A $7 Nintendo Switch dock. $5 shoes. A full kitchen gadget set for less than one comparable item costs anywhere else. Temu's prices aren't a normal retail markup run thin, they're a different model entirely, and one piece of that model stopped working in 2025.
How Does Temu Sell Products So Cheap?
Temu's low prices come from selling directly from manufacturers with no retail middlemen, heavily subsidized shipping and marketing funded by parent company PDD Holdings, and, until May 2025, the de minimis customs loophole that let low-value packages skip import duties entirely. All three mattered. One of them is gone now.
No Middlemen, Factory-Direct Pricing
A typical retail product passes through a manufacturer, a distributor, an importer, and a retailer before it reaches a shelf. Each one adds its own markup. Temu skips most of that chain by connecting manufacturers directly to shoppers, what Doba's own guide to Temu calls a Next-Gen Manufacturing model, built to cut out the distributor, wholesaler, and retailer layers a normal supply chain runs through. A vegetable chopper that costs $3 on Temu and $25 elsewhere, same mold, is that model doing exactly what it's built to do.
This part holds up. It's also the least controversial piece, since factory-direct pricing is the same idea wholesale clubs and direct-to-consumer brands have used for years, just at much bigger scale and a much lower price point.
PDD Holdings Is Losing Money on Purpose
The bigger piece of the story is what Temu's parent company, PDD Holdings, has been willing to spend to grow fast. PDD spent over $2.8 billion on marketing in a single 2023 quarter, up 55% year over year, and said plainly that the near-term goal wasn't profit, it was market share. The numbers back that up: Temu's US user base went from 5.8 million in October 2022 to over 104 million about two years later.
That growth cost real money. PDD's operating costs as a share of revenue went from 24.1% in 2022 to roughly 43% by 2025, and net profit dropped nearly 50% in a single quarter in 2025 once tariff and customs changes hit the US business. That's the subsidy in plain terms: a company big enough to absorb years of thin or negative margins in one market, betting that the customer base it buys along the way is worth it.
The De Minimis Loophole, and Why It's Gone
For years, any package under $800 shipped directly from China to a US buyer skipped import duties entirely, a rule called de minimis. That exemption did real work keeping Temu's prices low, since most direct-from-China orders never touched the tariffs a normal importer would pay.
That ended on May 2, 2025, for China-origin shipments, and a similar rule went global that August. Temu's answer was to lean harder on a local fulfillment model, favoring products already sitting in US warehouses over items shipped one by one from China, since those no longer clear customs for free. That's a real shift, not a small policy update, and it's part of why prices on some items have crept up since 2025 even though Temu's underlying sourcing model hasn't changed.
Where the Low Price Holds Up, and Where It Doesn't
Not every Temu product is a good deal once quality enters the picture. Complaints across BBB filings and independent review aggregators cluster in specific categories: electronics that don't meet the safety certifications the listing implies, and clothing where sizing is inconsistent across thousands of individual factory sellers with no shared standard. Simple, low-complexity goods, kitchen tools, basic home items, phone accessories, don't carry the same risk, since there's no certification or precise fit for a factory to get wrong.
That split makes sense given the sourcing model itself. A supply chain built around thousands of independent manufacturers keeps prices low precisely because there's no centralized quality control layer checking every listing against a shared standard. That's a fair tradeoff for something like a silicone kitchen tool. It's a much bigger gamble for a product that needs to meet an electrical safety spec or fit true to size.
Temu's Pricing Model vs. Traditional Retail Markup Structure
A traditional retailer's price carries a chain of markups, manufacturer to distributor to retailer, plus the cost of holding inventory and running an established store. Temu's price is closer to factory cost, plus a company-funded subsidy on shipping and marketing, minus, until 2025, a duty most competitors were paying.
That's not a formula built to last forever as is. With de minimis gone and PDD's costs climbing every year, the gap between Temu and a traditional retailer is closing, especially in categories that now need local warehousing to keep delivery times competitive. Factory-direct pricing isn't going anywhere. The subsidy and the duty-free shipping are both under more pressure than they were a year ago.
Where This Leaves Sellers Thinking About Temu
None of this changes whether Temu is a good place to shop. It changes what a seller should take from it. The same price sensitivity that makes Temu's shoppers responsive to a $7 gadget is real demand, and a seller can reach those same shoppers without touching Temu's supply chain at all.
Doba's Temu integration lets sellers list products from Doba's own vetted supplier catalog directly on Temu's marketplace, through Temu's Local Seller Program, not by buying items off Temu and reshipping them. Same audience, same price expectations, none of the packaging or inventory problems that come with treating Temu itself as a supplier.
Browse Temu-ready products in Doba's catalog to see what's already positioned for that audience.
