The Absurd Economics Of $10 Junk

Summary

Teemu, an online marketplace known for selling Chinese products at incredibly low prices, has gained massive popularity in the U.S., becoming the most downloaded app post-Super Bowl ads. By eliminating middlemen and utilizing a direct-to-consumer model along with innovative supply chain strategies, Teemu offers cost savings to consumers. However, concerns arise about potential use of forced labor and the company's unsustainable cash-burning strategy, which may be pressuring small manufacturers while attempting to break into the American market.

Takeaways

• 💰 Teu Teu is an online marketplace known for selling Chinese-made products at extremely low prices.
• 📺 The company spent $14 million on two ads during the 2023 Super Bowl, which quickly made it a sensation.
• 📈 Teu became the most downloaded app in the U.S. a month after the Super Bowl and reached over 50 million users within two months.
• 🛍️ Teu's low prices are attributed to its direct-to-consumer model, which eliminates the need for middlemen and keeps costs low.
• 🏭 The platform operates on a 'next gen manufacturing' model, sharing consumer market insights with manufacturers to produce products more efficiently.
• 📊 Teu's data-driven approach helps in designing products that meet consumer needs, reducing the need for expensive market research and surveys.
• 🚢 The platform bypasses warehousing costs by manufacturing products in quantities that align with sales projections, reducing waste and costs.
• 💼 Teu utilizes legal loopholes, such as the $800 de minimis threshold for incoming shipments, to avoid customs duties and taxes in the U.S.
• 📉 There are concerns about Teu's suppliers possibly using forced labor and exploiting legal provisions to avoid responsibility for compliance.
• 💸 Despite the low prices, Teu is reportedly losing an average of $30 per order as it invests heavily to break into the American market.
• 🌐 Teu's parent company, PDD, has had success with a similar strategy in China, using deep discounts to build market share with Pinduoduo.

Q & A

What is the main reason behind the extremely low prices of products sold by Teemu?

Teemu offers low prices by operating on a direct-to-consumer model, bypassing middlemen, and using a data-driven approach to inform manufacturers about consumer needs, resulting in cost savings that are passed on to customers.

How did Teemu's advertising strategy during the 2023 Super Bowl contribute to its success?

Teemu reportedly spent $14 million on two ads during the 2023 Super Bowl, which quickly turned it into a sensation. This aggressive advertising campaign led to it becoming the most downloaded app in the United States and surpassing 50 million users within two months.

What is the traditional retail process that Teemu's model disrupts?

The traditional retail process involves a series of middlemen, including distributors, wholesalers, and retailers, each adding costs to make a profit. Teemu disrupts this by linking manufacturers directly with consumers, reducing the overall cost of products.

Can you explain Teemu's 'next gen manufacturing' model?

Teemu's 'next gen manufacturing' model is a straightforward approach where the platform shares valuable consumer market insights with its manufacturers and merchants, enabling them to produce, manage, and sell products more efficiently, which results in cost savings for the seller and better products for consumers.

How does Teemu utilize legal loopholes to keep costs low?

Teemu takes advantage of the $800 de minimis threshold set by the United States for incoming shipments. This means that shipments below $800 are not inspected or taxed by US Customs, allowing Teemu to avoid paying customs duties and taxes, which keeps costs low.

What is the reported financial loss Teemu is experiencing per order?

According to the analysis of the company's supply chain, Teemu is losing an average of $30 per order as it invests heavily in breaking into the American market.

How much money is Teemu estimated to be losing annually?

Analysts have calculated that Teemu is losing between 588 million and 1 billion dollars per year due to its high cash-burning rate.

What strategy has Teemu's parent company PDD used in the past to gain market share?

PDD has used a strategy of spending big on deep discounts to build market share, which has worked well for its Chinese flagship company Pinduoduo, targeting people on lower incomes in rural areas with cut-priced goods.

What concerns have been raised about Teemu's supply chain?

There are concerns that Teemu's suppliers might be using forced labor to manufacture products, and that Teemu relies on the de minimis provision to avoid bearing responsibility for compliance with prohibitions on forced labor.

How does Teemu's data-driven approach aid in product design and production?

Teemu's data-driven approach provides better products by eliminating the need for expensive consumer surveys and market research. It helps suppliers better predict sales, plan production quantity, and manage inventory, as products are manufactured just in quantities that align with sales projections.

What is the potential impact of Teemu's pricing strategy on small manufacturers in China?

Teemu's pricing strategy is pressuring small manufacturers in China to cut prices to levels that make it almost impossible to turn a profit, which could have long-term negative effects on these businesses.