Two Chinese online marketplaces are shaking up the e-commerce market with ultra-low prices, even as they face consumer concerns over labor practices.
Temu and SHEIN's rise in popularity has been so sudden that Amazon now sees the two as its biggest rivals, according to a recent report. The Wall Street Journal.
China-run Temu launched in September 2022 and currently has 51 million users in the U.S. Meanwhile, China-founded fashion and lifestyle retailer SHEIN has been downloaded about 14 million times in the United States.
Christopher Tang, a professor at the University of California, Los Angeles Anderson School of Management, said a loophole in the US tax code known as the de minimis rule allows the two companies to offer such low prices.
The demi-ministry rule, born out of U.S. concerns that the labor costs of collecting import duties would exceed the taxes collected, allows companies to ship products worth less than $800 into the U.S. without paying import duties.
“They don't actually have to pay any taxes,” Tan told VOA, “so they can pass the savings on to consumers.”
Tan said SHEIN's particularly effective internet-based business model allows it to cut expenses.
“Apart from selling online, they don't advertise that much either. They use influencers. They use what's called social commerce, using Instagram, TikTok and Facebook to promote their products.”
“SHEIN's models actually use a lot of data analytics to predict which models are going to sell well,” Tang added.
Temu, meanwhile, has a unique model of attracting customers through games, coupons and text message alerts, Tan said.
“By promoting all these products on their platform and their app, they're pushing products to phones every day,” Tan said. “It's a very exciting business model and I think it's going to be hard for U.S. companies to beat.”
However, some consumers have filed complaints about Tem and Shain with the Better Business Bureau (BBB), a nonprofit that rates companies for customer service. Complaints include issues with product quality, delivery delays, and customer service.
“Tem is working with the BBB to respond to and address the concerns raised by consumers,” BBB spokesperson Melanie McGovern told VOA.
McGovern said customers should be aware of the risks involved when shopping with any company before making a purchase.
“BBB always encourages consumers to look at the company's BBB Business Profile for the most up-to-date information,” McGovern said. “Consumers should do their homework, do their due diligence, look at the profile, read everything and then decide from there whether or not they want to shop with that retailer.”
For some customers, the issues with SHEIN and Temu go beyond customer service: A parliamentary committee report last year found that Temu and SHEIN's supply chains may have used forced labor.
“American consumers should be aware that there is a high risk that TEM's supply chain is tainted by forced labor,” the House Select Committee on China's Communist Party report said.
In December 2021, the United States passed the Uighur Forced Labor Prevention Act in response to allegations of human rights abuses in China's western Xinjiang region, which China denies.
“It's very convenient, but it obviously comes from some not-so-good labor practices,” said Vee Witzel, 20, a student at George Washington University in Washington who occasionally shops at Tem. “I know it's not good for the people who work there, so it's a bit of a moral dilemma for me.”
Zahan Riyaz, 20, a student at George Washington University, said he avoids shopping on e-commerce sites.
“To an extent, I understand it because it's a cheap option. People these days, especially university students, want cheap options,” Riyaz told VOA. “Fast fashion raises a lot of issues in terms of labor rights, especially abroad, and also creates a lot of waste.”
Tan said supply chains are not very transparent for many companies, making it difficult for lawmakers and consumers to prove allegations of questionable labor practices because it is not easy to trace who produced where clothes.
A Shein spokesperson said the company is committed to customer satisfaction and has taken steps to comply with US labor laws.
“SHEIN's loyal customer base is the foundation of our business, and we are committed to providing our customers with a great shopping experience,” a spokesperson wrote to VOA.
“SHEIN has a zero-tolerance policy for forced labor. We value visibility throughout our supply chain and are committed to respecting human rights. To comply with U.S. law, we require our contract manufacturers to only source cotton from approved territories.”
A spokesman for Tem did not respond to VOA's request for comment.
Tan said he believes American shoppers will continue to buy from Temu and SHEIN no matter what because of their low prices.
“American consumers love a bargain, so a deal like this is hard to beat,” Tang said.
