Temu is cheap because it sells factory-direct with few middlemen, and its parent company, PDD Holdings, spends heavily on marketing and promotions. Until 2025, many of its low-value parcels also entered the U.S. duty-free. That exemption has since been suspended, so factory-direct sourcing and PDD's spending are the levers still in place.
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 was suspended 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 2025, the de minimis customs loophole that let low-value packages skip import duties entirely. All three mattered. The duty exemption has since been suspended for all countries, and Congress has set a statutory end date of July 1, 2027.
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 Spends Heavily to Grow, and Its Profit Has Fallen
The bigger piece of the story is how much PDD Holdings has been willing to spend to grow. Sales and marketing expenses rose from RMB 82.2 billion in 2023 to RMB 111.3 billion in 2024 and RMB 125.3 billion in 2025, according to PDD's FY2025 annual report on Form 20-F. In 2025, that spending grew 13%, faster than revenue, which rose 10% to RMB 431.8 billion.
That spending has cut into profit. Net income attributable to ordinary shareholders was RMB 99.4 billion in 2025, down 12% from 2024. Net income also fell 47% in the first quarter of 2025, according to KrASIA's coverage of PDD's quarterly results. The group is still profitable. By our calculation from reported figures, sales and marketing spending was about 29% of revenue in 2025 and about 28% in 2024, so it is large in absolute terms but roughly flat as a share of revenue.
PDD does not report Temu's profit or loss as a separate line, so Temu's profitability can only be estimated from outside. Dolphin Research estimates that Temu is still loss-making but narrowing its losses, and attributes most of PDD's Q1 2026 profit growth to that narrowing. Earlier analyses based on 2023 data put losses at hundreds of millions of dollars a year, and one widely cited figure is roughly $30 of loss per order. Those are third-party estimates, not company disclosures, and they should be treated with caution.
The subsidy works in practical terms like this: because Temu's results are not reported separately, analysts describe its losses as being absorbed by the group's other profits. That lets the company accept thin or negative margins in a newer market while it builds a customer base. Reporting based on 36Kr data, summarized by KrASIA, suggests Temu's US advertising has shifted from acquiring new users toward raising how often existing customers buy.
The De Minimis Loophole, and Where It Stands Now
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.
The exemption ended in stages. It was suspended for China and Hong Kong on May 2, 2025, and for all other countries on August 29, 2025, under Executive Order 14324, as KPMG summarized at the time. On June 24, 2026, U.S. Customs and Border Protection made the suspension indefinite for every mode of entry except the international postal network, and postal shipments moved to a new entry process on July 24, 2026, according to KPMG's June 2026 update. Congress separately set a statutory end to the exemption for July 1, 2027.
Temu's response was to shift toward locally held inventory. Reporting from 36Kr, summarized by KrASIA, describes Temu's US business as operating under a fully managed consignment model, in which inventory sits in local warehouses. Local stock avoids the parcel-by-parcel duty problem that low-value imports now face.
Tariff Changes Since 2025
The de minimis change is only part of the picture. The broader tariff regime also changed in 2026. On February 20, 2026, the Supreme Court ruled that the International Emergency Economic Powers Act does not authorize tariffs, which invalidated the earlier IEEPA tariffs, including the China-specific ones, according to McCarter's summary of the ruling. A 10% global surcharge under Section 122 of the Trade Act of 1974 took effect on February 24, 2026, and expired on July 24, 2026, when its 150-day limit ran out.
New Section 301 duties on goods from 60 economies replaced the surcharge the same day. For China-origin goods, the new layer is 12.5%. According to Honigman's summary, it stacks on existing China Section 301 duties, which are 25% on many products, for an aggregate rate that can reach 37.5% before the normal duty. Goods covered by Section 232, such as certain steel, aluminum, copper, auto, wood, and semiconductor products, are excluded from the new layer.
Two points deserve attention. The U.S.–China tariff truce and the Section 301 exclusions are scheduled to expire on November 10, 2026, according to Dentons' tariff status update. And because rates depend on each product's HTS code and country of origin, the only reliable way to know your exposure is to calculate it product by product, not to rely on a single headline rate.
Where the Low Price Holds Up, and Where It Doesn't
Not every Temu product is a good deal once quality enters the picture. Consumer complaints and independent reviews often 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
The table below breaks down each cost layer, comparing a traditional retailer with Temu's model and noting what has changed since 2025.
| Cost layer | Traditional retail | Temu's model | What has changed |
|---|---|---|---|
| Sourcing | Several markups: manufacturer, distributor, importer, retailer | Connects manufacturers directly to shoppers, skipping most intermediaries | Unchanged. This is the most stable part of the model. |
| Platform subsidies | Marketing and freight are priced into the retail price | PDD funds marketing and promotions. Group sales and marketing spending reached RMB 125.3 billion in 2025, up 13% | Still funded by PDD. Analysts describe the losses as narrowing, but Temu's exact results are not disclosed. |
| Cross-border logistics | Bulk imports through consolidated freight | Parcel shipping from overseas, with a shift toward locally held inventory in the U.S. | Local stock now matters more, since parcels no longer clear duty-free. |
| Duties and tariffs | Importers pay duties on inventory, based on each product's classification | Low-value parcels were duty-free until 2025 | De minimis is suspended, and a Section 301 layer applies to China-origin goods from July 24, 2026. |
The sourcing advantage has not changed. Subsidies and duty treatment are the two layers under the most pressure. Duty-free shipping has ended, and marketing spending is still rising in absolute terms. The gap between Temu and a traditional retailer is likely to narrow in categories where duties and local-stock costs now matter most, even though the factory-direct sourcing model itself remains intact.
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 connects a Temu store to Doba's supplier catalog, so sellers can import products and fulfill orders from suppliers, rather than buying items off Temu and reshipping them. Same audience, same price expectations, and 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.
What Temu's Pricing Means for U.S. Sellers
Pricing. Temu's price is useful as a demand signal, not as a cost benchmark. A store that pays full freight, marketing, duties, and return handling can't match a subsidized price on landed cost. Price against your own landed cost plus a target margin, then compete on delivery speed, return handling, and product presentation.
Margins. Build the duty layer into your cost before you test any product. Two products with the same retail price can have very different duty exposure, depending on HTS code and origin. As a sample stress test, calculate your margin at today's duty rate, then again with an extra 10 percentage points. A product that still makes money under that scenario is a safer test. A product where one tariff change wipes out the profit is one to pass on.
Selection. Favor products where tariff exposure is lower and where specs are clear enough to reduce returns, since the quality problems described above cluster in products that need certifications or a precise fit. Where delivery speed matters, consider suppliers that stock inventory in the U.S. Avoid building a product line around a price that only a subsidized platform can sustain.
What Temu's Pricing Means for Temu Sellers
If you sell on Temu rather than compete with it, the platform's low prices are the rules of the channel, not just the competition. How much control you have over your own price depends on your seller model, and the 2025 de minimis change moved more of Temu's U.S. business toward the model where sellers carry more of the cost.
Fully managed sellers don't set the shelf price. Under Temu's original consignment model, merchants supply the goods and Temu decides what shoppers pay. Nikkei Asia reporting, republished by KrASIA, contrasts this with platforms such as AliExpress that let sellers price their own listings. In that setup, a supplier's main lever is its own cost.
Local sellers gain control but take on more risk. When the de minimis exemption ended for China in May 2025, a Temu spokesperson said all U.S. sales were now handled by locally based sellers fulfilling orders from within the country, and that the company was recruiting U.S. sellers, Supply Chain Dive reported. The same KrASIA report noted that the overhaul leaves individual sellers bearing more of the risk of doing business. If you hold U.S. inventory and fulfill orders yourself, those costs sit with you, not with the platform.
The shopper is still price-first. In a YouGov survey cited by eMarketer, 48% of U.S. consumers named lower prices as their main reason for shopping on sites like Temu. Whatever model you sell under, expect your listings to be judged on price first.
Before you list, check whether your landed cost still leaves a margin at the prices Temu shoppers expect, and read the pricing, promotion, and return terms for your specific seller model, since they differ by program and market. If you've been using Temu as a source of products rather than a place to sell them, compare it with Temu alternatives built around vetted, U.S.-stocked suppliers, where you can check supplier performance before you list.
Frequently Asked Questions
Q1:Is Temu losing money?
PDD does not report Temu's profit or loss as a separate line, so no one outside the company can confirm its exact results. PDD as a whole remained profitable in 2025, with net income of RMB 99.4 billion, down 12% from 2024. Outside estimates of Temu's losses exist, but they are estimates, not disclosed results.
Q2:Is the de minimis exemption still available for Temu-style imports?
Not for ordinary shipments. Duty-free treatment has been suspended for all countries since August 29, 2025. Since June 24, 2026, that suspension has been indefinite for every mode of entry except the international postal network, and postal shipments moved to a new entry process on July 24, 2026. Congress has also set a statutory end date of July 1, 2027.
Q3:Can a U.S. dropshipper match Temu's prices?
Usually not on a landed-cost basis. Temu's prices are shaped by a parent company that can fund subsidies and a sourcing model built around scale, while a store pays for its own freight, marketing, duties, and returns. Competing on delivery speed, return handling, and product presentation tends to work better than trying to match the sticker price.
Q4:How do I estimate tariffs on a product I want to source?
Start with the product's HTS code and country of origin, then check which duty layers apply: the normal duty rate, any China-specific Section 301 duties, and whether the item falls under a Section 232 category. For China-origin goods, the 2026 Section 301 layer can stack on existing duties, so rates vary widely by product. Confirm the classification and rate with a licensed customs broker before you commit to a supplier. This is general information, not customs or legal advice.
