benefits of cost savings might not be worth the risks to individual security and privacy.”
Ways to offset the concerns about apps like Temu
Canadians ought to be concerned about the data they’re giving any apps access to in exchange for downloading the application or setting up an account, Schmidt warns.
App developers are in some cases capable of “fingerprinting” a user based on the information they provide, such as IP addresses, physical locations and shopping habits, he says.
“It’s going to be important for folks, for everyday individuals to really start thinking about what information they want to be sharing here, especially if you’re starting to get pop ups for activating certain notifications or for access to specific locations,” Schmidt says.
There are a few steps Canadians can take if they have privacy concerns that can reduce their risk exposure, Schmidt adds.
For one, he says shoppers can buy a prepaid credit card rather than using one tied to a financial institution to limit the amount of money they’re spending as well as any possible risks should the card number be compromised.
When shopping online, Schmidt also recommends using a virtual private network that can spoof your location, or at the very minimum, using a private browsing tab to log into an account to limit what information is saved on the site itself.
Lastly, when setting up an account, keep in mind that you don’t have to be truthful about your answers to security questions. Data collected by answering seemingly innocuous questions about where you grew up or your parents’ birth names can all be compiled to create a profile of an individual, Schmidt notes.
Winder says that privacy concerns may not always be paramount for consumers who are struggling to get by and are just searching for the lowest possible price.
“If you’re a young person and you’re trying to save money right now and you’re trying to put food on the table and pay your rent, you’re probably not thinking about that as a first concern,” he says.
But when possible, Winder urges shoppers to think past the mindset of “ultra consumption” that apps such as Temu attempt to cultivate.
The ticking clocks on sales and the attempts to gamify deals and share the app widely are all designed to encourage more and more shopping — even if it’s not something the consumer needs.
“A lot of this is sort of based on our psychology and human behaviour, and it’s really trying to get us to consume,” he says.
These buying impulses can be especially harmful when it comes to apps that cater largely to Chinese manufacturers, Winder warns, with shipping from around the world contributing to a “massive carbon footprint.”
The more popularity that apps such as Temu can garner with low prices in an inflationary landscape, the more concern Winder has about the long-term fuels for climate change.
“I just see this as pouring a little bit of gasoline on the fire of some of the problems we have in the world right now from an environmental standpoint of buying a lot of things that we may or may not need and shipping them across the world.”
— with files from The Associated Press
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