Temu Semi-Managed Model Transformation Drives PDD Overseas Operating Efficiency and Profit Improvement

Temu’s deep transition to the semi-managed model is significantly improving the operational efficiency of its U.S. site. It is expected to achieve breakeven in Q4 2025 and drive the overall operating margin from -12% to -8%, indicating that the loss side of PDD’s overseas business is undergoing marginal narrowing. If it continues to promote localized fulfillment, merchant ecosystem expansion, and user retention based on a high proportion of semi-managed operations, it is expected to further offset cross-border investment around 2026, thereby accelerating the platform’s achievement of overseas breakeven. [0][1]

1. Improvement in Fulfillment Costs and Delivery Experience
   : Temu’s semi-managed coverage in the U.S. has reached 70%, meaning a large number of orders are co-managed by local warehouses, partner logistics providers, and Temu’s in-house team. This can significantly shorten delivery times, reduce return rates, and lower logistics subsidy pressures. Combined with the expected 43% year-on-year growth in GMV to 530 billion yuan in 2025—this means the marginal costs from order growth can amplify returns through the semi-managed model, instead of relying entirely on the high-cost structure of ocean direct shipping.
2. Expansion of Merchant Ecosystem and Localized Supply Chain
   : Temu recently launched an App that connects with Shopify merchants, allowing third-party sellers to directly sync products to the Temu platform and participate in the Local Seller Program, enabling “self-built inventory + local delivery” in over 30 markets. This not only expands the range of SKUs that Temu can respond to quickly but also further compresses the fulfillment chain and shipping costs, which is conducive to maintaining profitability under low average order values (AOV). [1]

• Leverage Effect of GMV and Geographic Distribution
  : Temu currently accounts for 9% of PDD’s total GMV, with a distribution of 3.5:4:2.5 across the U.S., Europe, and other regions. Even though the U.S. contributes less, the increase in marginal profit per unit of GMV (driven by semi-managed operations) will amplify its elasticity to overall performance, gradually shifting from a “growth investment” to a “profit contribution”.
• User and Order Structure
  : Although the MAU gap between Temu and Amazon is only 1.3x, there are still significant gaps in order volume and average order value (AOV). If the semi-managed system can improve user repeat purchases and actual single-order spending (better product combinations, logistics trust), future increases in order volume and AOV can offset the gross margin compression caused by Temu’s “low-price” positioning in the U.S., further promoting overseas breakeven.
• Financial Indicators and Valuation Logic
  : Currently, PDD’s stock price is around $110, with a P/E ratio of approximately 11x, indicating that the market expects sustainable profit improvement. If overseas businesses, especially Temu, can maintain semi-managed efficiency and GMV growth, their contribution to the recovery of overall profit margins will receive stronger valuation support. [0]

1. Policy/Compliance Risks
   : Regulatory reviews, including the EU’s subsidy investigation into Temu’s headquarters, are ongoing. If improper subsidies or trade deficit intervention are identified, it may lead to a short-term rise in operating costs in the European market, weakening the efficiency dividends brought by semi-managed operations. [2]
2. Logistics and Supply Chain Volatility
   : Although semi-managed operations reduce reliance on long-distance transportation, dependence on local warehouses and partners also means higher operational flexibility, requiring continuous monitoring of local inventory management and service provider performance.
3. User Growth Curve
   : Temu’s MAU in the U.S. is more than one-third of Amazon’s, but if it cannot further narrow the gaps in order volume and AOV, the profit-pulling ability of GMV expansion will remain limited.

1. Accelerate Semi-Managed “Local Warehouse + In-House Fulfillment” Capabilities
   : Prioritize the layout of local warehouses in key cities in North America and Europe, and use data-driven adjustments to categories and inventory to improve inventory turnover rates and fulfillment accuracy.
2. Deepen Merchant Empowerment Mechanisms
   : Continue to expand linkage with platforms like Shopify and FBA, build a joint ecosystem of “low-cost entry + high-availability fulfillment”, and reduce reliance on a single supply chain.
3. Precisely Track Operating Profit Improvement
   : Establish profit models divided by region/mode, regularly review the performance of semi-managed orders in price increases, cost savings, and user retention, and identify the marginal point of breakeven in advance.
4. Maintain Proactive Preparation for Regulatory Risks
   : Increase investment in compliance, tax, and public affairs teams in sensitive markets like Europe to respond to potential intensified policy pressures and prevent profit expectations from being disrupted by policy factors.

[0] Jinling API Data (PDD Real-Time Market and Company Profile)
[1] Temu Enables Shopify Merchants to List Products on Its Marketplace (PYMNTS, https://www.pymnts.com/news/ecommerce/2025/temu-enables-shopify-merchants-to-list-products-on-its-marketplace/)
[2] Temu’s Europe HQ Raided as Part of EU Foreign-Subsidy Probe (Bloomberg, https://www.bloomberg.com/news/articles/2025-12-10/temu-s-europe-hq-raided-as-part-of-eu-foreign-subsidy-probe)