From America to Europe: How Temu is Adapting to Global Challenges
From “fully managed” to a “half-managed”
Facing mounting regulatory pressures in the U.S. and Europe, Chinese e-commerce giant Temu is shifting its growth strategy from its core U.S. market to Europe. A widely circulated Chinese industry report highlights that Temu is pivoting its business model from “fully managed” to a “half-managed” approach while overhauling its global logistics network to achieve profitability before regulatory risks fully materialize.
External pressures are intensifying. The European Union’s Digital Services Act (DSA) recently flagged Temu for potential violations in product safety and supply chain management, which could lead to fines of up to 6% of its global revenue. Meanwhile, stricter U.S. tariff policies have caused a drop in Temu’s sales, accelerating its investment in overseas warehouses and multimodal transport networks. To date, Temu has established several self-operated warehouses worldwide to stabilize its supply chain and prepare for the possible termination of de minimis exemptions.
Despite these challenges, Temu’s adjustments showcase the adaptability of Chinese cross-border e-commerce businesses in navigating global policy barriers. By localizing its supply chain and optimizing its business model, Temu is opening up new growth opportunities in Europe, which is quickly becoming the company’s most critical strategic focus for the next phase of expansion.
Europe Overtakes North America
The third quarter of 2025 was transformative for Temu, as its GMV surged to $24 billion, with year-to-date figures reaching $60 billion. While the company still targets $100 billion in annual GMV, insiders and analysts now expect a more realistic range of $90 billion to $95 billion.
The big shift? Europe has officially overtaken North America as Temu’s largest market, contributing 40% of Q3 GMV compared to the U.S.’s 31%. This milestone signals a strategic pivot for the company, which is now doubling down on the European market. Over the past two years, Temu has quietly laid the groundwork for this transition, building warehouse networks, testing marketing strategies, and forging local partnerships.
The UK, France, Germany, Italy, and Spain were standout performers, with GMV growth in these markets hitting 80% to 100%. Meanwhile, U.S. growth slowed due to lingering tariff issues and internal strategic adjustments earlier in the year.
Latin America is also emerging as a key player in Temu’s growth. With GMV growth of 70% to 80%, countries like Brazil and Mexico are proving critical to the company’s long-term goal of reaching $140 billion GMV by 2026. As Temu continues to expand its product offerings and local infrastructure in these markets, its diversification strategy is beginning to pay off.
Bet on Half-Managed Model
2025 has been a challenging year for Temu, marked by rising costs and increasing regulatory pressures. To adapt, the company has shifted its focus toward a “half-managed” model while restructuring its global logistics and fulfillment network to maintain operational stability in a more complex environment.
The half-managed model, which includes “local-to-local” operations, now accounts for 34% of Temu’s global GMV, up from earlier levels, while the fully managed model has dropped to 66%. Notably, the half-managed model boasts a higher average order value of $55 compared to $32 for the fully managed approach. Analysts view this shift as a critical step toward profitability, as the new model cuts fulfillment costs and improves gross margins. For instance, in the U.S., where the half-managed model has the highest penetration at 38%, net profit margins have risen from 2% last year to 4% this year.
Logistics is also undergoing a transformation. Temu is scaling up multimodal transport to reduce its reliance on expensive air freight. In Europe, the share of air shipments has dropped to 35%, replaced by sea and rail freight. Similarly, in the U.S., sea freight now accounts for 50% of shipments. These adjustments have significantly lowered fulfillment costs. For example, in Europe, fully managed air freight incurs an 8% loss, while sea and rail freight reduce losses to just 2%. In the U.S., fully managed sea freight is nearing breakeven, with losses around 1%, compared to 7%-9% for air freight.
Anticipating potential regulatory changes in Europe, such as the elimination of the €150 tax exemption, Temu has prepared to adopt a B2B2C customs clearance model. By optimizing its clearance processes, the company expects to keep actual tariff costs within 5%-8%, ensuring its price competitiveness remains intact.
The True Enemy
In Europe, Temu’s fiercest competition is not with Amazon but with its fast-fashion rival SHEIN, whose business model closely mirrors its own.
Temu has outpaced SHEIN in order volume in key markets such as the UK, Germany, and France. However, SHEIN retains a GMV advantage, with an average order value of $50 compared to Temu’s $33. Analysts note that SHEIN represents a more significant challenge to Temu than Amazon.
The most intense rivalry is in the half-managed business segment, where the two companies share a 70% overlap in product offerings, supply chains, and customer bases. Temu has responded with an aggressive pricing strategy, slashing prices by 5%-15% on overlapping products to accelerate market penetration.
Temu’s competition with Amazon, by contrast, is more strategically misaligned. Fully managed product overlap between the two is less than 5%, with Temu avoiding high-risk categories like IP-sensitive goods, food, and publications. Instead, the company focuses on fast-moving, competitively priced products that appeal to price-conscious consumers.
Temu’s pricing strategy is its strongest weapon. Half-managed products are priced 10%-20% lower than Amazon’s, while fully managed goods are up to 60% cheaper. This approach has allowed Temu to secure a unique foothold in Europe while avoiding direct competition with Amazon.
As Temu transitions from rapid growth to profitability, its goals are clear. The company expects to break even in the UK by October, achieve profitability in its five core European markets by Q4, and reach breakeven for the entire European region by December.
