Temu business model: how does it work, and how are sellers actually making money?

Biggest risks:

• Price pressure: once you’ve shipped inventory, they may ask you to lower your supply price. Refuse, and they throttle your listing.
• Returns: you eat the cost. Sometimes they refund the customer and keep the product.
• Certification requirements: they’re strict. One mismatch between label and certificate can cost you hundreds in fines.

We’re a factory and Temu works for us. If you think about it, we’re already doing OEM for other sellers—selling to Temu isn’t that different. At least here, our brand is on the product. Not many competitors in our category because the supply chain requirements are high. It’s stable.

I’m doing about 200 orders/day. Profit is around $45/day. Basically moving boxes for very thin margins. Feels like I’d make more working a regular job.
*Note: this was early 2023. Volume may be higher now, but competition is also much fiercer.*

I got into Temu semi-managed early. Here’s what I’ve learned:
The business model: Sellers are essentially suppliers. You submit a supply price, Temu decides the final selling price—they can mark it up, sell at cost, or even subsidize it to drive traffic. You don’t control the front-end price.
Profitability: We actually have higher margins on Temu than Amazon. Zero commission, zero ad spend are huge advantages. But you give up control. The platform decides which products get traffic.
Price approval:If you’re a branded seller with established sales across other channels (Amazon, Walmart, etc.), you can apply for a branded store. Branded stores only compare against their own brand prices, not against unbranded sellers. That protects your pricing.
Deposit and fines: Standard account requires a deposit ($1,500 range). Fines are real—false shipment penalties can be significant, late delivery penalties are about $6 per order. Use reliable carriers and make sure tracking numbers are accurate.
Activity promotions:The most effective way to get traffic is joining platform promotions. This means accepting temporary price cuts, so build that into your initial pricing.
Who this works for: Factories with cost advantages and reliable logistics. If you’re a reseller sourcing from wholesalers, margins will be tight.

Talked to a factory owner who supplies Temu. His numbers: product cost $40, Temu supply price $49. That’s 18% margin. For comparison, his factory normally runs 12% margins on wholesale. So for factories, Temu can actually be higher margin than traditional wholesale.
His only concern: platform policies changing later. Will they add fees or shift costs onto sellers down the road?
Note: this was early 2023. Margins have likely compressed since then.