Chinese online giants Shein and Temu are now leading retailers with their business models disrupting the whole UK retail landscape. Their low-cost goods are driving an extraordinary boom in low-value imports from China. During fiscal year 2024-25, something to the tune of eight million small parcels arrived each year under this import tax exemption. They shot up to an astonishing £3 billion. This increase is a reflection of shifting consumer habits and increased desires to purchase low-cost alternatives to clothing, homeware, electronics, and toys.
Shein sells literally millions of on-trend clothes and accessories. Just last year the company announced skyrocketing profits, cementing its status as a leader within the fast fashion industry. Temu’s international rollout has been highly successful among UK consumers, attracting them through low priced goods. Along with other major manufacturers, it is widely suspected to lead the flood of low-cost fully assembled bikes from China. Their success speaks to a broader change in consumer shopping habits, as more shoppers seek out cheaper options that often steer clear of the brick-and-mortar stores.
Both companies have used unique forms of vertical integration and other innovative strategies to enable them to sell at low prices. Shein’s touted “on-demand” business model is wasteful and costly. These savings are subsequently shared with customers. Nonetheless, Temu seems intent on shoring up its local presence. By year’s end, it aims to have at least 50% of those sellers on its UK platform hailing from within that country’s borders.
To its credit, Shein has made a lot of smart moves. The company has faced criticism over labor practices associated with the production of goods sold on its marketplace. Much earlier this year, British Members of Parliament confronted the company over its deplorable labor standards. In response, a Shein spokesperson emphasized that “vendors are required to comply with Shein’s code of conduct and stringent safety standards.”
Shein and Temu are ringtossing their way to the top of the charts. This rapid growth is in the context of a UK government review of import regulations for low-value parcels. At present, packages worth less than £135 are exempt from customs duties when entering the UK. Unfortunately, this new policy has received swift backlash from all corners of the retail industry. In particular, local businesses are shutting their doors and looking at the influx of inexpensive imports as a major cause.
Katerina Buchy, a small business owner and local retailer, discussed how the flood of low-cost imports has stunted her ability to thrive and grow. “It’s affecting our customers as well. They’re just not ordering from us because they realize their customers can get it cheaper online,” she said. Buchy questioned the business tax ramifications of such large quantities of imports. She said, “I would love to see how much they’re not making in tax revenue. We pay taxes. We employ more than 100 people.”
Her sentiments underscore a growing mood of exasperation from brick-and-mortar retailers. They contend that the existing import tax exemption for any new manufacturing gives an un-level playing field. Buchy added that “this is a loophole that needs to be plugged,” while urging the government to ensure that any regulatory changes do not ultimately harm consumers or small businesses.
In light of these developments, a Treasury spokesperson reaffirmed the government’s pro-business stance. “We are a pro-business government that is backing Britain’s High Streets by protecting and extending business rates relief that would have ended without our action, permanently lowering rates for retailers from next year, and capping corporation tax at the lowest level in the G7 to encourage investment and growth.”
As a result, the situation in the UK is a world apart from the situation here in the United States. In the U.S., the government is poised to close its own “de minimis” exemption on low-cost imports from China and Hong Kong. This exemption allows goods worth $800 (£596) or less to come in without any tariffs. Now, thanks to this policy, through the lens of broader trade considerations, there is a renewed reevaluation.
Shein and Temu’s super speedy race to UK market share. This overall trend is not upending consumer purchasing patterns, but the dynamics of local retail markets that policymakers will have to analyze with a fine tooth comb. Finding the balance between supporting consumer access to affordable goods and protecting local businesses continues to be an incredibly complex challenge.