As the world’s fastest-growing economy giant, Chinese e-commerce remains a significant player in global trade. In line with its striking development in terms of digital payment services and economic infrastructure, China has taken the lead in the commercialization of goods and services through e-commerce, the online shopping platform favored by today’s digital society. As internet-based technologies have become closely embedded in the daily lives of Chinese citizens, the intensity of online shopping transactions in the domestic scope is relatively high (Jiang & Murmann, 2022). Demonstrating an outstanding record of online retail sales margin–reaching a peak of US$12 billion in the first quarter of 2024 alone–Pinduoduo is currently the largest mainland Chinese e-commerce company (He & Low, 2024). Thus, this figure has led Pinduoduo into following the footsteps of former prominent CBE players, Alibaba and Taobao, in taking strategic supply chain expansion in order to aim for wider market shares, even beyond Asian regions.
Earlier in 2022, PDD (Pinduoduo) Holdings introduced its sister e-commerce company, TEMU, which aims to accommodate Pinduoduo’s internationalization efforts. Following its recent cross-border breakthrough, TEMU has triggered various debates in the global market on its controversial ultra-fast C2M (customer-to-manufacturer) business model by bridging overseas buyers with factories from China, ensuring that the goods purchased are shipped directly from the manufacturers (Uchańska-Bieniusiewicz, 2024). Amidst its prospective outlook as TEMU inherits Pinduoduo’s strong foundation and legacy in leading China’s digital economy, the cross-border e-commerce (CBE) platform is faced with numerous oppositions from international markets. Hence, this paper will provide further examination on the business model introduced by TEMU, by assessing the opportunities and challenges of TEMU in entering the global market as a rising economy in transforming the CBE landscape.
Therefore, untangling the complexity of TEMU’s role as Pinduoduo’s cross-border extension can be further understood by utilizing the competitive advantage perspective, which draws significance from the studies of international businesses. In accordance with Porter (1990) in Gupta (2015), a nation’s prosperity is determined by the success rates of its firms in the global market, and a nation’s competitiveness is determined by the development and innovations created by its industry. Hence, this is reflected in the ‘success story’ of China’s biggest e-commerce company, Pinduoduo in targeting the global market for its further expansion, considering its competitive advantages in the form of its C2M innovative business model, which will be further emphasized in the following subsections.
The strong foundations from Pinduoduo, especially in terms of gross profit, total assets, and liabilities in China’s domestic market have provided convenience in accelerating overseas expansion through TEMU. With the company’s innovative approach in introducing the “Copy from China” model–which can be simply defined as a process where Pinduoduo replicates its already mature ecosystem basis amongst Chinese consumers into a larger global context–TEMU obtained an initial kickstart in establishing itself on the international arena. Given this valuable legacy, TEMU has the advantage in accessing resources from the supply chain and networks previously built by Pinduoduo, including company and factory partners, as well as in facilitating direct investments (Wang & Ni, 2024). While being merely profit-oriented remains a tactical aim, TEMU is more oriented towards more promising and sustainable growth by taking strategic measures in expanding its market geographically. The “scale first, profitability later” scheme is in fact essential in supporting TEMU’s establishment as a ‘new’ company with only 4 years of operation, striking a clear contrast with Alibaba–its predecessor, which has played the game for decades–which has reoriented its objectives towards profit gains (Wang & Ni, 2024).
Thus, maintaining a long-term value in an even larger foreign market can be obtained through a balanced increase in consumer loyalty (Wang & Ni, 2024). Given that the goods being ‘made in China’ are known for their low retail price, TEMU guarantees the lowest prices for the items sold on the platform, offering massive promotions and cashbacks, which further boost its sales (He & Low, 2024). Hence, TEMU’s business model in offering ultra-low-price strategies, which are highly favored by consumers, has certainly become a competitive advantage in comparison to the pre-existing cross-border e-commerce companies in the US, Europe, and Asia which involve merchants to consumers, involving yet complicated third parties. In addition, TEMU’s competitiveness is also strongly driven by the C2M business model, which has succeeded in connecting consumers with manufacturers, enhancing cost and time efficiency, especially in terms of logistics, as well as in untangling uncertain pricing concerns in pre-existing CBEs (Uchańska-Bieniusiewicz, 2024). As TEMU inherits Pinduoduo’s reliance on digital platforms, taking forms in both websites and mobile applications, the C2M model implemented is certainly very prospective in the era of digitalization, fueling the effectiveness and ‘seamlessness’ of cross-border trades through online platforms (Mak and Max, 2021). Through its innovative business strategy, not only does TEMU accommodate the movement of low-cost goods, but adaptability and alignment towards consumers’ demands can also be guaranteed.
However, TEMU is met with several regulatory challenges that are rooted in its unconventional business model, reflected through the case of TEMU operation bans in several countries, including the US and Indonesia. While the discourse in limiting TEMU transactions has not yet been legally established, in early June 2023, the U.S. House Select Committee on the Chinese Communist Party filed reports regarding the absence of TEMU’s audit transparency and the health risks brought by the products shipped from the Chinese ultra-fast CBE platform (Pao, 2024). As we immerse ourselves deeply in the case of US bans on ultra-fast Chinese e-commerce, this policy was taken by the US government solely not as a direct effect of the long standing geopolitical rivalry between the two countries. In fact, the problem lies beneath China’s state-managed digital capitalism, which becomes the US’ major threat in generating the global supply chain dynamics–challenging US dominance in the international economy in the digital sphere (Schmalz, et al., 2024). The US’ “protective” measure can be interpreted as a result of Huawei’s remarkable expansion in the global market, which challenges Apple’s prominent position in the international market.
The similar protectionism efforts in banning TEMU were also adopted by the Indonesian government. The Indonesian Ministry of Cooperatives and SMEs, in coordination with the Indonesian Ministry of Communication and Information Technology, has imposed strict restrictions on TEMU’s entry into the Indonesian market (Maulida & Nistanto, 2024). Reflecting TEMU’s business model of sourcing goods directly from manufacturers, the ban policy was formulated to protect SMEs and vulnerable industries in Indonesia, enhancing the resilience of local products amidst the digitalization. However, these measures taken by both the American and Indonesian governments can provide a clearer picture that TEMU’s competitiveness is undeniably threatening towards domestic businesses in various countries, regardless of whether the country is an established or emerging economy.
Given that Pinduduo has marked notable breakthroughs in accelerating the growth of Chinese-based e-commerce platforms in its domestic market, the internationalization envisioned by Pinduoduo is certainly not a distant goal. This takes into account the competitive advantage that TEMU has as Pinduoduo’s cross-border extension in leveraging its supply chain through the C2M model. However, TEMU’s entry into the global market remains challenging, reflecting the complexity of each target country’s domestic policies and persistent competition in the international market. Hence, in order to enhance TEMU’s penetration in a larger arena, more efforts should be made in rerouting strategies, demonstrating compliance with domestic policies, and increasing their business model flexibility to accommodate preconditions required by each and every designated country that benefits their expansion scheme.
