The Temu Superbowl Ad from the Boston headquartered Chinese ecommerce discounter marketplace was a big bet. It ran three of the same animated commercials during game time, plus three more post-game, according to Bloomberg. But what it saved in using the same creative, it more than made up for spending on air-time, at least $21 million during prime time when each 30-second spot went for $7 million.

Shoppers may give Temu a second chance after a first-time mistake, especially with such low prices, but after that, all bets are off. Plus, shoppers risk losing social friends who they drew to the site. That could be an even higher price to pay in this social media age.

Animated Fairytale

The main message in the commercial is that with Temu, you can “shop like a billionaire,” repeated three times in 30 seconds. It’s underscored subliminally by appropriating an ersatz Hermès orange signature to brighten up the Temu world.

The commercial opens with a teenage character girl singing, “Feels like a dream, feels like magic,” as she acts the part of Cinderella’s fairy godmother making wishes come true for the characters she meets. The prices for each item are prominently displayed alongside each item that magically appears with the wave of her wand.

One thing is certain: Billionaires don’t shop like this, but then Temu lives in a fantasy world when it comes to the affluent. In the end, who really cares when Super Bowl viewership broke records to become the most-watched broadcast on record with some 123.4 million tuning in. “Mass advertising is all about reach and frequency,” shared Mary Ann O’Brien, founder and CEO of OBI Creative agency and author of Ask & Deliver. “Doing one creative execution was strategic in that it reiterated their message and repeating it (frequency) is important when driving brand awareness.”

With each subsequent viewing, aided by the music that persistently repeated Temu ad nauseum, pronouncing “teh-moo” not tea-moo, the message was further drilled into people’s minds. “It maximized exposure and brand awareness/recognition to drive more brand consideration toward direct response to the message,” she added.

Second Time’s the Charm

The Temu Superbowl ad was their second outing after running a single commercial last year, following its official September 2022 launch in the U.S. It was an instant hit, becoming the most downloaded app in 2023, numbering nearly 338 million downloads, and engaging users longer than Amazon.

All those users can’t seem to get enough of Temu. In its first month of U.S. sales, gross merchandise value (GMV) was approximately $3 million; by June 2023, GMV is estimated to have reached $1 billion and bested Shein in monthly sales and customers, according to YipItData.

As a wholly-owned subsidiary of publically-held PDD Holdings, which also owns the Chinese-centric  ecommerce giant Pinduodou, Temu is PDD’s international marketing arm. Now in more than 15 countries, it doesn’t report sales or earnings of either company. But we can be sure it’s big. Total PDD revenues reached $9.4 billion in the third quarter ending September 30, 2023, nearly doubling from the same period the previous year.

Spin That Dial

In the Super Bowl commercial, Temu dangled $15 million in coupons and giveaways to entice shoppers on game day to search across its platform. Its product range rivals Amazon’s in scope but betters it on price. With the exception of food, it’s got virtually every other consumer good category covered, including clothing and fashion accessories for the family, beauty and health, home and kitchen, sporting goods, musical instruments, jewelry and watches, small appliances, tools, toys and games, pet supplies, gifts and doodads and more.

Operating against trend, prices are kept low by sourcing products directly from Chinese factories. The trade-off is slow (free) shipping. Standard shipping times can take up to 23 days, though for an extra $12.90, customers can speed up delivery to between four and 12 days. It is counterintuitive that anyone other than value-obsessed customers would wait nearly a month to receive at $24 Kitchen Aid mixer.

Rock-bottom prices are key to Temu’s allure, as is the gamification embedded in its app. Visitors can collect coupon codes as they win games, turning shopping into an entertaining experience. Shopper/players are also incentivized to share deals with their social friends for free products. A progress bar is displayed to show how many more social shares are needed to get a gift.

This also plays to the more obsessive among us because the games get harder as players get closer to their goals. The combination of extremely low-cost shopping with gaming makes Temu sticky for extended play and brings people back for more. “Temu has the advantage of novelty and excitement that is hard to recreate for staid low-end discount retail brands,” Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors, told CNBC.

Through the Looking Glass

The problem with novelty is that it quickly wears off. Temu must keep advertising at a fever-pitch to replace shoppers who fade away. The Wall Street Journal reports Temu spent $1.7 billion on advertising in 2023 and it is expected to surge to nearly $3 billion in 2024. And given its high level of ad spend, Goldman Sachs speculates it could be losing on average $7 per order, though a Temu spokesperson disputes it sells at a loss to gain market share.

Its loss-leading advertising strategy was honed with the launch of sister-platform Pindoudou, but whether it will work here as well as it did in China is a question. Generating impulse purchases is an important part of Temu’s shopping equation, but impulse sales are rewarded by instant gratification which is lost in transit when it can take up to nearly a month.

Not unexpectedly, many shoppers end up disappointed. Its Better Business Bureau rating is only 2.5 stars out of five and complaints range from undelivered packages, substitutions, poor product quality, items not as they appeared and incorrect orders. They also complain that customer service is MIA.

Shoppers may give Temu a second chance after a first-time mistake, especially with such low prices, but after that, all bets are off. Plus, shoppers risk losing social friends whom they drew to the site. That could be an even higher price to pay in this social media age. “Temu has a bigger issue now with managing their brand perception as many U.S. consumers appear to be skeptical. It has a lot of work to do with brand consideration, perception, equity and trust issues,” observed OBI’s O’Brien.

In addition, the company has been hit with a personal data security class action lawsuit and accusations of using slave labor. Last year a House committee reported Temu has weak enforcement within its supply chain to ensure it complies with U.S. law prohibiting imported goods from China’s Zinjiang province. “American consumers should know that there is an extremely high risk that Temu’s supply chains are contaminated with forced labor,” the report stated, as it noted the company has relationships with 80,000 suppliers.

Wall Street Warning

While Temu is busy generating excitement among consumers, it has work to do in the investment community. Share prices got a modest bump after the Super Bowl outing, rising from $127.48 at close on Friday to just over $130 on Monday, but share prices remain well off the $151 high reached on January 11.

Earlier this year, Morgan Stanley analysts Simeon Gutman and Brian Nowak warned Temu sales appear to have crested and are now slowing, with nearly a third of its current users planning to spend less on the app over the next three months.

Investor’s Business Daily quoted from the Morgan Stanley note: “Per our latest data, the number of households shopping on Temu continues to fall (now about 20 percent lower than September 2023) with future purchase intentions also lower than most other discounters/e-tailers in our survey. Despite Temu buying millions of monthly app downloads, U.S. web traffic and app usage data also shows stalling/moderating uptake since October, even through the holiday period. App download velocity also now seems to be stalling.”

The company has one more innovation up its sleeve: opening its platform to sellers in the U.S., which could cut into Etsy and eBay’s business, and even give Amazon’s third-party marketplace some competition. However, as those plans remain in the works, it will probably take a lot of convincing to get U.S. companies to take a chance on Temu with so many questionable business practices and poor customer service. It could tarnish their reputations.