E36 – The Impulso Podcast – Temu’s Super Bowl: maintaining operational efficiency and pivoting customer acquisition strategy in the US

[Transcript]

Dalia 0:01
Hello, everyone, and welcome back to the Impulso Podcast. Today in the studio with us we have Weihan and Vion.

So if you follow American football closely, you probably know that Temu joined a long list of Super Bowl advertisers earlier this year. So while the purpose of this movie is pretty much clear, I think it’s super presents a very interesting case was the reason behind this move how they’re doing, you can get our experts to kind of set up the scene where the what kind of strategy they used when they entered this.

Weihan 0:36
Okay, so I think to give a bit of context for those who have not been paying attention to the space to enter the first market, which is the US in September 2022. And initially, how they tried to acquire users was to actually replicate exactly what people do or the parent company was doing back home in China, which relies a lot on the sort of like word of mouth kind of recommendations, but through the mobile phones. So what they tried is to get Temu users to recommend or send the link of Temu to their friends and their family members, and get them to download the app. So I think the first wave, this actually only worked among those, I think Chinese, they are based in America. So they are actually quite familiar with this kind of strategy. In terms of ecommerce companies, you tried to do user acquisition. But if you were to look at how the American users are actually responding, I don’t think it work. It worked very well, because people that are more used to Oh, I see this ad on like TV, I see this ad on or maybe Facebook or other platforms. And then they might be incentivized to give this new app a try. So I think, for the team, in order for them to continue in this space, they have to pivot and try to adapt the user acquisition strategy to something that suits their local environment, instead of trying to replicate exactly what they were doing back home.

Dalia 2:16
I think it makes sense. I think maybe it might not be just limited to the US users. I also cannot really imagine the holding the app also cannot imagine sharing the link or going this random app, I don’t think this is like how would you really share?

Weihan 2:33
I think more than just sharing the Avista is the fact that you’re sharing with friends and family. So this is something that is very familiar among Chinese users. But I think for the Americans, what they do is they will try to share the app with strangers like you can see all this like Oh, download through my affiliate link, they share it to their Twitter followers to share it on their Facebook on certain groups. Or maybe even I don’t know, some people will do it on YouTube, where there’s a bunch of random strangers on there and hope that someone actually clicks into it. So the act is not so much of like I sent to my friend I send to my family invite. It’s like, oh, you’re a complete stranger. There’s no ties to you if it’s not good. I guess a stranger coming for you. It’s not as bad as your family and friends coming in, say, hey, why don’t you send me this random link? Yeah. So in China, how the word that came about was Canada. So that means how do you translate that chop, chop? Chop it? Chop me chop the price? So what I’ll do I see that there’s a sharing link, I’ll share it to my social media. For example, I showed it to you that I helped me to Canada call me to chop my price, slashed the price, that’s the right way to say. So essentially, that that term is what goes around the circles quite goes viral in the in the social circle. That’s how penal law came about.

So to realize that this kind of strategy does not necessarily work in the US by sending it to friends and family and the fact that American users prefer to watch promotional videos, or like advertising on certain platforms that internet platforms. So they have pivoted to trying to advertise a lot on Facebook, I think, I think within a month or so you’re correct me if I’m wrong, they have about 38,000 ads posted. Yeah, so it’s quite a lot. So. And I think this has obtain a lot in order to get pretty good results people started to download, then their advertising was like, maybe your first product or this product for maybe 99 cents for as low as like 40 Something cents, which is very attractive to American users, because back then there were not a lot of platforms that are doing such low price products.

So, because if you see those on Amazon, even if it’s some of the sellers are based, they have supply chain based in China, their products are still not the cheapest as compared to what Temu is offering back then and even to date. So this really made the users very attracted to try checking out this brand new platform that has launched in the US. And I think Timo saw quite a fair bit of growth in terms of their users during this period of time,

Dalia 5:30
whenever I would go to Amazon and try to find something that is very cheap, even though the prices will be very low, so it will be kind of compensated by the delivery fees. So I don’t think I would ever find something below like five euros or something. But when we’re talking about Temu, they’re low prices, is this kind of low pricestays the same even with delivery,

Weihan 5:50
I think they would definitely charge a bit in terms of the delivery, because ultimately, it comes from the products come from China. But I think overall, the entire order value or the amount that consumers have to pay still remains pretty low, because individual products are priced very low. So the the slight, this the additional cost that they have to pay in terms of shipping, I guess most of them can accept it.

Vion 6:19
And one thing about this average order value rate, I mean, of course, we know that their target market is the low price or the mass market rate. And they have been doing very well. Many of Pinocchio’s or tmos peer assessment thinking about okay, it looks like low price is the way to go. And looks easier, I just have to offer something at really low price at the control, my costs are controlled by price. But we recently wrote an article on that. So essentially, it’s not that easy to you know, it’s not just lowering the price, right? It comes to everything at the backend, the culture, your people, your organization to put everything together so that you can maintain a low price. And I think one one specific thing would be someone has been doing some research on this average order value of PinDot. Or Timo, same thing was that when the average order value goes down, sorry, when the average order value goes up, the GMV actually did not go down. Right, it does not mean that if I start selling more expensive stuff, my Jimmy start coming down, which is something you do not want to want to get yourself into your GMV to keep growing. So compared to many other platforms, where they start to sell things, which are slightly more expensive, people buy less. So that makes it very interesting. How can you sustain to make people even though you increase the average basket size people still buy. One thing, for example is that they have like a minimum barrier. If you if the total basket size is less than $20. I can’t deliver it for you that kind of mechanism and tactics that they put in place. So yeah. And another way is to actually keep growing your users such that even if they increase the product, price by a bit, with more people buying overall GMV would still increase.

Weihan 8:12
And I think coming back to the topic of why we’re doing this podcast today is why so why did team eventually go on to the Super Bowl. So I think they were gaining traction in terms of the advertised advertisements done on Facebook, or meta or the meta platforms. But I think they wanted wanted to further this, this growth, and they wanted to find a platform in which gives them the exposure at one shot. So it just happens to it just happens that the Superbowl coincided during this period in which they’re thinking about how do they get another platform to really increase their reach? Yeah, so bigger than Facebook, bigger than Facebook. And the fact that Super Bowl is something that almost all Americans pay attention to it’s a yearly event that everyone, both consumers, as well as many brands out there really pay a lot of attention. And you see a lot of the big brands like maybe Apple Pepsi, they really fight for a spot to advertise what to actually perhaps like maybe sponsor put a brand out there during this big event. So Tim was saying was thinking that, Hey, maybe I could also leverage on this platform to really try to increase my users because at this point, I think they are only about maybe less than six months ago in the market. So they’re still very new, very, very new.

Dalia 9:44
Has this kind of reputation as this company that is has a very high level of operational efficiency. And now that you’re saying that there are very big companies competing for the spot to advertise during Superbowl like Apple and Pepsi. I’m really curious how to manage to pull it off, especially if I guess they were kind of in this condition with the high tech pressure, right? Yeah, watch this market. Do you have maybe any kind of information about how how was it working behind the scenes?

Weihan 10:16
Yeah, I think get to give you a sense of how stressful it is for teams team, they have less than a month to prepare everything, including filming the advertisements, planning what to put on the ads, how to get coordinate or the back end in order to like, let’s see if the ad does well, people immediately start downloading Temuand start ordering how is the backend going to support it? So, Timo how it started is someone basically have this idea of wanting to advertise on TV, I mean, advertise on the Superbowl. And then you have people will support it and the people who don’t, and the people who support it, obviously, the reason is, there’s a lot of traffic, we need the traffic now we need to grow. But for the people who don’t support it, it’s more like, I think, because this is such an unconventional thing to do, especially Temu is a Chinese automobile Chinese company they’re trying to do so much they’re drawing a lot of attention to themselves. If they were to advertise on the Superbowl, in the we’re afraid that this might perhaps bring about some regulatory or political issues associated with it. So the people who do not support it, we’re really concerned about whether or not they should even try to do the Superbowl ad. But so these two sides, they can come to a conclusion. So the entire issue is escalated to the headquarters. And I think long story short, our headquarter eventually approved, mainly because the, the traffic is just too, is too good to just too far for them to just keep it up.

So yep, so once the headquarters approved of this proposal, they got to work immediately, there’s a team setup for them to run all this, you have the team that is in America, as well as a team in China. So these two were working concurrently to support the entire operation. And the Chinese team actually worked us hours. So what they do is that they work, I think, in the afternoon to early mornings, and then they rest, and they don’t go back to read this live at their desk. So in case anything requires the help, they can immediately respond to it. So that’s the kind of culture that team was actually working, how the people at team was actually really working to. And if you would like to find out more about this kind of working culture, do check out our previous podcast. There’s a lot of insightful and very funny stories in that forecast. But yeah, so they were working very hard. And I think you can’t discount the fact that they did get help from an American based company. Oh, which one? I think it’s how Saatchi and Saatchi. So it is one of the bigger advertising. I think it’s bigger advertising a marketing firm in I think globally if I’m not wrong. So they they actually discussed what they want. And then they came to a conclusion to produce a video in a very, in a very short amount of time to directly target like people’s innermost desires to shop. So it’s like, how are they going to do so in like a short video and like, for example, have 30 seconds video? How do I get you to shop and want to buy things off my platforms within this 30 seconds? So that was the main focus of how they were how they were going to run the overall app. And yeah, I think it’s it’s a pretty fast process. But I think they have also I think they have lost a bit of focus because everything was so rushed, and the video turned out to be very women’s fashion focused, even though like Temuis a it’s a platform that sells more than just women’s specialty. So all the daily necessities, and much more. Yeah, it’s much more than that.

Vion 14:30
And the tag line “Shop like a billionaire”. Yeah, so it’s really I think it’s like short and snappy, catchy enough. Yeah, definitely. And I think what based on the whole story that we had tells us it tells it’s quite telling of the whole team and pinned to the culture. We always talk about doing going all in and have decided on a specific direction coming from the top. People go all in the US team the Chinese team work together go in and then of course, not just the content them.Thinking site, but also how the supply sites comes together, and how you have to keep your stock ready so that when the demand comes out, you can actually, you know, respond to it yet. Otherwise there will be a failure, right?

Dalia 15:12
Such a waste of all those resources. So I think they went all in, and it’s really interesting to hear on how exactly they change their position. I wonder if they’re kind of like expectations, were they justified after this campaign, and even beyond that, we know that there is another ecommerce, Chinese ecommerce giant that is also operating in the US. And I wonder how their dynamics changed

Weihan 15:41
I think if you were to look at it, when Teemu first entered the US, right, they’re very new. And back then she was already pretty established. And they have a lot of us users that really relied on sheen to buy a lot of the quotes. So how team decided was that they’re just gonna, in a sense, imitate what she needs doing. So if she didn’t buy them, they’re searching home, maybe they were trying to do, this is my chemo home. So they were they were really following what she was trying to do. But then after this entire situation, right, Timo actually is very became very successful now. And now they became like, the, the one that people make so because he was spending so much in terms of their marketing and the ads, right, she This has also increased the marketing and advertising investments as well, I think for teams case, initially, their marketing budget was okay, we see how much he is putting in try to follow that. But no team was marketing budget became like, oh, there’s no upper limit. Oh,yeah. So I think because you have these two giants, always investing so much in terms of the the marketing of the ads, right? For a lot of the smaller brands. They can’t afford to compete, because the basic cost to advertise on any of the platforms has increased tremendously ever since. This people. I mean, this, these two companies have came in.

Vion 17:19
Yeah, that team is spending about daily on a daily basis, advertising spending on Facebook, and all this Google about 10s of millions of dollars. And Shane is like eight, eight millions of dollars. Right? Yeah, like so it’s like two giants, right. And the whole you can feel the earthquake on the ground.

Weihan 17:38
I think maybe there was a flood this like, joke going around there. I think Temu and SHEIN like advertising spend actually helped a lot of like, Facebook and Google, Facebook and Google to single handedly singularly failing at this.

Vion 17:56
And just on this, one of our collegue , she just went to us. And she was sharing that the one she landed. She was just like browsing through YouTube Once landed, and the first ad that she see was Temu

Weihan 18:18
Maybe we will start to see that if Temu eventually comes to Singapore. So far, no. It’s quite interesting as they first entered, Philippines and Malaysia, and some of the media is spreading around around the region was like, Oh, we’re gonna write a piece on Timo. They’re gonna probably enter into Singapore soon. But then now looks like they are kind of like focusing a bit more on Middle East. And currently in 48 countries now around there. A lot on media sites. They were expanding very quickly elsewhere. But when it comes to Southeast Asia, I guess they’re more cautious with their agency, especially with the entire situation happening with

Dalia 18:58
Exactly, yeah, I can listen, and why. Yeah, but who knows, maybe they would join still, by the time we released this podcast, I think this is always the kind of bread that we make.

Okay, so yeah, it’s really interesting to hear how they disrupted the landscape in the US, but it’s kind of with their strategy. So if you want to know more about him and their operational efficiency, we’re, we’re now we are gonna link our report, who is Temu in the shownotes. So you will feel free to check that out. And we’ll see you next week. Bye.