This interview was extracted from an interview with Kaifei during the Impulso Podcast E110 “From China to the world: Temu’s low price strategy decoded”.
[00:01:13]
There have been many negative reports about Temu with claims that the company is flooding European and American markets with cheap goods in large quantities and exploiting its suppliers. What’s your take on that news?
Kaifei:
Yes, there have been a lot of negative reports surrounding Temu. However, I think it’s important to also consider how we view this company and its positioning. To understand Temu, let’s first take a look at the history of Pinduoduo, its parent company, and the ecommerce landscape in China.
Pinduoduo entered the Chinese ecommerce industry in 2015, starting with a unique model focused on group buying, particularly for agricultural products like fruits. Users would share links on WeChat to group orders and get discounts. This allowed Pinduoduo to grow rapidly, and by 2018-2019, it had become a major player, reaching a GMV of 1 trillion RMB and going public. If you compare it with the likes of ecommerce giants like Alibaba and JD.com, which had been established since 2000, Pinduoduo’s success is partly due to its ability to carve out a niche in a crowded market. If we talk about the positioning of ecommerce companies, then Pinduoduo has chosen a track that is cost effective. The essence of “saving” is extreme cost control – meticulously controlling product manufacturing costs, logistic costs, transportation costs and overall operational efficiency to the utmost extent. So, from what we can directly observe, as Jianggan has mentioned before, this company may place higher demands on their suppliers. Its service providers and logistic providers may also have some complaints due to these higher standards. The essence of this still ties back to its positioning. To be cheaper than other competitors iis crucial. Some of our friends who have not lived in China may not know this, but the reason why Pinduoduo stands out in China is due to its cost-effectiveness. For example, if you take 100 products, Alibaba has them – on Taobao, for instance – JD.com has them, Pinduoduo has them, and Douyin also has them. But out of these 100 comparable products, possibly more than half of the cheapest ones will be found on Pinduoduo, while the remaining 50% will be spread across the other three platforms. This is why Pinduoduo likely offers more affordable products compared to the other e-commerce platforms. Essentially, this positioning has led to Pinduoduo having to optimize cost in other aspects. If you look at the book Disruptive Innovation, it presents a logic: when entering a new field of market, we should aim to find a niche where platform giants are locked in competition with each other. At that time, if we look at the ecosystem, JD.com was actually very similar to Amazon. Similarly, in starting a business, or building a company, the same applies. We should try to find an entry point that is different from others’. That’s why, if we take a look at what the founder of Pinduoduo, Colin Huang, said early on – if we were Taobao or JD.com, we would never be able to surpass them. To become unique, we must first carve out our own identity and niche. I personally think this is the core logic that aligns with the essence of disruptive innovation – everyone needs to find that unique entry point.
[00:06:12]
Do you think the emergence of a company like Pinduoduo at that time was inevitable, or somewhat accidental?
Kaifei:
I think inevitability outweighed pure chance.
I believe the team and the organization behind it were crucial. If we look back at that time, several favorable conditions contributed to Pinduoduo’s rise. As we mentioned before, and have discussed previously, the e-commerce infrastructure was already becoming well-established. This included the increasing efficiency of courier services like SF Express and the “four major couriers” (STO, YTO, ZTO, and Yunda), as well as the widespread adoption of WeChat Pay and Alipay, which had ingrained a habit of convenient digital payments among users. Additionally, people had already become familiar with online shopping through Taobao and JD.com.
All these factors allowed Pinduoduo to stand on the shoulders of giants. This aligns with the philosophy of Duan Yongping (founder of BBK, Vivo, OPPO, and Subor), who often emphasized “daring to be the one who comes later but does it better.” Pinduoduo leveraged the foundational contributions of Alibaba to the e-commerce and retail industries. For instance, in the early days, when digital payment solutions were lacking, Alibaba created Alipay. When logistics infrastructure was underdeveloped, Alibaba built Cainiao and partnered with courier services. These efforts laid the groundwork for Pinduoduo’s emergence.
Another key precondition was the lack of interoperability among China’s major internet companies at the time. Because of this lack of integration, Taobao couldn’t enter WeChat’s ecosystem, which created a gap in the market that Pinduoduo was able to exploit.
This is why I emphasize the importance of the team. Around 2015–2016, there were some entrepreneurial opportunities, particularly ones that allowed for small-scale success. By “small-scale,” I mean businesses that could generate RMB 100 million in revenue. Many micro-businesses (WeChat-based sellers) had already achieved this within the WeChat ecosystem, indicating a significant market opportunity. Taobao couldn’t enter this space, and although JD.com had received substantial investment from Tencent—including the acquisition of Paipai—it failed to capture this opportunity.
This situation ties back to the theory of disruptive innovation. The key was to find a niche that JD.com couldn’t easily penetrate. One major turning point was the rise of WeChat Red Packets, which suddenly digitized money for many rural users in China. This new pool of online consumers didn’t necessarily have a lot of money—often just a few yuan, maybe 10 or 20 yuan—but that amount wasn’t enough to buy anything on JD.com. However, it was enough to buy something on Pinduoduo.
Pinduoduo’s success stemmed from its affordability. While we now recognize that it genuinely offers low prices, in the early days, it simply presented an alternative to JD.com’s premium logistics model. Rural consumers didn’t necessarily need next-day delivery. If they were told that waiting longer would save them money, many were willing to wait.
Another critical factor was JD.com’s focus on fast logistics. Because JD insisted on maintaining its own premium logistics service, it was difficult for them to collaborate with courier companies like SF Express or the “four major couriers.” This made JD’s logistics expensive, which meant it had to sell more expensive products to offset delivery costs.
Today, Amazon is facing a similar problem. Its FBA (Fulfillment by Amazon) service is expensive, making it hard to compete with Temu’s low-cost, fully managed fulfillment model.
[00:10:28]
You just mentioned the issue of logistics. In China, Alibaba and Tencent each have their own large and deeply integrated ecosystems, but they don’t interconnect with each other. This situation is relatively unique to China—overseas, we don’t see one company having a completely isolated ecosystem from another. Typically, e-commerce companies just focus on e-commerce, while other companies handle different services. So, does this mean that when Pinduoduo expands overseas with Temu, the market advantages they can leverage are very different?
Kaifei:
Yes, I think Temu’s market opportunities today are definitely not as favorable as they were back then. In 2015 and 2016, there was no TikTok e-commerce yet, so the market was mainly divided between JD.com and Alibaba. Alibaba couldn’t enter the WeChat ecosystem, and JD.com’s products and services were expensive. Additionally, JD.com couldn’t collaborate with courier companies.
Going overseas, the environment is not as advantageous as it was in China back then. There is no equivalent of WeChat. By 2015–2016, WeChat’s daily active users (DAU) had already reached 700–800 million, with monthly active users (MAU) likely around 1 billion. Overseas, platforms like Facebook, Instagram, WhatsApp, and Telegram provide good traffic, but they are primarily social tools—they don’t function like WeChat, which shielded Pinduoduo and allowed it to exclusively enjoy its market advantages. This creates challenges.
However, Temu has adopted interesting growth tactics, though they are controversial. This relates to Jianggan’s earlier question—there have been criticisms in China, for example, “9.9 RMB iPhone” deals or “9.9 RMB bicycle” promotions. Some users don’t read carefully: sellers take a close-up photo of a miniature model of the product, and customers assume it’s full-size, only to feel deceived later. Even though the product details clearly state that it’s a model, users still feel misled.
Another example is that users might think they’re buying an iPhone for 9.9 RMB, but in reality, they’re entering a lottery to win an iPhone. The small print below the “9.9 RMB iPhone” offer may clarify that it’s a lottery, but the text is tiny and unclear, leading to controversy.
While these tactics are criticized, they have effectively driven high user acquisition. As a result, Temu has seen polarized reactions—some users appreciate the low prices, while others feel deceived.
Even though Temu lacks the advantages that Pinduoduo had in China, it compensates with aggressive marketing and growth strategies. This is why Temu outperforms its overseas competitors. Currently, very few e-commerce platforms outside of Amazon have surpassed $100 billion GMV (Gross Merchandise Volume). Shopee is approaching that level but hasn’t quite reached it yet. Temu, however, is growing rapidly and could become the first non-Amazon platform to hit the $100 billion GMV milestone.
[00:23:46]
If we take a look at many e-commerce companies overseas, including MercadoLibre (Meli) in Latin America and several European e-commerce platforms like Allegro in Poland and Bol in the Netherlands, Belgium, and Luxembourg, they all share a common characteristic: most of them were founded around 1999. Many of these companies eventually went public, and once they did, they naturally faced investor pressure to increase their average order value (AOV) and improve per-user monetization.
In China, we see that Alibaba and JD.com also faced similar pressures. The so-called “consumption upgrade” was, in some sense, about increasing order values and boosting brand participation. However, at this crucial moment, Pinduoduo chose to go in the opposite direction.
So do you think Pinduoduo’s strategy is still feasible in the long run?
Kaifei:
Yes, to some extent, Pinduoduo will definitely face this pressure. However, this is closely related to the macroeconomic environment. The global economy is slowing down, deflationary pressures are increasing, and ultimately, people have less money in their pockets while employment rates decline. Under these conditions, I actually think this situation is favorable for Temu and Pinduoduo.
I have also asked similar questions to several companies. Specifically, if Pinduoduo were to target the middle class or even higher-income consumers, would the strategy need to be different?
Their response was that one key factor to observe is the average income of people shopping at Costco versus Walmart. Costco shoppers certainly care about product quality, but at the same time, Costco has strong pricing power and tight control over its supply chain, to the point where it makes almost no profit from product markups. This means that the ability to sell at low prices is not just for people with less money—even high-income individuals seek cost-effective options.
If I remember correctly, they told me that the average annual income of Costco shoppers is around $100,000 to $120,000, while Walmart shoppers have an average annual income of about $70,000. This pattern makes sense—people don’t seek affordability only because they lack money; even wealthier consumers will choose lower prices when given the option.
Today, we can see the same trend on Pinduoduo—many people buy iPhones through the platform. It’s not that they can’t afford them elsewhere; they are simply choosing to purchase at a lower price. This shows that Pinduoduo’s model is not just for lower-income groups but actually appeals to a much broader range of consumers.
[00:31:09]
If we examine how Alibaba and JD.com have responded to Pinduoduo in China, it also seems to be a process of self-reflection. What insights could this process provide for overseas e-commerce platforms like Amazon and MercadoLibre (Meli)?
Kaifei:
I think when we talk about the idea of “more variety, faster delivery, better quality, and lower prices,” it’s nearly impossible to achieve all of them simultaneously. Today, JD.com and Amazon have only achieved part of it, and the same goes for Meli and many other regional e-commerce platforms. Each has chosen a particular focus.
For example, if we look at Pinduoduo, its presence in women’s fashion is still relatively weak. The proportion of women’s fashion sales on Pinduoduo, or its breakthrough in branded fashion, is not as strong as what we see on platforms like Douyin, JD.com, or Taobao. This is a weak point for Pinduoduo. Fashion brands that rely on storytelling, influencer marketing, or emotional appeal don’t perform as well on the platform.
When you buy clothes, it’s probably not just because they’re cheap. First, they need to look good, and then, if the price is reasonable and within your budget, you will consider buying them. The same logic applies to food. It’s not just about being cheap—otherwise, the most economical choice would be eating plain bread every day just to stay full. Only when you are at the very bottom of Maslow’s hierarchy of needs would you completely sacrifice other aspects of value.
So I think Maslow’s theory can be used to analyze how differently e-commerce platforms position themselves. This same concept applies to the catering industry and different e-commerce platforms. Are you trying to be Xiaomi, or are you trying to be Apple, which is extremely difficult and requires constant innovation. On the other hand, targeting Xiaomi’s market segment, which aligns more with the lower tiers of Maslow’s hierarchy, is relatively easier. As the Occam’s razor principle recommends: the simpler something is, the sharper it becomes. The less complexity involved, the fewer discussions are needed, and the easier it is to execute effectively.
So, to answer Jianggan’s question—when deciding which aspect of “more variety, faster delivery, better quality, and lower prices” to prioritize, companies must make strategic choices. Today, we also see the rise of instant retail, which introduces an additional factor beyond these four—convenience. A friend recently shared an insight with me: sometimes, people order instant retail not because it’s cheaper than going to a convenience store downstairs, nor because it offers a wider selection. They do it simply out of convenience, because they don’t want to leave their homes.
[00:38:28]
What do you think about the future of Pinduoduo and Temu? Looking ahead, we see them shifting their business model in key markets from a fully managed retail-like approach to a more localized fulfillment model. Do you think their core strategy will still revolve around low prices, or will it evolve over time?
Kaifei:
As I understand it, Pinduoduo’s domestic market GMV has already reached around 3 to 4 trillion RMB, which is approximately 500 billion USD. Throughout this growth, they have remained committed to their core focus on cost savings. Even in their expansion into branded products, they continue to stick to their business model. While many brands initially resist being forced to offer the lowest prices across all sales channels, Pinduoduo has still managed to make it work.
Fundamentally, when you expand into different areas—say you were very strong in area A, but then try to enter areas B and C—you inevitably become weaker in some aspects. That’s why the key is to maintain a sharp focus and limit the scope of what you pursue.
Pinduoduo’s organizational philosophy also aligns with this approach. In the business world, companies often emphasize “trial and error,” but Pinduoduo operates more on a “trial and success” model. Their strategy is to go all-in—either they don’t do something at all, or if they do, they fully commit.
[00:42:34]
Do you think that if Pinduoduo or Temu becomes a truly global company, large enough in multiple markets worldwide, it will also suffer from big-company disease?
Kaifei:
Yes, definitely. I think it’s inevitable—100%—just a matter of time. This phenomenon exists in every country; even dynasties follow a similar pattern. There’s no such thing as perpetual continuity. The same applies to companies. I believe big-company disease is unavoidable, but it can be delayed.
If you analyze the causes, you’ll find that the first cause is the age of the company. The older a company is, the more likely it is to develop big-company disease.
So what lies behind the company’s age? The departure of the founding team. Once they’ve made enough money, they might no longer care about the company. This ties into the founders themselves—aging can mean they’ve earned enough wealth, or they’ve moved through different life stages. Initially, they work hard to make money, but eventually, they transition toward retirement. When the founding team exits, professional managers may start hiring indiscriminately. Founders tend to exercise restraint in hiring, but once they leave, more people join, leading to increasing disorder and rising communication costs. As a result, decision-making becomes more complex, especially under professional management, which might bring in different decision-making logic.
Another key factor is whether the company remains focused on its core business. This is also why startups always have opportunities. A large company’s CEO can only oversee, at most, around 80% of operations. The remaining 20% is managed by professional executives or subordinates handling new business ventures. In contrast, startup CEOs are entirely dependent on their venture’s survival, so they fight hard. In large companies, however, professional managers can simply move elsewhere if they fail, which further contributes to big-company disease..
So, to answer Jianggan’s question—big-company disease is inevitable. However, if we look at Pinduoduo today, it still fares better than some other big companies.
First, Pinduoduo is relatively young—compared to JD and Alibaba, it is more than a decade younger.
Second, many founding teams in other companies have already left. But if we examine Pinduoduo’s founding team, many of them are still present. The key leaders of its business units have worked with Huang Zheng for over ten years. They are still part of the original startup team.
Last, if we also look at efficiency within the company—Pinduoduo still maintains the highest efficiency with the smallest workforce. That’s why, for now, we see that Pinduoduo can still compete effectively.
[00:45:48]
We’ve seen that many governments worldwide have started expressing concerns about Temu. After all, for most countries, it still operates on a cross-border model. And with that model, it inevitably impacts local retail industries and, in some cases, even domestic manufacturing.
So, if I were a policymaker in a given country, how should I respond to this situation?
Kaifei:
I think there are two main aspects: the extent of the impact and how to respond.
First, let’s assess how significant the impact actually is. I think it’s manageable—some countries will be affected more than others, but overall, it remains under control. It won’t cause a massive disruption for any single country. Why? Fundamentally, the impact is greater in less developed regions with lower per capita GDP, where consumers are more willing to wait ten days for a package. However, in developed countries, breaking into mainstream consumer spending is nearly impossible.
If you tell me something is just a few dollars cheaper but requires a ten-day wait, I won’t accept it. I might be fine with waiting three days, but not ten. In countries like China and other developed markets, where user experience is continuously improving and Amazon is already dominant, Temu or Pinduoduo is not significantly cheaper. So, when you consider a 10- or 20-day waiting period, mainstream consumers are unlikely to adopt it.
That’s the first point—on the consumer side, demand varies by GDP level, and tolerance for longer delivery times differs. People at lower levels of Maslow’s hierarchy of needs may have different priorities.
The second point is about cross-border logistics. There are capacity bottlenecks, making it difficult for Temu to grow indefinitely at its current pace. Right now, it may be growing at 20%, 30%, or even 40% annually, but as it scales, that rate will slow. If it reaches $100 billion or $200 billion in revenue and spreads across multiple countries, its growth rate won’t be as overwhelming as it seems now.
In other words, while its growth appears explosive now, it’s simply because it started from a small base. But over time, this rapid expansion will naturally level out. By 2027, its annual growth rate might slow to 20-30% as it expands across numerous countries, making its overall impact more moderate.
The third point is localization. Temu is already recruiting local merchants, which is partly driven by consumer demand—local buyers want lower prices and faster delivery. As it localizes, its impact on domestic industries will be less severe.
For governments, each country will adjust based on its own situation. If a country is already dependent on imports for certain goods, it may be more tolerant of Temu’s presence. However, if a country has a strong domestic textile and apparel industry, Temu’s entry could threaten local businesses.
At its core, most governments can learn from each other’s policies. They can examine how other nations regulate and guide e-commerce platforms to see whether the overall impact is positive or negative.
There are also advantages: once localized, Temu will require more warehouse employees. It can drive digitalization in e-commerce and improve local online payment systems. Governments are generally motivated to enhance monetary circulation and banking integration. In that sense, the entry of Temu can be beneficial.
