In May, daily users of PDD Holdings’ discount e-commerce platform Temu dropped by 58%, as reported by the market intelligence firm Sensor Tower. This decline is seen as one of the challenges the retailer is facing amid ongoing US-China trade tensions.
Following the White House’s decision on May 2 to terminate the “De Minimis” policy, which had allowed low-value goods from Chinese suppliers to reach US consumers without tariffs, Temu opted to scale back its advertising in the US and change its order strategy.
For years, Temu, alongside the fashion retailer Shein, benefited from this provision to keep prices competitive.
Recent data from consulting firm Bain & Company indicates that while both Temu and Shein have faced a downturn in sales and customer growth since trade tariffs were lifted, Temu’s situation has deteriorated more than that of its competitor.
Although tariffs have driven both retailers to increase prices, Shein managed to raise its average customer spending compared to last year, whereas Temu has struggled in this area.
Temu did not provide any comments regarding the decline in daily US users or the challenges it faces in the market.
Simeon Gutman, an equity analyst with Morgan Stanley, mentioned that interest in Temu has diminished significantly since the exemption ended. He commented, “The tariff environment is uncertain, but if this situation persists, we believe Temu’s competitive edge will weaken.”
Recently, PDD’s first-quarter revenues fell short of growth expectations. Company executives highlighted the burden that tariffs have placed on merchants.
They reemphasized a prior commitment to stabilize prices and enhance collaboration with merchants, aligning with plans to transition to a local fulfillment model introduced in early May.
Under the old business model, merchants were responsible for ordering and supplying products, while the China-based company oversaw logistics, pricing, and marketing.
In a memo from HSBC analysts, it was noted that Temu merchants can now ship individual orders from China to Temu partners but must handle duties, customs fees, and necessary paperwork. Temu will continue to manage order fulfillment, pricing, and online operations to be close to shoppers.
HSBC’s memo also highlighted Temu’s growth in markets outside the US, with non-US users now making up 90% of its 405 million global monthly active users in the second quarter, stating that new user growth is rapidly increasing in less affluent markets.
