Temu Growth Slows In US: BofA By Investing.com

Investing.com — Temu’s growth in the US market is starting to show signs of slowing, Bank of America said in a note on Monday.

Citing data from Bloomberg Second Measure (BSM), BofA analysts noted that Temu’s observed U.S. sales growth slowed to 37% year-over-year in August, down from 45% in July and significantly less than the growth of 99% observed in the second quarter of 2023.

This slowdown comes after a period of rapid expansion in 2023, when Temu’s market share increased significantly.

BofA analysts attribute the deceleration to tough year-over-year comparisons and payment sales, with Temu’s market share against Amazon (NASDAQ: ) stabilizing at about 3% in the first seven months of 2024.

However, Temu saw a slight increase of 40 basis points in August, taking its share to 3.4%. Despite this, daily active users (DAUs) were on the decline, falling 17% year-over-year in August, according to Sensor Tower data.

“The BSM data also indicates that absolute dollar sales compared to Amazon have apparently settled at around 3% in the first 7 months of 2024, after rising in 2023, although we see a solid 40bps m/m in August to 3.4% (Temu rose 3.5% m/m while Amazon fell m/m after Prime Day),” BofA wrote.

The note also highlights comments from Temu’s parent company Pinduoduo (NASDAQ: PDD ), which noted that “high revenue growth is not sustainable” and outlined new challenges, including a shift to quality over low prices and growth global competition.

PDD is said to be taking steps to address these challenges by supporting high-quality merchants and removing “bad actors” from its platform.

While the slowdown in Temu’s growth may have limited impact on the broader U.S. e-commerce sector, BofA analysts warn that online advertisers like Meta (NASDAQ: ) could face slight headwinds.

With 10% of Meta’s revenue coming from Chinese advertisers, a slowdown in ad spending from companies like Temu and Shein could pose a minor challenge, although the bank says wider declines would be needed to have an impact significant.