The photo illustration of the Shein application on the App Store reflected in the TEMU logo.
Stefani Reynolds | AFP | Getty images
The closure of a commercial escape and prohibitive prices on China has upset the TEMU and Shein business model in the United States. And yet, electronic commercial companies are likely to remain a dominant force in American online retail, experts suggest.
On Friday, the Minimis rule – a policy that had exempt American imports worth $ 800 from commercial prices – officially closed its doors from China. It saw Temu and Shein exposed to tasks up to 120% or flat -rate fees of $ 100, which should reach $ 200 in June.
The price exemption from the small package had been the key to the capacity of companies to maintain the budget prices on the goods they ship from China. Now that it's gone, prices on Tem and Shein have rise upwith the first Finish direct shipments From the outside of the United States.
The change will be greeted by many detractors of De Minmis, among which we legislators,, Unions and retailersWho argued that Temu and Shein abused exemption to undermine local businesses and flood the country with illicit and counterfeit products.
But despite the new commercial challenges that Temu and Shein Face,, Electronic and supply chain experts told CNBC that companies were still able to compete with their rivals in the United States
“Don't count them … Not at all.
“I personally believe, if something, the game (American electronic commerce) has accelerated in favor of Temu and Shein … I would not be surprised if the competitiveness gap continues to expand,” added Weinswig, whose research and advice company works with customers through technology, retail and supply chains.
Unforeseen
The loss of the minimis exemption has long been planned, US President Donald Trump temporarily closure He in February. In preparation, Temu and Shein had accelerated location strategies for the United States
Scott Miller, CEO of the E-Commerce consulting company, PDPLUS, told CNBC that Shein and TEMU would continue to take on American sellers on their applications to protect them from prices.
“Many current sellers on TEMU and Shein are located in China or in the nearby countries, but not all. Local American companies have joined these platforms at an accelerating rate … Several of our customers have integrated or started the integration process in recent months,” he said.
Although the margins for more localized brands and other sellers are not as high as those of sellers in China on platforms, they can be competitive, he said.
He added that in the case of TEMU, sellers are attracted to lower costs, lighter competition and greater assistance for the integration and implementation of sales channels compared to what Amazon offers.
In recent days, TEMU, which belongs to the Chinese electronic commerce giant PDD holdingsHas started exclusively by offering goods sent from local warehouses to American buyers.
Many of these goods still come from China, but are then shipped in bulk in American warehouses, according to experts. Although these bulk elements are subject to prices, they also benefit from economies of scale.
This development is likely to see the variety of products on TEMU has reduced the back, said Henry Jin, an associate professor for the supply chain at the University of Miami. However, he added, TEMU is likely to resume direct expeditions from China, according to the emergence of the trade war between the United States and China.
Shein, on the other hand, relied on the expansion of the supply chain, building manufacturing operations in countries such as Turkey, Mexico and Brazil, And would have plans to move to Vietnam.
The company still seems to be shipped directly from China and probably has more room to absorb the prices because of its “Sky-High” margins in its rapid basic company, said Jin.
“If there is one thing in which Chinese companies are gifted, it works on a thin razor margin in an intensely competitive, if not unfavorable environment … They find each scrap they can survive,” he added.
Competitive price?
Aside from emergency plans, experts agree that Trump's trade policy will continue to allocate TEMU and Shein prices. Companies first announced that they were upset In mid-April to counter the prices.
According to Coresight data, prices between Shopping categories on Shein increased between 5% and 50% in the last half of April, with the strongest increases in toys and games and beauty and health.
However, many electronic commerce experts are convinced that TEMU and Shein will continue to be competitive at the price.
Weinswig de Coresight said that the two companies had already been able to offer products to a third party on Amazon for comparable products. Thus, even if they double more than prices to absorb the impacts of prices, many products could remain cheaper than those of American electronic commerce and retailers.
Jason Wong, who works in the logistics of products for TEMU in Hong Kong, noted this dynamic when speech at CNBC last month, compare TEM to a dollar store. If prices at the Dollar store range from $ 1 to $ 2, it's still a dollar store, he said.
Furthermore, Trump's commercial prices On China and other business partners, also affected American retailers and electronic commerce sites like Amazon.
Other advantages
When Forever 21 submitted a bankruptcy file earlier this year, he blamed the use by Shein and Temu of the exemption from Minmis, who declared his business “undermined”.
But the experts say that the attribution exclusively of the success of Shein and Temu to this commercial escape lacks many other factors that made them shine in the United States
According to Anand Kumar, associate director of research at Coresight Research, Temu and Shein are very successful in their very agile supply chains that quickly adapt to consumer trends.
For example, the production of small lots of Shein – in which the styles of products are initially launched in limited quantities, generally around 100-200 articles – allows it to test and effectively escape products.
Another key is the applications of companies, which use various strategies to maintain the interest of users, including frequent telephone notifications, product recommendation algorithms and perhaps more particularly, constantly displaying reduced prices for promotions and sales of flash.
TEMU offered Monday an “MEGA SAVings Extravaganza” for American consumers. Some of the best -selling items for sale included stainless steel hook gains for $ 1.45 and an adjusted mattress for $ 11.54. It is not clear if local goods at reduced prices were stored before the prices are entry into force.
In addition, users of applications will often be greeted by mini-games which grant different coupons or means of winning rewards, as well as opportunities to buy “mysteries” with matching products.
This “gamification strategy” definitively plays in consumer psychology many American buyers who often buy articles by the excitement of being able to obtain a lot, said Jin of the University of Miami.
Experts also reported that Temu and Shein have been very effective marketingincluding by the harness of live delivery and social media.
On the other hand, according to Weinswig de Coresights, American retailers have failed to correctly recognize the threats of TEMU and Shein and to adjust their supply chains and their price models.
