The billion dollar question: How can Temu sell products so cheaply?

CHICAGO (CBS) – The online shopping platform Temu spent millions of dollars recently for a Super Bowl advertisement that ran several times. 

The app is also ranked as the top downloaded free shopping app on both Google Play and Apple's App Store. Google indicates its Temu app has over 100 million downloads and 2.5 million reviews, giving the app 4.7 out of 5 stars. The App Store shows nearly one million reviews with the same overall rating.

Why are Temu prices so low? 

Bargain-basement prices attract shoppers to Temu. 

"Because we've become so accustomed to shopping for the lowest price, people are really happy, and we're proud when we find something on sale or something inexpensive," said Melissa Gamble, a fashion studies professor at Columbia College Chicago.

More than 100,000 reviews are three stars or below on those app platforms. Even four- and five-star reviews reveal concerns about product quality, long shipping times, and the app being "addictive."

Kathy Gianone, who lives in the Chicago suburbs, knows something about that -- although she said she's not addicted to Temu. 

"It's just a way to pass the time, more so than anything," said Gianone, "and I can go through their app for an hour and just look at all the junk that they sell. They just sell everything. And it's just pure entertainment."

Temu refund issues

Gianone kept ordering despite her first purchase, a $15 flexible garden hose, not working out. 

"Went outside, hooked it up, turned it on, water starts spurting out," she said, "and then the internal plastic lining popped, and the whole thing exploded within five minutes."

Gianon described the refund process as convenient, quick, and easy the first time. 

"They refunded everything like I didn't have to send anything back," she said.

But over the next few months, she spent more than $300 on several other items -- some of which also didn't work out. She found the return process a little more inconvenient. 

"The second time, they very specifically said you have to go to a UPS Store and print this label and so on and take photos of all the items," Gianone said. "So there's been things that I have bought and should have returned but just never did."

Gianone also has some other complaints, mainly about the barrage of emails she gets with incentives to keep shopping. 

"I get one to two emails every single day," she said, "and there's always ads to win a prize and just get a huge discount, and it's nonstop."

Temu consumer complaints

The Better Business Bureau currently gives Temu a C+. Its BBB customer review rating shows 2.5 out of 5 stars.

Through a public records request, the CBS 2 Investigators asked the Federal Trade Commission how many complaints it has received since Temu began operating in September 2022.

The data revealed 3,323 complaints received by the FTC between October 1, 2022, and January 30, 2024.

The most consumer complaints come from California, with 352, followed by New York, with 259, and Texas, with 196. The FTC has received 99 complaints from Illinois, including 32 from Chicago.

The complaints get to the FTC from various sources, including those filed by the consumer directly, passed on from the BBB, or referred from other state and federal agencies tasked with protecting consumers.

The majority of those complaints, 74%, involve issues relating to online shopping.

"I think Temu is very problematic on a number of levels," said Professor Gamble. "Anytime we see companies that are selling that volume of product for such a low price, it's very concerning."

Gamble is concerned about working conditions for the people who make the inexpensive products sold through the Temu platform. 

"I will say we know that apparel can't be produced at those prices and pay the workers producing it a living wage," she said.

Temu maintains it does not make any of the products it sells. In a statement, the company responded:

• "Accusations that Temu achieves its competitive prices through exploitative labor practices are untrue. We encourage everyone to look deeper into how we reduce prices by stripping out unnecessary costs. 
• Our cost-effectiveness stems from connecting consumers directly to manufacturers, eliminating layers of middlemen and their associated markups. Additionally, our factory-to-consumer model reduces the transportation, warehousing, and handling involved in producing and selling merchandise while passing on these savings to consumers in the form of lower prices.
• Many of our merchants are established, sophisticated manufacturers equipped with state-of-the-art production facilities. These same factories supply well-known US brands and retailers like Amazon, Walmart, and Target. They adhere to industry standards and have a proven track record of quality production.
• Temu is committed to ethical labor practices. Our Third-Party Code of Conduct strictly prohibits forced, penal, or child labor and mandates compliance with all local wage and hour laws. Our partners must respect workers' rights to voluntary employment, freedom of association, and collective bargaining."

As for the consumer complaints, Temu responded that many of its competitors also have racked up thousands of complaints, with some having lower BBB ratings. Some of those retailers have been in business decades longer than Temu.

In a statement, a Temu spokesperson added:

• "We believe that many of these complaints arise from fraudsters impersonating Temu rather than Temu itself. Temu is working to combat a slew of imposters using Temu's protected trademarks to create spoofed domain names, counterfeit apps, look-a-like online marketplaces, fake coupon codes, and other false promotions—all designed to mislead consumers into believing they're engaging with genuine Temu offerings. When the victims of these scams fail to receive items they try to order or otherwise have bad experiences, they make online complaints, including to the Better Business Bureau, not realizing that the source of their bad experience is a Temu imposter rather than Temu.
• For any complaints Temu receives about products genuinely ordered on its app or website, Temu works closely with its merchants to ensure that the products meet appropriate standards. Temu also has a comprehensive buyer protection program that allows customers to return products for refunds within 90 days of purchase."

Temu is suing domains using the name "Temu" in their URLs. 

Temu faces its share of lawsuits over copyright infringement and data privacy accusations, including a class-action lawsuit filed in Northern Illinois.

Temu calls those lawsuits "meritless" and vows to fight them.