---
title: "Why Temu and Wish can't make money"
url: https://modern-mba.com/case/wish
sector: "Technology"
sector_url: https://modern-mba.com/sector/technology
aired: 2023-12-24
published: 2026-08-27
updated: 2026-08-28
reading_time_minutes: 15
charts: 19
video: https://www.youtube.com/watch?v=rB26ZCr7vqI
author: "Yishan Lin"
author_url: https://www.linkedin.com/in/yishanlin/
publisher: Modern MBA
license: "© Modern MBA, all rights reserved. Quote and cite with credit and a link; republishing needs written permission."
---

# Why Temu and Wish can't make money

Wish went from $144 million of revenue to $1.9 billion and lost money every single year, spending 90 cents of every revenue dollar on advertising to acquire customers worth $10. AliExpress has never turned a profit either. Temu is running the identical playbook a decade later. This case study reads Wish's filings, Alibaba's segment reporting, and Pinduoduo's numbers to explain what actually made the $5 item possible — a postal subsidy written in the 1800s — and why the software-platform story never survived contact with it.

## Key figures

- **84% → 29%** — Wish gross margin once it had to own its own logistics
- **$25 vs $10** — Cost to acquire a Wish customer against what one was worth
- **<6%** — AliExpress share of Alibaba revenue, against 67% for Tmall

## The argument

What made a $5 item shippable across the Pacific for free was not technology. It was the Universal Postal Union, an 1874 treaty that heavily subsidized mail leaving developing countries for wealthy ones. China kept that classification into the 2010s, so a package from Guangdong to Ohio cost less than the same package from California. The treaty covers items under 4.4 pounds, which is exactly why everything on Wish, AliExpress, and Temu is a trinket or a gadget, and why none of them has ever moved into furniture.

Wish built a company on that arbitrage and dressed it as software. It called itself a data-science platform and spent under 5% of revenue on R&D while spending 70–90% on sales and marketing — $1.58 billion in 2018 against $1.73 billion of revenue. It bought customers for $17 to $25 who were worth $10 to $30. Active buyers plateaued around 62 million from 2018 through three consecutive billion-dollar ad years. It lost money every year of its existence.

Then the subsidy went. The US threatened to leave the UPU, rates were reformed, and postage from China jumped roughly 50% overnight. Wish had to become the thing it promised investors it never would: warehouses, logistics, inventory. Gross margin fell from 84% to 29% — below Nike, below Vans — so you would make more money selling branded clothes than running the platform. AliExpress reached the same place and has never profited either; Alibaba carries it at under 6% of revenue. Temu is the same business again. The software platform was never the business. The postage was.

## Charts

### Every year, more revenue and more losses

Wish revenue and operating income in millions of dollars. There was never a profitable year.

|  | Revenue | Operating income |
| --- | --- | --- |
| 2015 | $144M | −$522M |
| 2016 | $445M | −$141M |
| 2017 | $1,101M | −$147M |
| 2018 | $1,728M | −$223M |
| 2019 | $1,901M | −$144M |
| 2020 | $2,541M | −$631M |
| 2021 | $2,085M | −$367M |
| 2022 | $571M | −$398M |

Source: Modern MBA, “Why Temu and Wish can't make money”, aired December 2023. Chart: https://modern-mba.com/case/wish#chart-1 · Sources: https://modern-mba.com/case/wish#sources

### The adjusted numbers were just as bad

Operating margin against Wish's own adjusted EBITDA margin — the metric a company gets to define for itself.

|  | Operating margin | Adjusted EBITDA margin |
| --- | --- | --- |
| 2015 | −363% | −349% |
| 2016 | −32% | −30% |
| 2017 | −13% | −12% |
| 2018 | −13% | −12% |
| 2019 | −8% | −7% |
| 2020 | −25% | −9% |

Source: Modern MBA, “Why Temu and Wish can't make money”, aired December 2023. Chart: https://modern-mba.com/case/wish#chart-2 · Sources: https://modern-mba.com/case/wish#sources

### The marketplace worked. Everything after it did not

Gross profit against total operating expenses, in millions of dollars.

|  | Gross profit | Operating expenses |
| --- | --- | --- |
| 2015 | $66M | −$588M |
| 2016 | $314M | −$455M |
| 2017 | $896M | −$1,043M |
| 2018 | $1,450M | −$1,673M |
| 2019 | $1,458M | −$1,602M |

Source: Modern MBA, “Why Temu and Wish can't make money”, aired December 2023. Chart: https://modern-mba.com/case/wish#chart-3 · Sources: https://modern-mba.com/case/wish#sources

### A data-science company that would not fund data science

R&D expense against revenue, in millions of dollars. R&D never exceeded 5% of either revenue or operating expenses.

|  | Revenue | R&D |
| --- | --- | --- |
| 2015 | $144M | $6M |
| 2016 | $445M | $10M |
| 2017 | $1,101M | $28M |
| 2018 | $1,728M | $45M |
| 2019 | $1,901M | $74M |

Source: Modern MBA, “Why Temu and Wish can't make money”, aired December 2023. Chart: https://modern-mba.com/case/wish#chart-4 · Sources: https://modern-mba.com/case/wish#sources

### It funded advertising instead

Sales and marketing spend against revenue, in millions of dollars. Between 70% and 96% of every dollar earned went straight back out.

|  | Revenue | Sales & marketing |
| --- | --- | --- |
| 2015 | $144M | $560M |
| 2016 | $445M | $429M |
| 2017 | $1,101M | $989M |
| 2018 | $1,728M | $1,576M |
| 2019 | $1,901M | $1,463M |

Source: Modern MBA, “Why Temu and Wish can't make money”, aired December 2023. Chart: https://modern-mba.com/case/wish#chart-5 · Sources: https://modern-mba.com/case/wish#sources

### No platform spends like this

Sales and marketing as a percentage of total revenue. Airbnb and Uber both sat around 30% over the same years.

|  | Wish | Spotify |
| --- | --- | --- |
| 2017 | 96% | 12% |
| 2018 | 90% | 12% |
| 2019 | 91% | 14% |

Source: Modern MBA, “Why Temu and Wish can't make money”, aired December 2023. Chart: https://modern-mba.com/case/wish#chart-6 · Sources: https://modern-mba.com/case/wish#sources

### It cost more to buy a customer than a customer was worth

Customer acquisition cost against customer lifetime value, in dollars. At a 15% commission, a $30 lifetime value is about $50 of spending a year.

|  | Acquisition cost | Lifetime value |
| --- | --- | --- |
| 2017 | $17.31 | $10.00 |
| 2018 | $23.44 | $20.00 |
| 2019 | $22.58 | $25.00 |
| 2020 | $25.00 | $30.00 |

Source: Modern MBA, “Why Temu and Wish can't make money”, aired December 2023. Chart: https://modern-mba.com/case/wish#chart-7 · Sources: https://modern-mba.com/case/wish#sources

### Three billion-dollar ad years bought nothing

Advertising spend in millions of dollars against active buyers in millions. Buyers plateaued from 2018 and never moved again.

|  | Ad spend ($M) | Active buyers (M) |
| --- | --- | --- |
| 2017 | 900 | 52 |
| 2018 | 1,500 | 64 |
| 2019 | 1,400 | 62 |
| 2020 | 1,600 | 64 |

Source: Modern MBA, “Why Temu and Wish can't make money”, aired December 2023. Chart: https://modern-mba.com/case/wish#chart-8 · Sources: https://modern-mba.com/case/wish#sources

### Active buyers, before the plateau

Number of active buyers in millions — at least one purchase a year. The growth was bought, and it stopped in 2018.

|  | Counts |
| --- | --- |
| 2015 | 18M |
| 2016 | 31M |
| 2017 | 52M |
| 2018 | 64M |
| 2019 | 62M |
| 2020 | 64M |

Source: Modern MBA, “Why Temu and Wish can't make money”, aired December 2023. Chart: https://modern-mba.com/case/wish#chart-9 · Sources: https://modern-mba.com/case/wish#sources

### Building the logistics it promised it would never build

Annual revenue contribution in millions of dollars. Logistics services went from nothing to $743 million — table stakes, arriving years late.

|  | Sales commission | Logistics services |
| --- | --- | --- |
| 2017 | $1,053M | $0M |
| 2018 | $1,508M | $6M |
| 2019 | $1,473M | $137M |
| 2020 | $1,827M | $514M |
| 2021 | $1,177M | $743M |
| 2022 | $220M | $305M |

Source: Modern MBA, “Why Temu and Wish can't make money”, aired December 2023. Chart: https://modern-mba.com/case/wish#chart-10 · Sources: https://modern-mba.com/case/wish#sources

### The margin story died with it

Gross profit margin. Wish converged on Amazon from above and kept going straight past it.

|  | Wish | Amazon |
| --- | --- | --- |
| 2016 | 77% | 35% |
| 2017 | 84% | 37% |
| 2018 | 81% | 40% |
| 2019 | 71% | 41% |
| 2020 | 63% | 40% |
| 2021 | 53% | 42% |
| 2022 | 29% | 44% |

Source: Modern MBA, “Why Temu and Wish can't make money”, aired December 2023. Chart: https://modern-mba.com/case/wish#chart-11 · Sources: https://modern-mba.com/case/wish#sources

### The platform now earns less than the people making the product

Gross margins of platforms against brands and manufacturers. Hermès runs 68%, adidas 47%, Under Armour 45%, and Uber 38% — all of them above the platform.

|  | Percentages |
| --- | --- |
| LVMH | 82% |
| Airbnb | 73% |
| eBay | 70% |
| Canada Goose | 67% |
| Vans | 53% |
| Nike | 46% |
| Amazon | 44% |
| Wish | 29% |

Source: Modern MBA, “Why Temu and Wish can't make money”, aired December 2023. Chart: https://modern-mba.com/case/wish#chart-12 · Sources: https://modern-mba.com/case/wish#sources

### Cash at hand, and the burn underneath it

Cash and equivalents in millions of dollars, with a $280 million credit facility not shown. Free cash flow was −$947M in 2021 and −$473M in 2022.

|  | US dollars |
| --- | --- |
| 2017 | $837M |
| 2018 | $722M |
| 2019 | $744M |
| 2020 | $1,965M |
| 2021 | $1,009M |
| 2022 | $506M |

Source: Modern MBA, “Why Temu and Wish can't make money”, aired December 2023. Chart: https://modern-mba.com/case/wish#chart-13 · Sources: https://modern-mba.com/case/wish#sources

### The turnaround CEO's own track record

Foot Locker's direct-to-customer sales in millions of dollars under Vijay Talwar, who ran Wish for nine months and left with $6 million.

|  | US dollars |
| --- | --- |
| 2017 | $1,022M |
| 2018 | $1,109M |
| 2019 | $1,225M |
| 2020 | $1,285M |
| 2021 | $2,101M |
| 2022 | $1,929M |
| 2023 | $1,528M |

Source: Modern MBA, “Why Temu and Wish can't make money”, aired December 2023. Chart: https://modern-mba.com/case/wish#chart-14 · Sources: https://modern-mba.com/case/wish#sources

### Alibaba never needed AliExpress to work

Share of Alibaba group revenue. AliExpress has never cleared 6% while Tmall carries the company.

|  | Tmall | AliExpress |
| --- | --- | --- |
| 2018 | 74% | 6% |
| 2019 | 69% | 5% |
| 2020 | 68% | 5% |
| 2021 | 70% | 5% |
| 2022 | 69% | 5% |
| 2023 | 67% | 6% |

Source: Modern MBA, “Why Temu and Wish can't make money”, aired December 2023. Chart: https://modern-mba.com/case/wish#chart-15 · Sources: https://modern-mba.com/case/wish#sources

### Smaller than Wish, and just as unprofitable

AliExpress revenue and adjusted EBITDA in billions of dollars, converted from RMB. Same playbook, same decade, same result.

|  | Revenue | Adjusted EBITDA |
| --- | --- | --- |
| 2021 | $6.8B | −$0.7B |
| 2022 | $8.5B | −$1.2B |
| 2023 | $9.6B | −$0.8B |

Source: Modern MBA, “Why Temu and Wish can't make money”, aired December 2023. Chart: https://modern-mba.com/case/wish#chart-16 · Sources: https://modern-mba.com/case/wish#sources

### Pinduoduo went from zero to $4.3 billion in four years

Annual revenue since founding, in millions of dollars. Whether the number is trustworthy is a separate question.

|  | US dollars |
| --- | --- |
| 2015 | $0M |
| 2016 | $71M |
| 2017 | $254M |
| 2018 | $1,835M |
| 2019 | $4,329M |

Source: Modern MBA, “Why Temu and Wish can't make money”, aired December 2023. Chart: https://modern-mba.com/case/wish#chart-17 · Sources: https://modern-mba.com/case/wish#sources

### And that story is what Temu is really funding

Pinduoduo's valuation on the American equity markets in billions of dollars, from IPO. No American can use the core app.

|  | US dollars |
| --- | --- |
| IPO | $24B |
| Q4 2018 | $25B |
| Q2 2019 | $23B |
| Q4 2019 | $44B |
| Q2 2020 | $100B |
| Q4 2020 | $211B |
| Q2 2021 | $158B |
| Q4 2021 | $73B |
| Q2 2022 | $78B |
| Q4 2022 | $103B |
| Q2 2023 | $91B |
| Q4 2023 | $200B |

Source: Modern MBA, “Why Temu and Wish can't make money”, aired December 2023. Chart: https://modern-mba.com/case/wish#chart-18 · Sources: https://modern-mba.com/case/wish#sources

### Level with Alibaba, four times JD

Company valuation relative to Chinese peers, in billions of dollars. The youngest platform of the three.

|  | US dollars |
| --- | --- |
| Alibaba | $195B |
| Pinduoduo | $194B |
| JD.com | $46B |

Source: Modern MBA, “Why Temu and Wish can't make money”, aired December 2023. Chart: https://modern-mba.com/case/wish#chart-19 · Sources: https://modern-mba.com/case/wish#sources


## Takeaways

1. The whole category rests on a treaty from 1874. The **Universal Postal Union** subsidized mail from developing countries to wealthy ones, **China** kept that classification into the 2010s, and shipping a parcel from China to the US cost less than shipping it coast to coast inside the US.
2. It only covers parcels under **4.4 pounds**, which explains the entire product catalog. Trinkets, gadgets, compact electronics, and anything that folds — and no furniture, no appliances, no home decor, on any of these platforms, ever, despite all three having had war chests.
3. **Wish** grew revenue **$144M**, **$445M**, **$1,101M**, **$1,728M**, **$1,901M**, **$2,541M** and lost money every year: **−$522M**, **−$141M**, **−$147M**, **−$223M**, **−$144M**, **−$631M**. It never had a profitable year in its existence.
4. The self-declared data-science company spent almost nothing on data science. R&D was **$6M**, **$10M**, **$28M**, **$45M**, and **$74M** against revenue of **$144M** to **$1,901M** — under **5%** of revenue every year. The founders were engineers. They knew where the returns were not.
5. They were in advertising, and it ate everything. Sales and marketing ran **$560M**, **$429M**, **$989M**, **$1,576M**, and **$1,463M** — **70% to 96%** of revenue. For every dollar Wish earned, up to 90 cents went straight back out to Facebook, Instagram, and YouTube.
6. That is not what platforms do. Sales and marketing was **96%**, **90%**, and **91%** of **Wish** revenue across 2017 to 2019 against **12%**, **12%**, and **14%** at **Spotify**, with **Airbnb** and **Uber** both around **30%**.
7. Gross profit was never the problem: **$66M**, **$314M**, **$896M**, **$1,450M**, **$1,458M**. Operating expenses were **$588M**, **$455M**, **$1,043M**, **$1,673M**, **$1,602M**. The marketplace worked. Everything downstream of it did not.
8. The unit economics were inverted from the start. Customer acquisition cost ran **$17.31**, **$23.44**, **$22.58**, and **$25.00** while lifetime value ran **$10**, **$20**, **$25**, and **$30**. At a 15% commission, a $30 lifetime value means a customer spent about **$50** a year on the platform.
9. And the spending stopped working. Active buyers went **18M**, **31M**, **52M**, **64M**, **62M**, **64M** — flat from 2018 — while ad spend went **$900M**, **$1,500M**, **$1,400M**, and **$1,600M**. Three consecutive billion-dollar years bought no growth at all.
10. **Adjusted EBITDA** is the metric a company defines for itself, and Wish's was no better than the audited one: operating margin of **−363%**, **−32%**, **−13%**, **−13%**, **−8%**, **−25%** against adjusted margins of **−349%**, **−30%**, **−12%**, **−12%**, **−7%**, **−9%**. There was nothing left to spin.
11. Then the arbitrage closed. The US threatened to leave the **UPU**, rates were reformed, and cross-border postage from China rose roughly **50%** overnight — from a maximum of **$5.41** for a sub-4.4-pound parcel to **$10.77**, against **$11–25** to send the same thing inside the United States.
12. So the software-only platform had to build the thing it said it would never build. Sales commission went **$1,053M**, **$1,508M**, **$1,473M**, **$1,827M**, **$1,177M**, **$220M** while logistics services went from **$6M** to **$743M** — table stakes for any marketplace, arriving years late.
13. Owning distribution destroyed the margin story. **Wish** gross margin fell **84%**, **81%**, **71%**, **63%**, **53%**, **29%** while **Amazon** climbed **37%** to **44%**. The disruptor converged on the incumbent from above and kept going.
14. At **29%**, Wish now runs a worse gross margin than the manufacturers it was supposed to be disintermediating: **44%** at **Amazon**, **45%** at **Under Armour**, **46%** at **Nike**, **47%** at **adidas**, **53%** at **Vans**, **67%** at **Canada Goose**, **70%** at **eBay**, **73%** at **Airbnb**, and **82%** at **LVMH**. Selling branded clothes pays better than running the platform.
15. **AliExpress** survives only because nobody at **Alibaba** needs it to work. It has been **5–6%** of group revenue since 2018 against **67–74%** for **Tmall**, it ran revenue of **$6.8B**, **$8.5B**, and **$9.6B** against adjusted EBITDA of **−$0.7B**, **−$1.2B**, and **−$0.8B**, and it has never turned a profit in its life.
16. **Temu** exists because **Pinduoduo** needs a growth story for American investors who cannot use its Chinese app. PDD went from **$0** revenue in 2015 to **$4.3B** by 2019 and its US-listed valuation ran **$24B**, **$44B**, **$100B**, **$211B**, then down to **$73B** and back to **$200B** — level with **Alibaba** at **$195B** and four times **JD.com** at **$46B**.

## Common questions

### How is Temu so cheap?

Three things stack. The sellers are Chinese manufacturers, wholesalers, and distributors operating at a much lower cost base, shipping generic unbranded goods that cost cents to produce. The products are non-essential impulse items with no brand to protect, so quality is whatever clears the price. And the postage is subsidized: the Universal Postal Union has set below-cost cross-border rates for parcels under 4.4 pounds leaving countries classified as developing, which China was until the rates were reformed. That is why the catalog is all small, light, foldable goods and why none of these platforms sells furniture or appliances. On top of that, Temu is deliberately loss-making — Pinduoduo funds it out of a profitable Chinese business to buy a foothold in the US market.

### Is Temu profitable?

Not as a standalone business, and it is not designed to be yet. Pinduoduo has said publicly that Temu's financial impact is small and that investors should not expect continued high growth from the core platform, which is precisely why Temu exists — PDD's group-buying model does not translate to the West, its Chinese user base has plateaued at around 880 million, and its US-listed valuation depends on a growth story. Temu's offer of 90-day refunds, 30-day price adjustments, free shipping, and two-week delivery costs more than the margin on a $10 order can support. It is subsidized entry, funded by a mature core business, exactly as AliExpress is by Alibaba.

### What happened to Wish?

It ran out of the arbitrage it was built on. Wish grew revenue from $144 million in 2015 to $2.5 billion in 2020 and never posted a profitable year, because up to 90 cents of every revenue dollar went to advertising to acquire customers worth $10 to $30 over their lifetime. Active buyers plateaued around 62 million from 2018 despite three straight billion-dollar ad years. When the US forced a reform of Universal Postal Union rates, cross-border postage from China rose about 50% overnight and Wish had to start building warehouses and logistics — which took gross margin from 84% down to 29%. It has gone through three CEOs in two years and now survives on a 30-to-1 reverse split to stay listed on Nasdaq.

### Why does AliExpress still exist if Wish failed?

Because Alibaba does not need it to make money. Alibaba's business is B2B wholesale and Tmall, which is 67–74% of revenue; AliExpress has been under 6% since 2018 and has never turned a profit. It targets emerging markets — Russia, Spain, Brazil — where e-commerce and product standards are less developed, rather than competing for low-income households in Amazon's home market. Its roadmap has been identical to Wish's over the same decade: an unregulated marketplace on flat commission that gradually curates, localizes, and starts charging merchants for logistics to cut delivery times. It reached the same destination. The difference is that its losses are rounding errors inside a profitable group.

### Why isn't a software marketplace automatically a good business?

Because you are compensated for the problems you solve, and a marketplace that refuses logistics, quality control, and returns has only solved the easy one. Wish had software-level gross margins of 84% and still lost money, because the hard part — convincing someone with little disposable income to buy a non-essential item, sight unseen, from an unknown seller, with a four-week delivery — had to be bought with advertising every single time. Taking 10–20% commission on a $5 order is a fundamentally different business from taking it on a $50 order, and no amount of volume fixed the ratio. When Wish finally started doing the hard parts, its margins converged on Amazon's and then fell below the brands' entirely.

### Was Wish's data-science moat real?

No, and the spending says so. Wish pitched proprietary data science, personalization, and network effects as its competitive advantage, then spent under 5% of revenue and no more than 5% of operating expenses on R&D every year — $6 million in 2015 rising to $74 million in 2019 — while spending up to 96% of revenue on advertising. Companies fund what they believe returns. The founders were engineers who knew that recommendation algorithms deliver marginal improvements, not a moat, and that what Wish was actually doing was what Amazon and eBay had already done years earlier. The discovery feed was the dollar-store treasure hunt in software, which is a merchandising choice rather than a technology.

## Discussion

- Free shipping for a $5 item across the Pacific was not technology — it was an 1874 postal treaty that subsidized mail from developing countries. How much of what gets called disruption is actually a rule nobody had read?
- The treaty covers items under 4.4 pounds, which is exactly why everything on Wish, AliExpress, and Temu is a trinket and none has moved into furniture. What does it tell you when a company's entire catalog is shaped by a weight limit?
- Wish called itself a data-science platform while running an arbitrage. Why do companies reach for the technology framing, and who is it aimed at?
- When the subsidy that makes a business viable is a policy, what is the correct discount to apply to its valuation?
- You are advising a marketplace built on a regulatory advantage that is about to close. What do you do with the time you have left?

## Sources

Wish revenue, operating income, gross profit, operating expenses by line, active buyers, advertising spend, adjusted EBITDA, and cash position from ContextLogic Inc. S-1 and 10-K filings for the years shown; comparative sales and marketing ratios and gross margins for Amazon, Airbnb, Uber, Spotify, and eBay from company filings; brand and manufacturer gross margins from company annual reports; AliExpress and Alibaba segment shares from Alibaba Group annual reports, converted from RMB; Pinduoduo revenue and US-market valuation from company filings and Nasdaq data; cross-border postal rates are Universal Postal Union terminal dues for items under 4.4 pounds

---

From [Modern MBA](https://modern-mba.com/). Read this case in full at [https://modern-mba.com/case/wish](https://modern-mba.com/case/wish), or watch the episode at https://www.youtube.com/watch?v=rB26ZCr7vqI.