Introduction to Temu’s Shift in Business Model
Hours after the exemption of the US tariff, the Chinese e-commerce website Temu announced a significant change in its shipping model. The company will now handle all sales in the USA through local sellers, with orders within the country being fulfilled by these sellers.
The Reason Behind the Change
A Temu spokesman explained that the change is an important shift for the platform. Temu, along with other Chinese e-commerce websites such as Shein and Aliexpress, previously used the de minimis loophole to flood the United States with ultra-low-cost goods. However, with the new tariffs imposed by US President Donald Trump, Temu’s move shows how large companies can avoid this demand and try out other tactics.
The De Minimis Loophole
The de minimis gap allowed the delivery of goods worth $800 or less into the US duty-free, often skipping time-consuming inspections and paperwork. Chinese e-commerce sites took great advantage of this exception, flooding the US market with ultra-low-cost products. However, since Trump imposed tariffs on all Chinese imports, the millions of Americans who rely on these sites found them less affordable.
Temu’s New Business Model
The vast majority of Shein and Temu products are produced in China and imported directly to the USA, which is why prices are so cheap. Temu’s new business model may seem like a response to Trump’s tariffs, but just because a product is shipped from a "local warehouse" does not mean it is manufactured in the United States.
Building US Warehouses
Websites such as Temu and Shein have been building their US warehouse portfolio to lower shipping times for years. This move allows them to store goods in the US, reducing the need for international shipping and avoiding tariffs.
Impact on Consumers
Temu started increasing prices last week, and according to the company, there are no import fees on its website or additional costs for delivery for articles bought from local warehouses. However, some users have reported that items are no longer in stock, and additional fees are being applied for orders that do not meet a minimum threshold.
Challenges Ahead
Temu has only a few options if there is a lack of products. The company could reorder products, which would cost time and money, or begin to offer "replacement substances" or recommendations of similar products in stock. Alternatively, Temu could increase prices, which it has already started doing.
Consumer Reactions
Some users have taken to social media to express their frustration with the changes. One user found that about 60 of the items in their cart were suddenly not available, while another user reported that an additional fee was applied unless a "local order" was at least $30. Consumers are adjusting to the new reality of shopping on Temu, with some expressing disappointment and frustration with the changes.
