Morgan Stanley says Temu demand hit by ongoing policy changes

Investing.com -- Temu’s U.S. demand continues to deteriorate amid ongoing trade policy changes, according to a new note from Morgan Stanley. 

Based on the firm’s latest AlphaWise survey and third-party data, the bank stated that the Chinese e-commerce platform is facing mounting headwinds from elevated tariffs and regulatory shifts, which have weakened consumer engagement.

“Demand for Temu continued to decline in June,” the analysts wrote, noting that the platform “is struggling to stay competitive as policy changes take hold.” 

Although the Biden administration recently pulled back from proposed 145% China tariffs, the elimination of the de minimis exemption and a still-high ~55% combined tariff rate “caused engagement with Temu to decline significantly.”

The most recent survey, conducted in June among ~2,000 U.S. consumers, is said to have shown that just 18% had shopped on Temu in the past three months, a record low since Morgan Stanley began tracking the data in September 2023. 

Meanwhile, net purchase frequency expectations remained the lowest among tracked retailers at -25%.

Website and app metrics confirmed the weakening trend. Temu.com traffic and visitors dropped by 81% and 78%, respectively, from March to May, while app downloads declined 85% year over year, according to Morgan Stanley. 

They add that monthly active users fell to about 49% of peak levels.

Morgan Stanley believes Dollar Stores are emerging as major beneficiaries. 

“Shopper overlap between Temu and FIVE/DG/DLTR declined,” the analysts said, suggesting that “Temu’s threat to Dollar Stores is waning and may potentially be flipping in the other direction.”

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Despite these challenges, Morgan Stanley’s China Internet team expects Temu’s U.S. GMV to reach $39 billion by 2030, with profitability in sight by 2025. But for now, the firm warns the retailer remains exposed to policy uncertainty and consumer attrition.

 

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