China-based Temu and Shein, two of the most disruptive new entrants in recent U.S. e-commerce history, are preparing for a whiplash-inducing reversal on their home courts. The Trump administration plans to end the ‘de minimis’ rule, which currently allows U.S. imports worth $800 or less to pass trade duties unaffected. Indeed, both companies are bracing for this change by increasing the prices of their drugs. Beyond that, they’re doing a lot of things to be more competitive within the U.S. retail market.
The ‘de minimis’ rule has been critical success. It enables them to keep providing low-cost products to American consumers while avoiding additional tariff expenses. Temu, which was launched in the US by Chinese e-commerce behemoth PDD Holdings, is already adjusting to those future restrictions. They’re the only game in town, providing goods shipped directly to U.S. shoppers from Chinese warehouses. This decision was made to reduce the effects of tariffs as much as possible and keep customers engaged.
Strategic Shifts to Avoid Tariff Impacts
Shein, another leading player in the market, pursued the opposite strategy by deepening its supply chain investments. The company has announced plans to construct new manufacturing facilities in places like Turkey, Mexico and Brazil. The company has announced that it will move much of its production to Vietnam. This strategy is meant to dodge possible tariff impacts while still delivering low-cost fashion to customers.
As we approach the removal of the de minimis exemption, Temu and Shein’s product prices have soared right past the threshold. This surge only applies to goods shipped directly from China to the U.S. To make up for these increasing costs, both companies have taken several measures to attract and engage users. They use constant, intrusive phone alerts and advanced artificial intelligence-driven product suggestion engines to hook shoppers. The use of promotional discounts and flash sales work to ensure their pricing stays competitive.
Even with added uncertainty from new tariffs, analysts are optimistic that the adaptive capacity of both firms allows them to weather the storm. During a recent Semaphore Capital webinar, industry analyst Deborah Weinswig pointed out to the remarkable resilience of Temu and Shein in the rapidly evolving e-commerce landscape.
“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,” – Deborah Weinswig.
Scott Miller, a consultant in the e-commerce buzzing space, caught a very big trend. While the majority of sellers on Temu and Shein come from China or other nearby Southeast Asian countries, there is a growing presence of U.S.-based companies selling through 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 … several of our clients have onboarded or began the process of onboarding in just the past few months,” – Scott Miller.
Communities have been looking forward to the day when the de minimis rule would end. This expectation became heightened after U.S. President Donald Trump closed it down temporarily in February. As of mid-May, Temu has suspended direct shipments from outside the U.S. Today’s move is a proactive step to ensure that its products are ready and aligned with emerging regulations. Shein’s quick turn tactic facilitates small-batch production, so it can rapidly and cheaply test products and then scale up.
Contingency Plans in Place for Potential Tariff Increases
In private, two industry experts concede that both companies have well-developed contingency plans to deal with an expected final fourfold increase in tariffs. Deborah Weinswig mentioned that she was optimistic about their prospects of navigating these transitions.
“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,” – Deborah Weinswig.
Henry Jin, another industry analyst, praised the operational prowess of Chinese success stories such as Temu and Shein.
“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,” – Henry Jin.
Like Shein, Temu has successfully used aggressive marketing techniques including livestreaming and TikTok-fueled sales. Yet their increasing effectiveness hinges on their malleability in the face of new and changing trade barriers in the U.S. market.
What The Author Think
The shifting landscape of tariffs and e-commerce regulations presents both opportunities and challenges for companies like Temu and Shein. As they adapt to new policies, their resilience will be critical in maintaining their market share and profitability in the U.S.
Featured image credit: Heute
Enjoyed this article? For more stories like it, click the +Follow button at the top of this page to follow us on MSN.