The recent decision by the Trump administration to end the tariff-free importation of low-cost goods into the U.S. is expected to impact fast-fashion retailer Shein more significantly than online dollar-store Temu, according to analysts. This is due to Temu’s broader product range and its efforts to adjust its shipping strategy.
Both companies experienced substantial growth in the U.S. market in recent years, benefiting from the de minimis rule, which exempted shipments valued at less than $800 from import duties. A report from June 2023 indicated that these two Chinese retailers accounted for more than 30% of all packages shipped to the U.S. daily under the rule.
While the rule was scrutinized during the Biden administration, prompting both companies to prepare for a reduced reliance on it, Temu has adapted its business model more quickly. Temu, owned by PDD Holdings, has implemented a strategy similar to Amazon’s, wherein goods are shipped in bulk to overseas warehouses rather than directly to customers.
By the end of 2023, roughly 20% of Temu’s U.S. sales were shipped from local warehouses instead of directly from China. Additionally, the company increased its use of sea freight, shipping larger and more valuable items like furniture in bulk to reduce reliance on de minimis shipments.
In contrast, Shein, which continues to focus on air freight for fast delivery of a large volume of fashion items, has also made adjustments by opening fulfillment centers in several U.S. states, including Illinois and California, and a supply chain hub in Seattle. Shein’s business model prioritizes speed and responsiveness to fashion trends, making its reliance on fast air freight crucial to maintaining its business operations.
While Shein continues to manufacture the majority of its products in China, it has started diversifying its supply chain, adding suppliers in countries like Brazil and Turkey. This shift could increase in response to the new tariffs and regulations.
Trump’s recent executive order has caused confusion in the express shipping industry, leading to the U.S. Postal Service reversing an earlier decision not to accept parcels from China and Hong Kong. According to Nomura analysts, de minimis shipments to the U.S. could decrease by 60%, leading to higher prices for American shoppers purchasing from Shein, Temu, and Amazon Haul. In 2024, approximately 1.36 billion shipments entered the U.S. under the de minimis provision, a 36% increase compared to 2023, based on data from U.S. Customs and Border Protection.
Despite these challenges, analysts, including tech expert Rui Ma, remain optimistic that Shein and Temu will be able to adapt. Ma noted that China’s e-commerce companies are agile and have advanced supply chains, which will help them navigate the changes. While the shift will likely impact the companies in the short term, Ma does not foresee a catastrophic effect unless more drastic measures are introduced.
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