📉 The Absurd Economics of Wish, AliExpress, and Temu
The inner workings of these platforms and how they operate.
You’ve probably seen ads for them on social media: apps that offer meager prices on a variety of products, from clothes to electronics, shipped directly from China. They promise deals like $8.98 for wireless Lenovo earbuds, $15 for a computer keyboard, or even free stuff if you invite your friends to join.
But are these apps too good to be true? And how do they make money while undercutting traditional retailers?
Modern MBA’s latest episode is a deep dive into the world of e-commerce and the economics behind three of the biggest players in the game: Wish, AliExpress, and Temu. The episode is a must-watch for anyone interested in the inner workings of these platforms and how they operate.
Meet the players
The three apps we’re going to focus on are Wish, AliExpress, and Temu. They all have a similar business model: they connect buyers with sellers, mostly from China, and take a cut of each transaction. They also rely heavily on online marketing, especially on platforms like Facebook, Instagram, and TikTok, to attract customers.
Here’s a quick overview of each app:
Wish: Founded in 2010 by former Google engineer Peter Szulczewski, Wish is the oldest and most popular of the three apps. It has over 100 million monthly active users and claims to be the most downloaded shopping app in the world. Wish is valued at $11.2 billion and went public in December 2020.
AliExpress: Launched in 2010 by Alibaba, the Chinese e-commerce giant, AliExpress is a global marketplace that offers products from thousands of sellers. It has over 150 million active buyers and operates in more than 200 countries and regions. AliExpress is part of Alibaba’s international expansion strategy and competes with Amazon and eBay.
Temu: The newest and most controversial of the three apps, Temu was founded in Boston in 2020 and is owned by PDD Holdings, the parent company of Pinduoduo, China’s second-largest e-commerce platform. Temu offers steep discounts and free products to users who promote the app on their social networks and get friends and family to sign up. Temu has been the most downloaded free app on both the App Store and Google Play for much of the last two months.
The pros and cons
The main appeal of these apps is obvious: they offer cheap products that are often hard to find or expensive elsewhere. For example, you can buy a pair of AirPods for $159 on Apple’s website or a similar-looking product for $10 on Wish. You can also find niche items like cosplay costumes, novelty gadgets, or personalized jewelry.
However, there are also some drawbacks to using these apps. Some of the common complaints from customers include:
Low quality: The products are often poorly made, defective, or different from what was advertised. For example, some users have reported receiving fake or counterfeit goods, such as knock-off AirPods that don’t work or have poor sound quality.
Long shipping times: The products are usually shipped from China, which can take weeks or even months to arrive. Some users have reported never receiving their orders or getting partial or wrong shipments.
Poor customer service: The apps are often unresponsive or unhelpful when customers have issues with their orders. Some users have reported difficulty getting refunds, canceling subscriptions, or contacting support.
Privacy and security risks: The apps collect a lot of personal data from users, such as their location, contacts, social media accounts, and browsing history. Some users have reported unauthorized charges, spam messages, or malware infections after using the apps. There are also concerns about the apps’ Chinese ownership and potential ties to the Chinese government.
The bottom line
These apps are not for everyone. They cater to a specific segment of customers who are willing to sacrifice quality, reliability, and convenience for low prices. They also pose some challenges for traditional retailers, who have to compete with their aggressive pricing and marketing strategies.
However, these apps are not invincible. They face increasing scrutiny from regulators, consumers, and competitors, raising questions about their business practices, ethics, and sustainability. They also have to deal with the volatility of the global supply chain, the rising costs of online advertising, and the changing preferences of customers.
So, next time you see an ad for a $1 watch or a $5 drone, think twice before you click. You might get what you pay for, or you might get more than you bargained for.
To watch the episode click here ⬇️