Shein distribution center in Whitestown. Image Source: Jonathan Weiss/Shutterstock
China’s Shein and Temu are two large e-commerce app companies, with thousands of smaller Chinese vendors and factories on their platforms. With many of these small suppliers now struggling, the platforms are offering them a lifeline, but it will come with a trade-off.
In 2022, Shein became one of the largest fashion platforms, with Temu, owned by PDD Holdings, not too far behind. Shein now has customers in over 150 countries worldwide, with Temu serving customers in almost 50 countries. Both platforms provide merchandisers and factories in China with opportunities to sell millions of items to millions of customers worldwide.
However, this relationship comes at a cost. For example, several suppliers have spoken out recently about having to deal with tremendous pressure to lower prices due to extremely tight profit margins. Others are suffering from copious amounts of excess inventory and unsold stock, and are now debating whether working with Shein or Temu is actually good for business or even justifiable.
Shein and Temu’s business model of producing and delivering goods in record time can be seen as the pinnacle of the capitalist system in action, but at what cost to smaller entrepreneurs or even the market itself?
Even though using real-time supply and demand cuts down on the need for storage space and even helps mitigate the risk of excess inventory, but the fast-paced nature of the process causes other problems and risks, especially for these smaller suppliers.
For example, several smaller clothing makers that have been supplying goods for Shein for several years now, have recently had to stop working with the e-commerce platform due to being unable to make a real profit, despite selling hundreds of products each month.
In some cases, Shein will order a certain number from these suppliers, possibly even hundreds at a time. But if the items don’t sell well, Shein will only take a lesser amount, leaving the supplier to try and sell the rest themselves. However, Shein also won’t allow them to sell the items on other platforms, making finding alternative buyers a lot more difficult.
This means that many smaller companies struggle to sell their goods independently while, at the same time, are lost at sea within Shein’s massive inventory catalog. While these smaller suppliers might have enjoyed good success selling with Shein in previous years, this is no longer the case.
According to Shein, its system provides these suppliers with insight into exactly what online shoppers are looking for, as well as analytics on inventory levels, trends, and customer demand. But this information doesn’t necessarily correlate to profit, especially in recent years when customer spending levels are now at an all-time low.
Shein, founded in China and now based in Singapore, over the decade has become a fashion powerhouse all over the world, but especially in the U.S. However, in the past year alone, Temu has quickly gained ground and is now right behind its competitor. In 2023, Temu became the number three e-commerce retailer in the United States, just behind Amazon and Walmart.
By mid-2023, Temu’s sales figures in America had surpassed Shein’s. To counteract this and compete more directly with Temu, Shein has now started to allow third-party sellers to sell an assortment of other goods on its website, in addition to its fashion-related items.
It is estimated that both Temu and Shein now ship around one million packages a day to customers in the United States. It has also been calculated that Shein now has roughly 5,400 suppliers operating in its fashion branch, most of which are based in China.
It is worth mentioning that one of the factors that has helped Temu rise so quickly is its strict policy when it comes to pricing. Of all online distributors, Temu offers the lowest benchmark price to its independent suppliers, resulting in the largest profits for Temu, and the smallest profit margins for suppliers.
Shein, on the other hand, permits its suppliers to set their own prices within a certain capacity. Following the success of Temu, many other platforms, such as AliExpress, Alibaba, Shopee, and even TikTok, have started to take advantage of China’s supply industry to maximize profits and provide customers with cheaper and more options.
Even Amazon has endeavoured to renew and expand its global reach, with vendors in China being a primary target. However, as the market continues to get more and more crowded, things are set to get even more competitive between these companies and platforms for the best deals and profits possible.
Shein distribution center in Whitestown. Image Source: Jonathan Weiss/Shutterstock
China’s Shein and Temu are two large e-commerce app companies, with thousands of smaller Chinese vendors and factories on their platforms. With many of these small suppliers now struggling, the platforms are offering them a lifeline, but it will come with a trade-off.
In 2022, Shein became one of the largest fashion platforms, with Temu, owned by PDD Holdings, not too far behind. Shein now has customers in over 150 countries worldwide, with Temu serving customers in almost 50 countries. Both platforms provide merchandisers and factories in China with opportunities to sell millions of items to millions of customers worldwide.
However, this relationship comes at a cost. For example, several suppliers have spoken out recently about having to deal with tremendous pressure to lower prices due to extremely tight profit margins. Others are suffering from copious amounts of excess inventory and unsold stock, and are now debating whether working with Shein or Temu is actually good for business or even justifiable.
Shein and Temu’s business model of producing and delivering goods in record time can be seen as the pinnacle of the capitalist system in action, but at what cost to smaller entrepreneurs or even the market itself?
Even though using real-time supply and demand cuts down on the need for storage space and even helps mitigate the risk of excess inventory, but the fast-paced nature of the process causes other problems and risks, especially for these smaller suppliers.
For example, several smaller clothing makers that have been supplying goods for Shein for several years now, have recently had to stop working with the e-commerce platform due to being unable to make a real profit, despite selling hundreds of products each month.
In some cases, Shein will order a certain number from these suppliers, possibly even hundreds at a time. But if the items don’t sell well, Shein will only take a lesser amount, leaving the supplier to try and sell the rest themselves. However, Shein also won’t allow them to sell the items on other platforms, making finding alternative buyers a lot more difficult.
This means that many smaller companies struggle to sell their goods independently while, at the same time, are lost at sea within Shein’s massive inventory catalog. While these smaller suppliers might have enjoyed good success selling with Shein in previous years, this is no longer the case.
According to Shein, its system provides these suppliers with insight into exactly what online shoppers are looking for, as well as analytics on inventory levels, trends, and customer demand. But this information doesn’t necessarily correlate to profit, especially in recent years when customer spending levels are now at an all-time low.
Shein, founded in China and now based in Singapore, over the decade has become a fashion powerhouse all over the world, but especially in the U.S. However, in the past year alone, Temu has quickly gained ground and is now right behind its competitor. In 2023, Temu became the number three e-commerce retailer in the United States, just behind Amazon and Walmart.
By mid-2023, Temu’s sales figures in America had surpassed Shein’s. To counteract this and compete more directly with Temu, Shein has now started to allow third-party sellers to sell an assortment of other goods on its website, in addition to its fashion-related items.
It is estimated that both Temu and Shein now ship around one million packages a day to customers in the United States. It has also been calculated that Shein now has roughly 5,400 suppliers operating in its fashion branch, most of which are based in China.
It is worth mentioning that one of the factors that has helped Temu rise so quickly is its strict policy when it comes to pricing. Of all online distributors, Temu offers the lowest benchmark price to its independent suppliers, resulting in the largest profits for Temu, and the smallest profit margins for suppliers.
Shein, on the other hand, permits its suppliers to set their own prices within a certain capacity. Following the success of Temu, many other platforms, such as AliExpress, Alibaba, Shopee, and even TikTok, have started to take advantage of China’s supply industry to maximize profits and provide customers with cheaper and more options.
Even Amazon has endeavoured to renew and expand its global reach, with vendors in China being a primary target. However, as the market continues to get more and more crowded, things are set to get even more competitive between these companies and platforms for the best deals and profits possible.
