Temu vs TikTok Shop: Comparing Their Business Strategies

Temu vs TikTok Shop: Key Insights

• Two Distinct Marketplace Models: Neither marketplace has its own inventory, Temu ships products directly from manufacturing facilities to consumers. TikTok Shop provides the platform for sellers to connect with creators and consumers, but without warehousing or supply chain services.

• Temu Is an eCommerce Platform With Social Commerce Features: Temu uses gamification, social referrals and group buying to engage users. Consumers already spend significantly more time on the platform than on comparable sites.

• TikTok Shop Is a Social Platform That Integrates eCommerce: Being mostly prevalent in Southeast Asia, TikTok Shop now ventures into Western markets. Its high penetration, especially among younger users, makes it the ideal platform for brands large and small to reach a wider audience.

Temu and TikTok Shop are two emerging eCommerce platforms with Asian origin that are widely being talked about. Especially in Europe, where different markets meet various tastes and economic circumstances, Temu’s and TikTok Shop’s market entry is creating a stir. 

But on closer inspection, these two platforms are not really that similar. ECDB has information on both marketplaces, including GMV (gross merchandise volume) development. Here is what sets Temu and TikTok Shop apart.

Business Strategies: Are Temu and TikTok Shop the Same? Short Answer: No.

Temu uses a consumer-to-manufacturer (C2M) strategy: Ordered products are shipped directly from manufacturers, so Temu doesn’t keep an own inventory. Small batches of products serve as a test to gauge consumer interest, and are then increased in production when ordered on a larger scale. Ultra-fast fashion brand Shein works with a similar model. 

TikTok Shop connects external sellers with audiences through influencer marketing. TikTok also provides the tools to track content-driven purchases and related statistics for sellers. The main difference between TikTok Shop and Temu is that TikTok Shop basically allows everyone, from individual to established brand, to act as a seller on the platform.  

On the other hand, Temu’s pool of sellers encompasses registered manufacturers from China, which need own warehouses and production facilities. Temu does not provide any support for sellers and keeps costs and prices extremely low that way. 

Both approaches remove warehousing from the supply chain, reducing storage costs for each provider and avoiding excess inventory. The highly technological approach improves efficiency, but takes years to implement.

Temu’s Strategy: Engaging Consumers With Gamification & Cheap Products

Temu’s marketing strategy is aggressive and ubiquitous, reaching consumers from TV commercials, social media posts, and sporting events. It is believed that PDD Holdings, Temu’s parent company, is currently spending more than it earns with product sales. But this is intentional; in order to receive brand recognition, Temu is willing to forgo profitability for the first few years. 

Not only has Temu raised consumer awareness of itself in a very short time, but it also manages to keep users engaged longer than comparable platforms:

But there is another marketplace on the horizon, emerging from a social media platform that engages customers on average at way higher rates than regular eCommerce sites: TikTok Shop.

What Is TikTok Shop About?

TikTok Shop works differently than Temu in the sense that it does not operate via a C2M model, but rather connects sellers to a wide audience. TikTok Shop also allows individuals to participate in the selling process by posting promotional content for products as creators. 

The “Creator Marketplace” helps brands find users who fit the brand identity and post clickable content on the product. Entertainment value is highly significant on the app, which is why hard sales rarely work; engaging content that makes consumers want to emulate what is shown and fosters a sense of relatability is more likely to drive sales. 

TikTok Shop also features the “Creative Exchange” where creative professionals advise brands on viable marketing strategies, and “Follow Me” an educational program for SMEs (small- and medium-sized enterprises).  

The nature of sellers profiting from TikTok Shop is various. It can include established brands looking for an additional sales venue, small businesses seeking to break into larger recognition, or individual sellers on the hunt for an additional income with a dropshipping strategy. 

The variety of sellers and products, combined with TikTok’s immersive quality, already position its GMV above Temu’s:

Because TikTok Shop enables sellers to trace the effectiveness of affiliated creator content in driving sales, it provides them with the tools to adjust their strategies and gauge consumer preferences more effectively. 

It is quite clear that established brands have no other choice than to participate on this platform, as it significantly helps to reach a wider and younger audience with relatable UGC (user-generated content). How brands choose to do so, whether with a high-end or low-cost strategy, is up to each player.

Main Differences: Temu vs TikTok Shop

1. Marketplace Models:

• Temu: Uses a consumer-to-manufacturer (C2M) strategy, shipping products directly from manufacturers without keeping inventory.

• TikTok Shop: Connects sellers to consumers through influencer marketing without handling warehousing or supply chain services.

2. Platform Nature:

• Temu: An eCommerce platform integrating social commerce features like gamification and group buying.

• TikTok Shop: A social media platform that incorporates eCommerce, allowing individuals and brands to sell and promote products.

3. Seller Engagement and Support:

• Temu: Features registered manufacturers from China with minimal support, focusing on low costs and prices.

• TikTok Shop: Enables a wide range of sellers, from individuals to established brands, to use influencer-driven sales strategies and provides tools for tracking sales and content effectiveness.

Temu vs TikTok Shop: Wrap-Up

The main difference between Temu and TikTok Shop lies in the nature of their platforms: Temu is an eCommerce platform with social commerce integration for engagement, while TikTok Shop is a social commerce platform that allows sellers of all types to promote their products. TikTok Shop additionally invites regular users to endorse products as creators. 

So while Temu is a low-cost competitor to established sellers and brands, TikTok invites these sellers and brands to join the platform with the promise of reaching a huge audience. It is clear that if TikTok Shop were to break into Western markets, its revenues would be immense, as the platform takes a cut of every transaction made. Temu is in its own niche of low-cost products, which is certainly successful, but not as all-encompassing as TikTok can be if it becomes ubiquitous.