I’ve shopped at Temu: 3 reasons I’m not convinced Temu is a big threat to Amazon

If there’s one thing that can draw shoppers in, it’s the lure of low prices. Combine that with endless scrolling and “influencers” promoting the items you have on social media, and you have the online shopping platform Temu. And on Temu.com, there’s always some kind of sale on an item that can give consumers an incentive to spend a little more money while they’re on the platform.

Some Amazon (AMZN -2.33%) investors are concerned about Temu’s growing popularity. While Amazon remains the dominant force in e-commerce, owner Temu, PDD Holdings (PDD 0.77%)it also runs online retailer Pinduoduo and has deep financial resources, which could potentially make Temu a major drag on Amazon’s growth.

This sounds concerning, but after using Temu multiple times, I can think of three reasons why I’m not convinced this is a serious problem for Amazon.

1. Shipping speed is becoming more important, not less

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

Depending on what you order, it can take anywhere from a week to over a month for your purchase to arrive. Most of the items I’ve purchased have taken at least 10 days. There are of course third-party sellers on Amazon who may also have longer shipping times, but users can usually filter out those options easily. Standard shipping from Temu 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 your package to arrive.

If Temu focuses primarily on low prices and free shipping, its shipping speeds will likely remain significantly slower than those offered by Amazon, and this could be a deciding factor for many consumers.

2. Poor quality at Temu only makes matters worse

If you’re just willing to wait a little longer to make a purchase to save money on Temu, it may make sense to go there instead of Amazon. But if the product quality is poor or inconsistent, it’s not a good deal.

On Temu, many sellers sell almost identical products and I had a harder time telling them apart than on Amazon. This creates a problem because the buyer may receive a product of a different quality than he expected. And this on a platform already full of low-quality products.

The one item I purchased from Temu that took the longest to ship (six weeks) I had to return immediately. Something as simple as the dimensions were way off what was on the website. I ended up buying a similar item from Amazon and getting it the next day with no issues. While it was a bit more expensive, the process was much easier.

There are over 20,000 reviews of Temu on the Trustpilot ratings site, and nearly 40% of them give it a one-star rating. Many of these poor reviews focus on Temu’s slow shipping and/or product quality. The Better Business Bureau has a similar story, where Temu has an average rating of 2.46, with many consumers complaining about the same issues.

Amazon products also have quality issues, and many sellers may be the same as those on Temu. But when you factor in the huge number of similar products and add slower shipping speeds, it can result in a more complicated and lengthy shopping experience, especially if you need to return an item.

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

What makes it harder for competing platforms to succeed is the Amazon Prime membership. With so many features, including free shipping, video streaming, food delivery, and deals on groceries and healthcare, it’s easy to see why its estimated 230 million subscribers can justify the $139-a-year price tag.

This subscription is an incentive for consumers to shop on Amazon.com instead of using competing sites like Temu. Amazon Prime members reportedly spend an average of 12% more on Amazon than non-Prime members.

Is it worth buying Amazon shares?

Amazon shares have gained nearly 30% this year as the e-commerce giant continues to perform well, generating net income of nearly $38 billion over the past 12 months. The company is no stranger to competition, yet consumers continue to return to its platform as their first option for online shopping. Regardless of whether AlibabaWish (which ContextLogic owns) or Ago, Amazon has found success despite several low-cost competitors trying to chip away at its site’s market share.

Of course, Amazon’s business is broader, as the company has ventured into chatbots and artificial intelligence, and it also has a very successful cloud business with Amazon Web Services. Its strong positioning across multiple industries makes Amazon stock a good buy for long-term investors. The stock isn’t cheap, trading at more than 50 times earnings. But with a lot of growth potential, it’s the kind of investment you can buy and hold for decades.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Dawid Jagielski has no position in any of the companies mentioned. The Motley Fool holds positions in and recommends Amazon. Motley Fool recommends Alibaba Group. Motley Fool has a disclosure policy.