Temu Sales Plummeting: A U.S. Nightmare
U.S. sales for Temu are experiencing a significant drop
Jump on board as we delve into the tumultuous world of Temu, the Chinese discount e-commerce platform that's currently facing a storm back in the good ol' USA. This is all thanks to a game-changer in tariff regulations!
It's crunch time for Temu as its sales in the U.S. drop like a lead balloon. According to Bloomberg's own data, American consumers have been shelling out less than a quarter of what they used to to the company, swooping in between May 11 and June 9. And guess what? Temu appears to have decided to shove its advertising budget deep into the couch cushions while it adapts its business to the new rules of the game in the U.S. market.
Temu's strategy was built on the "de minimis" tariff exemption in the U.S., which allowed shipments below $800 from China to zip into the USA duty-free. Oh man, before the beloved Donald J. Trump put the kibosh on this exemption as part of his play-hard tariff increases, Chinese traders were estimated to be shipping about a million Temu packages daily to the U.S.! In 2020 alone, about 1.5 billion knick-knacks entered the country under this rule.
Fast forward to April 9th, 2024, and Temu announced that it would be drastically revamping its business strategy for the U.S., promising to supply American customers only from distribution centers within the U.S. borders. It's reported that they've been trying to persuade vendors to build inventories in these centers, but alas, these inventories ain't cutting it to maintain the previous firehose-like shipping volume. Not to mention, prices have started to inch up due to the new tariffs in some instances.
Meanwhile, Temu continues to enjoy duty-free status in the European Union, where packages under €150 are still tariff-free. Guess who's been importing the majority of those packages? You guessed it—China! Needless to say, European retailers are whining about a competitive disadvantage, while consumer advocates are warning that a significant chunk of Temu's products ain't meeting Europe's safety standards.
Enough with the Europeans, let's talk about the Germans! The German government already took matters into its own hands at the beginning of the year by implementing stricter checks on these shipments. The European Commission even proposed a tariff reform that would retire the duty-free status for small packages, a proposal that's got the backing of the German Finance Minister Lars Klingbeil.
All in all, this is a portentous time for Temu in the U.S., with its dramatic sales drop largely due to the end of the U.S. de minimis exemption on China imports. Tariffs and import fees are playing a cruel game with Temu's key pricing advantage in the U.S. market, forcing it to jack up prices, which isn't exactly a Beluga whale treat for budget-conscious consumers. Additionally, Temu's slashed U.S. advertising spend has accelerated its sales decline, leaving it gasping for air in the land of the free.
However, it seems that the EU's tolerance for small imports without additional tariffs allows Temu to breathe a sigh of relief, as it can still keep its ultra-low prices and competitive positioning in Europe. Predictably, this policy creates a more conducive atmosphere for growth outside the U.S. Ultimately, the policies governing small shipments are the key to Temu's ability to compete on price and scale in various global markets.
In the midst of Temu's declining sales in the US, the company has reallocated its advertising budget, focusing on adapting its business strategy to the new tariff regulations. The end of the de minimis exemption on China imports has significantly impacted Temu's key pricing advantage in the US market, forcing price increases and causing a decline in sales. Conversely, the industry-wide policy of allowing duty-free status for small packages under €150 in the European Union allows Temu to maintain its competitive positioning and low prices, fostering growth outside the US. This highlights the significance of employment policies, financial policies, and business strategies in navigating the complexities of various global markets.
