In Chinese tech, no incumbent can sit back and relax.
In recent weeks, the media has been filled with reports of Temu, an ecommerce app owned by China’s Pinduoduo but focused on cross border into North America. Headlines such as “SHEIN copycats chase explosive growth” and “Fast-fashion upstarts are using SHEIN’s own strategies against it” are commonplace.
Temu has also overtaken Amazon (and SHEIN) to top the shopping category in both Apple Store and Google Play Store in the US.
However, it does not take much effort to find out that at least at the current stage, that Temu is not exactly the same as SHEIN. Whilst SHEIN still largely focuses on fast fashion, Temu sells everything … like, a better version of Wish.
Although, Pinduoduo is not Wish. If any other company tried to replicate SHEIN, investors should easily dismiss it. However, Pinduoduo is not any other company.
Many Chinese investors believe that SHEIN, in pursuit of further growth, will eventually become a platform, whilst Temu will encroach deeper into fast fashion – a classic Chinese tech story of involution.
Will Pinduoduo make it? Let’s use the People, Organisation, Product -Leadership (POP-Leadership) framework to analyse. You might find more case studies and applications of the POP-Leadership framework in our book “Seeing the unseen: behind Chinese tech leaders’ global venturing”.
Like its contemporaries Meituan and ByteDance, Pinduoduo is famous for its high pressure work environment. The people who are assigned to Temu, according to Chinese media, are from various previous projects in Pinduoduo – familiar with the culture and pace.
Many of the early employees of Pinduoduo still stick around with the organisation – while a lot of the late stage hires, including high profile ones, could not adjust themselves to the culture and have subsequently left.
That in the short term obviously ensures very fast execution. In the longer term, if Temu wants to become a mainstream ecommerce app in the US, it will have to build hybrid teams. SHEIN, with its strong supply chain, does not have to do it.
Finding US employees adhering to Pinduoduo culture, especially in the age of ‘great resignation’, would be very challenging. Pinduoduo’s founder, unlike Twitter new owner Elon Musk, does not inspire a cult.
Pinduoduo has kept its organisation agile and capable of launching new initiatives with the same level of execution as the main business.
This has been manifested in the community group buy war in China in 2019-2021. Meituan and Pinduoduo managed to beat other giants, including Alibaba, JD, and Didi, to emerge top (whether the business model stands is another question obviously).
Also remember, Pinduoduo itself was launched based on a myriad of previous attempts by Colin Huang and his team.
Now it is launching the same organisational agility (a marching army basically) into a foreign market. In the short term, this will stand, especially as mentioned below that the leaders are very committed.
Remember, cross border selling into the US is actually much easier compared to selling into Europe or emerging markets, as so many sellers and platforms have already accumulated the knowledge and ripened (for the lack of more apt word) the infrastructure.
The question, however, will arise when Temu acquires its initial customers, and would want to become a more general ecommerce platform. That will require the organisation to make some adjustment which might be uncomfortable.
There is time for Pinduoduo to make that happen – but might not be a lot of time.
As mentioned above- Temu feels like an unbranded department store rather than a curated retailer (like SHEIN is). Its key strategy seems to be using very good value for money household, electronics and other key categories to acquire customers.
Compared to SHEIN, which had already accumulated a lot of users when acquisition was cheap, Temu faces a challenge of high customer acquisition cost (probably >10x of SHEIN’s original levels).
That means the product needs to evolve to actually keep these expensive customers and extend their lifetime value. Pinduoduo has pulled the late comer game off in China, but that was because it leveraged the social networks on WeChat. (WeChat owner Tencent is an investor of Pinduoduo).
Facebook and TikTok would not give Temu the same treatment in global markets, nor do they have the social tools that WeChat has. Temu will need more creative and persistent ways to make it work – in addition to Pinduoduo’s trademark relentless pursuit of efficiency.
One thing though, is that Pinduoduo has likely already learnt how SHEIN does their supply chain. Colin Huang is known to send his people to work for other companies undercover – some work for more than half a year, learn tremendously, before heading back to Pinduoduo to adapt such learnings,
Media reports in China that Temu is led by Pinduoduo veteran Gu Pinpin. Gu has been working with Pinduoduo founder Colin Huang, and been through Huang’s various ventures before founding Pinduoduo.
There is quite possibly a strong level of trust in the working relationship. In SHEIN and ByteDance, that trust amongst the early team has persisted, while Meituan has seen a few retirements lately.
We also heard from sources that Huang, who supposedly had retired, is actually personally driving the growth of Temu, as well as the team. If that is really the case, Huang, who does not have to worry about the day to day of Pinduoduo, might provide the leadership mental space, leadership and commitment/persistence to drive Temu forward.
Some of Huang’s early lieutenants remain his trusted advisors, who will try their best to avoid Huang making bad mistakes.
In a similar way that Zhang Yiming, who is no longer CEO of ByteDance, is actually personally driving the global initiatives, including TikTok.
Actually Temu is very different from SHEIN. SHEIN has already built the moat which is its ‘small order, quick reorder’ formula through deep integration with the supply chain. Pinduoduo’s Temu, in its quick dash to acquire customers, will need to either build such supply chain capabilities fast, or openly challenge Amazon as a platform.
Neither will be easy – few companies can pull it off. Though again, as mentioned above, Pinduduo is not any other company.
A good advantage is that Amazon has kicked out so many Chinese sellers (industry participants put the number to be above 50k) for various rule violations – Temu can seize these sellers and at the same time ensure customer guarantee/protection.
Pinduoduo rose because Alibaba kicked out such sellers and deprioritised their products – Temu is trying to pull off the same thing, in a foreign market. Colin Huang has the determination, learning agility, people and organisation to make a wave.
We have done an analysis of SHEIN’s POP-Leadership in our Who is SHEIN report published in July this year. You can download a copy to make reference.