The End Of The Cheap Everything Era

Forbes

2 days ago

Temu and Shein take the early brunt of de-globalization policies
In the fast-paced world of e-commerce, few brands have captured consumer attention as swiftly as Shein and Temu. Their meteoric rise has disrupted traditional retail, threatening Amazon's (NASDAQ: AMZN) dominance of the market by offering ultra-affordable products that seem to materialize instantly on consumers' doorsteps. And though some of what these companies offer is of questionable value — bizarre, often unnecessary items that address needs or desires the consumer didn't even know they had — the prices are low enough to make them nearly impossible to resist.
In the United States, those prices were made possible in part by the de minimis exemption, which allows small parcels to enter the country duty-free. But as regulatory and geopolitical headwinds intensify, the question now looms: has the Chinese export machine finally reached its limits?
LONDON, ENGLAND - FEBRUARY 20: In this photo illustration, the Temu logo is displayed on a laptop ... More screen alongside the Shein logo on a mobile device on February 20, 2025 in London, England. U.S. President Donald Trump's trade tariffs have affected two of the biggest Chinese-owned ecommerce platforms in the U.S. as Shein and Temu have had to withdraw some products from sale and raise prices. Shein has seen daily sales fall by up to 41% and considered cutting its valuation for a London IPO by nearly 25%. (Photo Illustration by)
In the last few years, Shein and Temu harnessed the power of algorithms, social media marketing, and a relentless focus on affordability to capture the attention — and wallets — of consumers around the world. Shein ascended rapidly, becoming the top e-commerce fashion retailer in many Western markets, with a business model rooted in rapid trend analysis and turnover, as well as on-demand manufacturing. Shein spawned a whole new language of 'real-time fashion,' 'hunger marketing,' 'micro-influencers,' and 'hauls.'
Temu, backed by the Chinese company PDD Holdings (NASDAQ: PDD), followed suit, leveraging its parent company's extensive supply chain to offer similar low-cost, factory-direct goods in more than 100 categories that cover everything from furniture to pet food to auto parts.
This disruptive approach posed a direct threat to Amazon, which had long dominated the online retail market. Consumers, especially those with less discerning tastes and younger demographics, flocked to these new platforms for fashionable apparel and ultra-affordable goods. Quality and durability matter less when anything can be replaced for just a few dollars, with the added allure of constant novelty and the dopamine hit of an endless scroll through quirky, hyper-targeted deals.
The de minimis tariff exemption was an existential pillar of Shein and Temu's business model, as it enabled them to keep prices razor-thin while maintaining incredibly quick turnaround times without the need for warehouses or inventory in the U.S.
But this model was always vulnerable to policy shifts. The Trump administration's move in April 2025 to eliminate the de minimis exemption marked a turning point, significantly increasing import costs for small parcels, which in turn impacted consumer prices and purchase behaviors. The prohibition will be extended to all countries starting on July 1, 2027, as part of the so-called 'Big Beautiful Bill' that Trump recently signed into law.
The consequences are already stark. CNBC reports that Temu has halted direct shipments from China to the U.S., citing the end of the de minimis exemption as a key factor. Temu's sales plummeted 48% in May, while Shein's sales in the U.S. were down by 23%. Shein's U.S. app download ranking went from #7 to #80, and Temu dropped from #3 to #85, according to recent data.
MILAN, ITALY - APRIL 17: Customers visit the SHEIN's 'Spring Boutique' temporary store at Palazzo ... More dei Giureconsulti on March 23, 2024 in Milan, Italy. SHEIN, a Chinese e-commerce platform specialized in ultra fast fashion, frequently holds temporary "pop-up" stores to allow customers to experience their products in person and to interact with the brand offline. (Photo by)
In response to the limitations in the U.S., Shein and Temu have pivoted toward Europe and other emerging markets, as Shein ramped up digital advertising in Europe by over 70% in early May, seeking to offset the decline in the American market. Temu's sales in the E.U. soared by 63% in May while Shein's were up by 19%, according to data from Sensor Tower. However, the campaigns faced strong opposition from environmental groups and labor-rights activists. In France, when Shein launched a 'fashion is a right' campaign, its social justice messages were countered with satirical comments that highlighted the ecological harm caused by the rampant consumerism.
European regulators are increasingly scrutinizing ultra-fast fashion and small parcel imports, threatening to introduce and enforce tighter restrictions. The European Commission's proposed flat tax on parcels under 150 euros, along with ongoing debates about advertising restrictions, underscored the regulatory tightening. Meanwhile, France's Senate has approved a protectionist law that would target 'ultra' fast fashion (read Shein), while exempting 'classic' fast-fashion players, such as European Zara, and struggling French brands, including Jennyfer and Nafnaf, which are already in bankruptcy.
Faced with mounting regulatory and consumer challenges, Shein and Temu are exploring various avenues for reinvention.
Shein is investing in sustainability initiatives, shifting part of its supplier base to India, and attempting to improve its supply chain transparency. Meanwhile, both companies are experimenting with different marketing approaches, including collaborations with local influencers and targeted ad campaigns designed to appeal to European consumers' growing environmental and social justice consciousness. Temu is investing in localizing its supply chain in the U.S. to reduce the tariff bite, while Shein may believe that its inherent price and responsiveness advantages will allow it to reemerge on top once competitors burn through their stockpiles of imported apparel.
Both companies are targeting emerging markets such as Brazil, where Shein has cranked up ad spending by 130% while Temu increased its spend by 800%. Markets outside of the U.S. now make up 90% of Temu's 405 million monthly active users, according to an HSBC report.
The end of the de minimis exemption signals a broader reckoning for the Chinese export machine's low-cost, high-volume model. As tariffs rise and regulations tighten, the economics of hyperspeed, ultra-cheap, factory-direct models they pioneered are under threat.
That said, it would be a mistake to underestimate the ingenuity of these two companies, which have transformed the retail landscape, or the insatiable desire of American consumers for really cheap stuff. Middle-class consumers in emerging markets, with less entrenched domestic brands and manufacturing to protect, may welcome the chance to splurge on abundant, shiny things.
As they pivot to new markets and attempt to reinvent themselves, the broader question remains: Is the era of Western consumers 'shopping like billionaires' coming to an end? The coming months will be crucial in determining whether these brands can sustain their growth or become relics of a bygone trend of cheap, disposable goods.