Temu and Shein, China-founded budget e-commerce platforms, are increasingly turning to Europe as their U.S. operations suffer under unfavorable trade policies. However, their entry into European markets may not be met with open arms. In recent weeks, complaints have been filed against both companies within the European Union, accusing them of questionable business practices. These developments coincide with the EU’s introduction of a new two-euro flat fee on small packages that were previously exempt from customs duties—packages commonly shipped by online marketplaces like Temu and Shein.
Experts warn these challenges may further hinder the platforms’ growth, following the U.S. closure of a small package tariff exemption in May and the imposition of high duties—54% or $100 for items sent through postal services.
Anand Kumar, associate director of research at Coresight Research, told CNBC that as regulatory and trade pressures intensify in the U.S., Temu and Shein are eyeing Europe and the U.K. as vital growth markets. Yet, Kumar noted that the companies are already encountering regulatory resistance in these new regions similar to what they faced in the U.S.
He described the EU’s proposed €2 customs fee as “more than a minor surcharge” but rather a strategic move designed to curb the rapid expansion of ultra-cheap cross-border e-commerce. Kumar warned this could reshape how these platforms operate in Europe over the next two to three years.
Boosted European Presence
Reflecting their shift away from the U.S., Temu and Shein have increased advertising spending in Europe, especially in the U.K. and France, according to Reuters. Consumer Edge Research, which tracks spending patterns through credit and debit card data, found that Temu’s consumer spending in the U.S. dropped roughly 36% year-over-year in May, while Shein’s declined 13% during the same period.
Many former U.S. customers of these platforms have migrated their spending toward established department stores and fast fashion retailers. Sensor Tower data further shows a significant slowdown in U.S. app usage for Temu and Shein.
Conversely, in the U.K. and EU, the platforms have experienced strong growth. May data revealed year-over-year consumer spending increases of 63% in the EU and 38% in the U.K. Shein’s growth stood at 19% in the EU and 42% in the U.K., while Temu showed particularly strong gains in France, Europe’s second-largest economy.
To capitalize on this momentum, both companies are expanding their operations in Europe by boosting warehouse capacity, experimenting with localized business models, and substantially increasing digital advertising in key markets like the U.K., France, and Germany.
Kumar emphasized that this expansion reflects a strategic realignment rather than opportunistic moves. However, he also cautioned that Europe’s strict regulations on product safety, consumer protection, and fair competition require Temu and Shein to invest heavily in compliance and transparency.
Mounting Regulatory Challenges
Recent developments signal growing scrutiny. French media report that an “anti-fast fashion” bill under debate in France explicitly targets ultra-cheap platforms like Shein and Temu. This legislation aims to penalize fast-fashion products for their environmental impact.
Moreover, the pan-European consumer group BEUC filed complaints with the European Commission against Shein and Temu over their use of deceptive “dark patterns” that encourage overconsumption. These complaints follow an EU investigation into Shein’s adherence to consumer laws and a public call in May for Shein to comply with EU protections.
Xiaomeng Lu, director of geotechnology at Eurasia Group, observed that the regulatory pressure Temu and Shein face in the EU mirrors what they encountered in the U.S. She explained that while their efficient supply chains and cost-effective offerings succeed in fast fashion, their labor and human rights standards may conflict with expectations in high-value markets like the EU and U.S.
Lu cited rising global protectionism and regulatory scrutiny as key drivers behind these developments.
In the U.S., Temu has faced accusations of violating the Uyghur Forced Labor Prevention Act (UFLPA), which bans imports linked to forced labor in China’s Xinjiang region.
Europe is preparing for tighter oversight as well. The Corporate Sustainability Due Diligence Directive, which member states must incorporate into national laws by July 2026, will require companies operating in the EU to identify and mitigate human rights abuses in their supply chains, disclose environmental impacts, and face penalties for inadequate action.
While these demands increase compliance costs, Kumar notes Europe still represents a significant growth opportunity amid a global environment trending toward protectionism.
Author’s Opinion
Temu and Shein’s pivot to Europe highlights the complex balancing act global e-commerce companies face amid growing protectionism and heightened regulatory scrutiny. While Europe offers fertile ground for growth, it demands higher standards in labor practices, consumer rights, and environmental responsibility. Success in these markets will require more than aggressive expansion—it will demand genuine commitment to compliance and sustainability. The companies’ future will hinge on their ability to adapt to these evolving expectations without compromising their core business models.
Featured image credit: Heute
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