China-based e-commerce platform Temu faces major user exodus as new tariffs and retention problems disrupt U.S. operations
Three Key Facts
- 58% user decline since May 2024 as Temu’s U.S. daily active users plummet from 60 million, marking a dramatic reversal for the Chinese e-commerce platform
- New buyer activations drop 60% from peak with quarter-on-quarter declines exceeding 20% and trending nearly 18% below early 2023 baseline levels
- 145% tariff surge forces major price increases after de minimis exemption expiration in May 2025, pushing Temu to raise prices 30%-50% on cheapest goods
Introduction
Temu’s ambitious U.S. expansion faces mounting pressure as customer engagement metrics hit record lows and regulatory changes reshape the competitive landscape. The Chinese e-commerce platform, once celebrated for reaching 60 million daily active users in America, now confronts a stark reality with user numbers plummeting 58% since May 2024.
Barclays analysis reveals critical weaknesses in Temu’s U.S. strategy, with new buyer activations declining more than 20% quarter-on-quarter. The platform’s struggles intensify as tariffs on Chinese imports surge to 145% following the expiration of the de minimis exemption, forcing significant price increases that threaten its core value proposition.
Key Developments
Temu’s decline accelerated throughout 2024 as multiple challenges converged simultaneously. New buyer activations now trend nearly 60% below their third-quarter 2023 peak, according to Barclays quarterly analysis. The metric sits 18% below early 2023 baseline levels when Temu began its U.S. scaling efforts.
Customer retention presents equally concerning trends. The fourth-quarter 2024 cohort retention rate dropped to approximately 30% in the following quarter, establishing a new historical low for the platform. Annual cohort retention for 2024 decreased 11 percentage points year-over-year to just 26%.
Regulatory changes compounded these operational challenges. The de minimis exemption expiration on May 2, 2025, triggered massive tariff increases that forced Temu to abandon direct shipments to U.S. consumers. The company now relies exclusively on local warehouses, increasing operational costs and affecting pricing strategies across product categories.
Market Impact
PDD Holdings, Temu’s parent company, bears the financial weight of these U.S. market struggles. The stock plummeted over 30% since early 2025, while annual profits declined 38% year-over-year. These losses reflect investor concerns about Temu’s ability to maintain growth momentum in its largest international market.
Temu’s advertising strategy underwent dramatic shifts in response to declining performance. U.S. ad spending dropped 95% as the company redirected resources toward European and international markets. Paid search traffic fell 52%, indicating reduced visibility and customer acquisition capabilities.
The platform’s share of wallet among existing users declined sharply in May, coinciding with the tariff implementation. Despite purchase frequency increasing 50% for the first-quarter 2025 cohort compared to 2023, average order values show mixed trends that fail to offset broader engagement declines.
Strategic Insights
Temu’s U.S. challenges create opportunities for domestic e-commerce competitors. Amazon, Etsy, Chewy, and eBay all demonstrated improved retention rates over the previous year, contrasting sharply with Temu’s declining metrics. Over 97% of Temu’s U.S. customers also shop at Walmart, highlighting intense competition in the discount retail segment.
The company’s global strategy reveals a deliberate pivot away from the troubled U.S. market. Monthly active users reached 405 million globally by second-quarter 2025, with significant growth in Europe, Latin America, and Southeast Asia. This geographic diversification aims to offset U.S. revenue losses, as America accounts for nearly one-third of Temu’s total revenue.
Gross merchandise volume increased 239% between 2023 and 2024, reaching $47.5 billion, demonstrating underlying business strength despite regional challenges. The closure of the de minimis loophole represents a structural shift that affects all Chinese e-commerce platforms operating in the U.S. market.
Expert Opinions and Data
Trevor Young, leading Barclays analysts, emphasizes the severity of Temu’s decline in a Monday research note. “New buyer activations are now trending down just shy of -60% from the 3Q23 peak,” Young reported, highlighting the platform’s struggle to attract new customers in its most important international market.
Barclays research indicates that most current data precedes recent regulatory developments, suggesting more profound challenges ahead. The implementation of “Liberation Day” tariffs and elimination of de minimis import exemptions create additional headwinds that may not yet appear in current metrics.
Industry analysts view Temu’s difficulties as symptomatic of broader challenges facing Chinese e-commerce platforms in Western markets. Geopolitical tensions, regulatory scrutiny, and established local competition create complex obstacles that require sophisticated strategic responses beyond traditional price competition.
Conclusion
Temu’s U.S. market struggles illustrate the complexities of international e-commerce expansion amid evolving regulatory landscapes. The platform’s dramatic user decline and deteriorating engagement metrics signal fundamental challenges that extend beyond temporary market fluctuations.
The company’s strategic pivot toward global markets represents both necessity and opportunity. While European and emerging market growth provides alternative revenue streams, Temu’s ability to navigate supply chain costs, tariff pressures, and local competition determines its long-term viability as a global e-commerce platform.
