Shein, Temu Sales Slide After Losing US Duty-Free Loophole

Temu’s struggling to sell its dizzying array of ultra-budget goodies ($7 sneakers, $15 rugs, $3 bearded dragon cowboy costumes) as American shoppers ditch the Chinese retailer. Half of Temu’s monthly US users left the marketplace between March and June, according to Sensor Tower, slashing its total shoppers to 40 million. Fast-fashion rival Shein’s monthly users dropped 12% to 41 million in the same time frame.

There’s more than one reason for the declines. In May, POTUS Trump scrapped the “de minimis” exemption that had allowed Shein and Temu to ship packages worth less than $800 to the US duty-free. At the same time, his administration’s fluctuating double-digit tariffs have hit the retailers’ supply chains. 

Unraveling Thread

Shein and Temu quickly became top US retailers by hawking ultra-cheap, heavily marketed products. Temu spent millions on its “Shop Like a Billionaire” Super Bowl ads, while Shein splurged on social media.

Both retailers were able to keep their prices low and stay on top of trends by drop-shipping products directly to Americans’ doors from Chinese factories, rather than sending bulk shipments to warehouses first. Now, Shein and Temu are trying new tactics:

• Temu said it stopped shipping goods from China to the US in March, only displaying products from its US warehouses on its US site. Shein is reportedly expanding its production in India, with plans to start shipping India-made clothes to the US within a year. 
• Both Temu and Shein have shifted focus to non-US shoppers. While the retailers slashed ad spending in the US, they’ve jacked up marketing budgets for the EU and UK by double-digit percentages. Temu’s users increased by more than 70% in France and Spain last month, and Shein’s UK users rose by as much as 20%. However, both the EU and the UK are considering levying import duties. 

Shopping Around: Both Shein and Temu won over US customers by racing to the bottom of the bargain bin and leveraging Chinese factories to churn out thousands of trendy tops and more. Any price hikes and supply-chain slowdowns resulting from the demise of de minimis could prompt shoppers to return to rivals like Amazon. However, retailers may be fighting over thinner wallets. Zara-parent Inditex and H&M both reported weaker second quarters than analysts expected.