Came across some watches on Temu for 1 euro or sometimes less. How do they generate a profit selling these things?
I realise the quality is not comparable to a decent watch, but surely the components cost more than a euro per watch?
In: 1
If you’ll buy a cheap Chinese watch for 1 euro (even if it costs the seller a couple of euros), you’re more likely to buy other cheap junk the can sell at a big profit.
A few factors:
1. Item is very very cheap to produce and has low margins to begin with.
2. A product close to free, might as well be free, and in that case the item isnt the product, you’re the product. The company now has your provided personal info, payment method, shipping address, etc, for future business.
3. Businesses sometimes initially operate at a loss to generate traffic and customers with massive marketing campaigns and “limited time events” to create FOMO. In this case, Temu – an asian all market platform is trying to break into the US and Western markets. The barriers to entry are high (Amazon, Walmart, etc) so Temu has to convince potential unfamiliar customers to come shop at its business.
Tldr: Sometimes emerging businesses operate at a small loss to get customer’s feet in the door for future sales. And most times these items they try to convince prospective customers with are low margin products or cheap to make in the first place.
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