Followers of Momentum Works newsletter would know that since March, Temu has gradually shifted the focus on its US marketplace: from “full consignment” cross border model to “half consignment” model allowing US-based companies to directly sell and ship to consumers from US warehouses.
Temu, which is in 77 countries and territories as of 1 August, is also launching the same model on 18 August in Korea and Japan, where it has gained significant traction.
Shipping cross border from China to North America, where air freight has to be used for time efficiency, limiting the goods that could be sold to small and light ones. In comparison, cross border fulfilment from China to the pair of East Asian neighbours can be easily accomplished.
One method is the ro-ro (roll-on roll-off) ships operating between China’s northern Shandong province and the Korean ports of Pingtaek and Busan, for example. Full container trucks can drive onto the belly of these giant ships, and drive off directly to the warehouse for clearance and sorting after arrival.
The whole journey (of 200+ nautical miles) on the sea can take less than 10 hours. Similar transportation can be arranged between Shandong and Japan: one route is direct to Japanese ports; another route involves driving across the Korean peninsula to Busan before getting on the ship again.
Air freight from nearby Chinese hubs to Japanese and Korean airports can be as fast as two hours, but requires a lot of handling and is much more expensive.
However, as Temu (as well as other cross border marketplaces such as AliExpress) grows in size and influence in Japanese and Korean markets, they have to care more about logistics efficiency. Large amounts of goods sold directly cross border can be a sensitive topic in many countries – no exception here.
Besides, Korea has a large and very vocal local seller community – just look at what happened during the recent problems with Qoo10’s Korean ecommerce subsidiaries.
Therefore, allowing sellers to sell and ship locally not only expands the assortment on Temu, but also makes the business model more compliant in the eyes of regulators.
Here are some of the specifics of the model:
- Stock: Stable stocks in Japan and Korea.
- Qualification of the main body: Only companies with main body in China and Hong Kong can enter.
- Compliance: All products need to comply with the legal and regulatory requirements for product sales in Japan and Korea.
- No restrictions on categories: Sellers can choose the business categories according to their own resources, but need to ensure compliance with local laws and regulations.