3 Reasons I’m Not Convinced Temu Is a Major Threat to Amazon

If there’s one thing that can attract shoppers, it’s the lure of low prices. Combine that with endless scrolling and “influencers” promoting the products you have on social media, and you have the Temu online shopping platform. There’s always some kind of product promotion on Temu.com that can encourage consumers to spend a little more money once they’re on the platform.

Some Amazon (NASDAQ: AMZN) Investors are concerned about Temu’s growing popularity. While Amazon is still the dominant force in e-commerce, owner Temu, PDD Companies (NASDAQ:PDD)it also runs online store Pinduoduo and has deep financial resources, which could potentially make Temu a major obstacle to Amazon’s growth.

This sounds concerning, but after using Temu a few times, here are three reasons why I’m not convinced this is a big problem for Amazon.

1. Shipping speed is becoming more important, not less

The biggest reason Amazon makes sense for many consumers is its shipping speed. Over the years, consumer delivery in some markets has accelerated from two days to next day and same day. But with Temu, you have to sacrifice that speed for lower prices.

Depending on what you order, delivery can take anywhere from a week to over a month. Most items I’ve purchased have lasted at least 10 days. Of course, there are third-party sellers on Amazon who may have longer shipping times, but users can usually filter through those options easily. Standard shipping can reportedly take anywhere from 6 to 22 days, and even if you use express shipping, you can still wait up to 11 days for delivery.

As long as Temu focuses on low prices and free shipping, shipping speeds will likely be much slower than Amazon’s. This may be the reason why many consumers do not complete the transaction.

2. Poor quality This only makes things worse

If you can wait a little longer to buy to save money on Temu, it may be worth it instead of Amazon. But if the quality of the product is poor or inconsistent, it’s not such a good deal.

On Temu, many sellers sell almost identical products, and I had a harder time distinguishing them than on Amazon. This is a problem because the buyer may end up with a product of a different quality than expected. And this on a platform that is already full of low-quality products.

I had to return one item I purchased from Temu and shipping took the longest (six weeks). Something as simple as dimensions that were significantly different from those listed on the website. I ended up purchasing a similar product from Amazon and it was delivered the next day without any problems. Although it was a little more expensive, the process was much easier.

The story continues

There are over 20,000 reviews for Temu on the review site Trustpilot, and almost 40% of them give it one star. Many of these bad reviews relate to Temu’s slow shipping speed and/or product quality. It’s a similar situation on the Better Business Bureau website, where Temu has an average rating of 2.46 and many consumers complain about the same types of problems.

There are also quality issues with Amazon products, and many sellers may actually be doing the same thing on Temu. However, if you include a huge number of similar products and add slower shipping speeds, it can result in a more complex and lengthy shopping experience, especially if you need to return the product.

3. Amazon Prime’s value proposition is just too good

What makes it difficult for competing platforms to succeed is Amazon Prime membership. Packed with features including free shipping, video streaming, food delivery, and deals on grocery and health care, it’s easy to see why an estimated 230 million subscribers could justify the $139/year price tag.

This subscription provides an incentive for consumers to shop on Amazon.com rather than using competing sites like Temu. Amazon Prime subscribers reportedly spend an average of 12% more on Amazon than people who don’t have a Prime account.

Is buying Amazon stock a bargain?

Amazon’s stock price is up almost 30% this year, and the e-commerce giant continues to perform well, generating net profits of nearly $38 billion over the past 12 months. The company is no stranger to competition, yet consumers seem to keep coming back to the platform as their preferred online shopping option time and time again. Is that AlibabaWish (which LogicalContext (real estate), or Ago, Amazon has found success despite several lower-cost competitors trying to take over the site’s market share.

Amazon’s business is, of course, broader, spanning chatbots and artificial intelligence to its wildly successful cloud business with Amazon Web Services. Its strength across multiple sectors makes Amazon stock a good buy for long-term investors. The stock isn’t cheap, sitting at more than 50 times earnings. But with plenty of growth potential, it’s the kind of investment you can buy and hold for decades.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. David Jagielski has no position in any stocks mentioned. The Motley Fool has positions on and recommends Amazon. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.

I’ve Been Shopping at Temu: 3 Reasons I’m Not Convinced Temu Is a Major Threat to Amazon, originally published by The Motley Fool