Brute Force — Temu’s Quest for Scale
Ad-spend should be looked at as an investment. Accountants look at it as an operating expense (Opex). For Temu, this is Capex. It is an investment with a predefined target outcome of gaining scale. It is a quest for being big. The returns from the investment will be harvested in future periods.
According to JPMorgan analysts, Temu will spend around $3 bn in ads in one financial year. The sheer size of this budget tells it all.
Its Ads-on-Steriods (AoS).
Its Ad-spend-as-a-Capex-item (Asaaci).
Advertising-as-an-Investment (Aaai)
This type and level of advertising is a forcing function. Talk about Brute Force.
You want a piece of the pie. Well nobody is going to give it to you, you gotta take it. You really want to become The Everything Store? They are not going to pave a red carpet for you. You gotta force your way into this industry. eCommerce is not crybabies.
Do you want to play? Force the issue.
Keep me in!
“He is a competitive kid and loves to play,” said Reid in a post-match comment regarding Kelce.
Well, Temu is a competitive kid and loves to play too.
For Temu, it is so brazen.
It is a pursuit of greatness. It's a pursuit of scale. Scale is a necessary condition to survive and thrive in the post-pandemic business world. Attaining a certain level of scale is what is demanded by customers. We, the customers demand scale because of the benefits that trickle down to us. Companies in turn are forced to scale. Scale or die.
The space that Temu wants to occupy can only be occupied by the hard knocks. It’s a hard-knock life.
Temu’s quest for being number 2 in the retail space is remarkable. The strategy can only be described as “brute force” — a relentless pursuit of scale, marked by a jaw-dropping investment of $21 million in three Super Bowl ads. This audacious move not only turned heads but also raised questions about the lengths to which companies are willing to go in their quest for market dominance.
There is an undeniable power in presence — the ability to capture the attention of millions in a single moment. By securing prime airtime during the Super Bowl, Temu ensured that its brand message reached a vast and diverse audience, transcending demographic boundaries and creating a lasting impression.
Of course, such a bold move doesn’t come without risks. With a price tag of $7 million per 30-second spot, Temu’s investment in Super Bowl advertising was a high-stakes gamble. Critics question the wisdom of allocating such a significant portion of the marketing budget to a single event, arguing that the ROI may not justify the expense. However, Temu’s leadership remains undeterred, confident in its ability to leverage the massive reach of the Super Bowl to drive brand awareness and customer acquisition.
Temu’s brazen quest for scale serves as a reminder of the power of boldness and ambition. By daring to defy convention, proceeding to invest heavily in ads, Temu has demonstrated its willingness to take risks in pursuit of greatness. Only time will tell if this gamble pays off, but one thing is certain — in the game of scale, fortune favors the bold.
Temu decidedly makes losses, for now, until they attain the scale they desire. When that happens, they can start to churn profits. The goal, for now, is to eviscerate competition.
The first line of casualties from this brute force could be:
- Dollar Stores — Temu directly competes against these, and it has a wider range and a better offering
- Other brick & mortar stores
- Other non-Amazon e-commerce platforms (Etsy, Shein)
- Dropshippers
- Bottom-30 Amazon retailers (the low-quality ones)
Whether Temu will rest a little bit once they have eviscerated these remains to be seen. I guess that they will proceed to take on the bigger fellas (Amazon & Walmart).
