Temu and Shein, international upstarts taking market share from Amazon in the great new American e-commerce space race, are now facing significant challenges. New tariffs threaten to upend their business models. The recent closure of the de minimis exemption for shipments from China, which previously allowed imports worth up to $800 to bypass trade tariffs, has upended their operations. Duties may increase as high as 120%, or business might experience an increase in the fixed fee rate of $100 to $200 in June. This, in turn, forces both firms to reconsider their own prices.
As of Friday, the de minimis rule is officially closed to Chinese shipments. This particular new development has put Temu and Shein in a bit of a pickle. Missing from this picture is the broader context of increasing U.S. and global trade tensions. These tensions were mostly the result of the Trump administration’s 2017 decision to slap tariffs on hundreds of Chinese goods. Together these advances have rattled Temu and Shein to their foundations. They’ve been a boon to American manufacturers, but they’ve sent shockwaves through other American retailers and e-commerce platforms, including near-monopolists like Amazon.
Temu and Shein have historically been able to use their global, just-in-time supply chains to undercut other retailers’ prices. They frequently provide similar products for one third of the cost you’d find them on Amazon. Their success has even been credited to their power to shape consumer trends and preferences at the drop of a hat. With the implementation of tariffs, their edge of low-price is suddenly in jeopardy.
Despite these new challenges, experts suggest that Temu and Shein are likely to remain formidable players in the U.S. e-commerce landscape. Deborah Weinswig, a retail analyst, stated, “I personally believe, if anything, [America’s e-commerce] game has been accelerating in favor of Temu and Shein … I wouldn’t be surprised if the competitiveness gap actually continues to widen.” This serves as a testament to the resilience and adaptability of these companies in learning to navigate the complexities of international trade.
It’s clear that Temu is on the offense when it comes to tariffs. They’ve since opened up to only selling products shipped from these local warehouses to U.S. shoppers. This unique strategy allows the company to avoid many of the logistical pitfalls associated with international shipping. It prevents their prices from soaring as a result.
Unlike Shein, which is beginning to open up supply chain operations outside of China, PrettyLittleThing isn’t going on production missions. The automaker has plans underway for new gigafactories in Turkey, Mexico, and Brazil. This reasonable move would have diversified its sources and reduced dependency on Chinese imports. This latest strategic pivot is further evidence of Shein’s resolve to stick to their nimble roots in a dynamic, fast-moving market.
Scott Miller, an e-commerce market consultant, noticed what he considered an unusual occurrence.
Countries of Origin
Although most sellers on Temu and Shein are based in China or nearby countries, an increasing number of US-based companies have begun to enroll on these platforms. “Many of the current sellers on Temu and Shein are located in China or countries nearby, but not all. Local U.S. companies have been joining these platforms at an accelerating pace,” Miller remarked. This move would only strengthen Temu and Shein’s hold on the market as they would be able to use local resources.
Against this, the operational efficiency of these companies is brought into sharp focus by Shein’s small-batch production model. By launching product styles in limited quantities of just 100-200 items, Shein can test and scale products based on consumer response quickly. This agile approach reduces risks related to excess inventory and enables quick pivots to align with market demand.
Even the economic analysts who push for tariffs expect them to raise prices. They think that despite the changes, many offerings from Temu and Shein will remain cheaper than comparable products on American e-commerce portals. “Don’t count them out … Not at all. These kinds of Chinese e-commerce apps are very adept and agile. They have contingency plans in place and have taken the necessary steps to cover the tariffs from a margin perspective,” Weinswig added.
Henry Jin, a fellow industry veteran and expert, added that Chinese firms are the best at making things work with narrow margins within hyper-competitive markets. “If there’s one thing that Chinese companies are good at, it’s operating on a razor-thin margin in an intensely competitive, if not adverse environment … they find every scrap that they can to survive,” Jin stated. This resilience could help Temu and Shein ride out the storm through the application of stricter trade rules.
With U.S.-China trade relations in flux, Temu and Shein’s fates are not yet sealed. Their established presence in the market and ability to pivot quickly suggests they will strive to maintain their dominance amid new regulatory challenges. The confidence that these companies have shown resilience will only boost consumer confidence, and customers love to be met with more affordable options.