The popular bargain app Temu, owned by Chinese e-commerce giant PDD Holdings, is increasingly shifting its business focus away from the USA. This is happening against a backdrop of growing political tensions and increasing regulatory challenges in the United States.

Last year, 60 percent of Temu's revenues came from the USA. However, this year the company expects that less than a third of sales will come from the American market. The shift in focus towards Europe and other regions is happening in parallel with the growing political uncertainty surrounding Chinese apps in the USA, particularly TikTok.

Temu, which became the second most popular shopping app in the USA after Amazon in less than two years, draws lessons from TikTok's difficulties. The ongoing issues of the video app operator with the US government have led Temu and its parent company PDD Holdings to accelerate their expansion plans into other markets. In March, the US House of Representatives passed a law that forces TikTok's Chinese owner ByteDance to either sell the app or face a ban in the USA.

Concurrently, Temu is facing legal and compliance challenges. US lawmakers accuse Temu and competitor Shein of potentially selling products that were made using forced labor. These accusations are related to the treatment of Uighurs in the Chinese region of Xinjiang. Temu has firmly rejected these allegations, emphasizing that the company requires its suppliers to not use forced labor.

Despite the Challenges, the US Market Remains Significant for Temu. However, the App Recorded a Decline in Monthly Users in the USA, While User Numbers in Other Regions Grew Strongly. In Light of This Development, Temu Redirected a Major Part of Its Advertising Budget to Europe and Other Markets. In the First Quarter, the USA Only Accounted for 38 Percent of Temu's Total Advertising Spending, Compared to 63 Percent in the Fourth Quarter of 2023.

In addition to legal issues and political tensions, Temu is also facing allegations of insufficient data security. Two lawsuits claim that Temu collects more information from US users than stated. The company denies these allegations, emphasizing that its app meets strict data protection standards.

The Expansion of Temu Takes Place in a Context Where Other Chinese Companies Such as TikTok and Shein Are Also Making Increased Efforts to Enhance Their Compliance Measures and Expand Their Presence in the US. Temu Plans to Establish a New Fulfillment Center in Mexico to More Efficiently Deliver Packages to US Customers and Further Reduce Dependency on the US.

PDD Co-founder Chen Lei Emphasized the Many Uncertainties and Challenges Facing Temu in an Analyst Meeting in March. He Stressed the Company's Willingness to Cooperate and Communicate with Regulatory Authorities in the Various Markets Where Temu Operates. These Precautions Highlight Temu's Strategic Focus on Minimizing Risks in the US and Promoting Growth in Other Regions.