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From: Glenn Petersen1/3/2024 7:30:21 AM
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Behind Cheap Stuff From Shein and Temu: A Hard Bargain With Suppliers

Shopping apps throw a lifeline to Chinese exporters, but it is a trade-off

By Yoko Kubota, Raffaele Huang and Shen Lu
Wall Street Journal
Updated Jan. 3, 2024 12:03 am ET

SHENZHEN, China—E-commerce sellers Shein and Temu are offering a lifeline for small suppliers in China’s manufacturing hubs—but it isn’t always a straightforward win.

In recent years, thousands of Chinese factories and vendors have joined the supply chain for Shein and Temu, whose popularity has exploded in the U.S. with their offers of inexpensive made-in-China goods, from T-shirts and handbags to electronics and kitchen items.

The two platforms enable factories and vendors on the ground in China to reach vast new numbers of consumers across the world. Shein sells to more than 150 countries, while Temu sells to more than 40.

But it is a trade-off: Some suppliers that spoke with The Wall Street Journal said they were grappling with razor-thin profit margins and intense pressure to cut prices. Others said they were drowning in unsold inventory and were questioning whether dealing with Shein and Temu would be sustainable in the long run.

Electronics vendor Jason Xie previously sold gadgets such as smartphone screens from a stall in a Shenzhen electronics market to buyers from the U.S., Middle East, Southeast Asia and elsewhere. When those buyers stopped coming during the pandemic, Xie turned to online commerce, first selling on platforms including and Pinduoduo, Temu’s sibling platform in China. In May 2023, he accepted an invitation from Temu’s parent, PDD Holdings, to sell on Temu.

He was hoping to ride Temu’s popularity overseas, but a few months later, he was already questioning the sustainability of Temu’s approach. Intended to be a high-volume, low-margin business, its marketplace was crowded and its profit margins were smaller than on Amazon, Xie said.

While some of his goods have been hits, including a $12 wireless speaker that comes with an LED night light, others have been costly flops. At one point, Xie and his colleagues prepared 1,000 $3 smartphone bands in a variety of colors. With many similar items on the platform, they sold just a dozen or so.

Workers sewing clothes on a production floor of a Shein facility in Guangzhou, China. PHOTO: GILLES SABRIE FOR THE WALL STREET JOURNAL

There were other issues: Temu suppliers are responsible for many costs related to returns, and suppliers could also face penalties from Temu if consumers file complaints during returns, Xie said.

Temu said that its low-price strategy benefits consumers and that there are manufacturers that excel on the platform, having developed economies of scale.

It pointed to Zhejiang Maibo Industrial, a factory in Wuyi in eastern China, which for years has been making water bottles and tumblers for other retailers. It started selling its products under its own brand on Temu in March, getting a profit margin of 20% compared with 10% when selling for other brands.

Bowen Wang, the head of the factory, said Temu’s barrier to entry was low given that it handles shipping as well as marketing.

New supply-chain modelTemu and Shein have upended the e-commerce supply chain with their on-demand business model; they place orders to suppliers to be delivered in days, rely on real-time data to quickly analyze demand and replenish orders as needed. That cuts down on the need for storage and limits inventory risk.

In some cases, that risk is getting transferred to the suppliers.

Dongguan Michun Clothing, a maker of children’s apparel near Shenzhen, has been supplying Shein for about two years, but in recent months has essentially halted work with the platform, said Zhang Qingwei, the general manager of the factory.

A worker at Zhejiang Maibo Industrial, a factory in Wuyi that produces water bottles and tumblers. PHOTO: ZHEJIANG MAIBO INDUSTRIAL

When Zhang’s factory suggests products, Shein might express interest in purchasing a certain amount, possibly several hundred. But if the product doesn’t sell well, Shein only takes a small share, leaving Zhang’s factory to deal with the rest, but doesn’t let him sell the items on other platforms, he said.
Such scenarios have led Zhang’s factory to swim in Shein inventory, he said. “The risk is too great for the factory,” he said. Revenue from Shein at its peak accounted for some 10% of the factory’s overall revenue, but is now down to around 1%.

Shein said that its system gives suppliers insight into what customers want as well as capacity, inventory levels and demand.

Shein and Temu, which have been competing for suppliers, also increasingly target the same customers overseas.

China-founded Shein, which is now based in Singapore, soared to American fame first, becoming a fast-fashion juggernaut over the past eight years. PDD launched Temu a little over a year ago, which quickly put pressure on Shein. For most of 2023, Temu has been the second-most popular e-commerce app in the U.S. measured by monthly users, behind Amazon, according to estimates by SimilarWeb, a digital data and analytics company.

By July, Temu’s sales in the U.S. were bigger than Shein’s, data from Earnest Analytics show. In recent months, Shein has forayed beyond fashion into the marketplace model, allowing third-party merchants to sell a variety of goods, putting it into more direct competition with Temu.

Zhang Qingwei, the general manager of Dongguan Michun Clothing, checks its inventory. PHOTO: YOKO KUBOTA/THE WALL STREET JOURNAL

In the U.S., Shein and Temu each ship an estimated one million packages a day, according to parcel-shipping consultant ShipMatrix.

Shein, for its fashion business, works directly with factories and said it has about 5,400 suppliers, primarily in China. Temu didn’t disclose how many suppliers it has, but also said most are in China.

Six sellers told the Journal they have stopped doing business with Temu because of its strict pricing policies. Temu typically sets the lowest price offered by all suppliers as a benchmark, leaving sellers with tiny profit margins. Shein allows suppliers to set their price within a certain range.

One Temu seller said that if he doesn’t reduce prices to match those set by other suppliers, Temu wouldn’t allow him to replenish inventory in its warehouses, effectively cutting him out of doing business with the platform. The seller said he has decided to stop selling on Temu.

Others say Temu has helped them increase profits. Huang Yilun in Huizhou, a city near Shenzhen, has been making Christmas decorations for export for nearly a decade. Desperate for new channels after the pandemic, which nearly obliterated his business, he started selling on Temu in June. Of 10 samples he sent in, Temu accepted two and told him to drop the price another 20% on one of them.

Even so, he said he was still making better profits than before. For example, he had been selling a Santa Claus cloth decoration that cost him around 14 cents to make for around 40 cents to an exporter. On Temu, he could sell it for at least $1, more than tripling his profit.

But he is struggling to hire workers, whose wages have gone up. Meanwhile, Temu is asking for more price cuts for several items.

“Temu is an attractive platform for me, but pressure has started mounting,” Huang said.

Since Temu’s debut, many other platforms, including TikTok, Alibaba Group’s AliExpress and Shopee by
Tencent Holdings-backed Sea, have also leveraged the Chinese supply chain to give global shoppers more and cheaper options. Amazon also has attempted to revive and expand its global selling program, with Chinese vendors a major target.

Lex Green, visual merchandising coordinator for Shein, organizes items at a Shein pop-up inside Forever 21’s Times Square store in New York. PHOTO: ADRIENNE GRUNWALD FOR THE WALL STREET JOURNAL

As the market gets crowded, sellers are testing which platform can bring them the best sales and profits.

Shenzhen-based Bai Yu turned to e-commerce after getting laid off from a private tutoring school in 2021. A few months after she set up an Amazon store for the U.S. market, selling battery chargers for golf carts, Temu called.

She started selling a few hundred golf-cart battery chargers a month on Temu, more than she sold on Amazon, though prices on Temu were often as low as half those of the same charger on Amazon.

Soon, Temu asked her to trim prices further to match other sellers.

“I feel like I have been pushed ahead and I have no choice,” she said about her price cuts. She is now considering trying out TikTok’s new program to sell in the U.S., she said.

—Zhao Yueling contributed to this article.

Write to Yoko Kubota at, Raffaele Huang at and Shen Lu at

Copyright ©2024 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Behind Cheap Stuff From Shein and Temu: A Hard Bargain With Suppliers - WSJ
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