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The next disruptive force in e-commerce: Low-priced Chinese retailers, muscling in on the U.S. market and elsewhere. Low costs are allowing them to grab a growing market share as inflation-weary consumers hunt for bargains.
The big players among Chinese e-tailers are Temu, which sells an assortment of goods ranging from T-shirts to appliances at low prices, AliExpress, another cheap general retailer, Shein, the popular fast-fashion dealer and, increasingly, TikTok Shop— the portal for purchasing items on the social media platform known for its short, viral videos and rapid growth. All are seeking new markets outside China as the domestic Chinese consumer economy cools.
You might be surprised at their U.S. sales. Temu has nearly matched Amazon in terms of its regular monthly U.S. users: 51 million of them, vs. Amazon’s 67 million. Shein (29 million users) and AliExpress (23 million) are becoming giants, too. TikTok Shop doesn’t disclose users but has said that the number of sellers visiting its portal is up to 40% of Amazon’s seller traffic.
What all these sites have in common — cut-rate prices enabled by low costs of production in China, and a shipping model that lets them avoid the customs duties levied on bulk quantities of imports. The Chinese retailers sell directly to customers and ship items individually or in small batches to stay below the $800 threshold that triggers duties on imported goods. That’s proving to be a boon for freight carriers and could keep air freight rates from going into their normal summertime decline, but it means multiweek delivery times for customers — the cost of duty-free shipping.
They are also slashing the fees that sellers pay in order to undercut big U.S. sites like Amazon. In fact, there is speculation that Temu loses money on every U.S. sale as it tries to grow its market share. Temu charges sellers just 2%-5% per transaction, and may even subsidize some of them, whereas Amazon typically charges much more.
The origins of many goods sold on these platforms are questionable, at best. Many items seem too cheap to have been made without some unethical practices. There is suspicion that some are made by slave labor in China’s Xinjiang region, where Beijing operates de facto concentration camps for its Uyghur ethnic minority.
Ethical considerations aside, expect China’s e-tail giants to keep growing. Both in the U.S. — where they threaten to take market share from players like eBay, Etsy and Target (but likely not from top sellers Amazon and Walmart) — and abroad. Temu in particular is targeting markets in Europe, Mexico, Japan and South Korea as its U.S. growth slows and potential new U.S. tariffs loom.
This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.
