As for the true speed of Temu's overseas surge, a recent Bloomberg report gives a quantitative figure: Temu's sales in January 2024 increased by 805% compared to January 2023[1].
Temu's rapid rise abroad is not only inseparable from its own efforts, but also thanks to a tariff policy called the "de minimis provision" in the U.S. market. The current meaning of this clause is:
Any package delivered by direct mail to an individual buyer can enter the U.S. duty-free as long as the value is less than $800
U.S. Customs data shows that as many as 1 billion packages entered the U.S. through "de minimis terms" in 2023, twice as many as in 2019 before the pandemic. Among them, one-third of the parcels are ** Temu and Shein [2] - according to the growth rate of these two cross-border e-commerce, this proportion is only high at present.
Under the cover of this clause, the already outstanding cost performance of Temu and SHEIN has become more and more obvious, and it has also made Americans realize the seriousness of the problem.
In 2022, Democratic Rep. Earl Blumenhaur said that "Chinese companies are using the de minimis clause to compete unfairly"[3]; Last year, Republican Rep. Mike Gallagher led a special report and claimed that "we should eliminate tariff exclusions altogether" [2].
Kim Glas, chairman of the National Textile Organization Committee, also felt that Temu and SHEIN were not dead, saying that the "huge hole" in the policy was "becoming a wildfire that got out of control" [2]. ”
But who would have thought that this wildfire, which was burning the whole of the United States, was actually lit by Americans?
The "$800 Clause" was signed in February 2015 when Obama signed the Facilitation and Enforcement Act, which dramatically increased the "de minimis clause" limit from $200 to $800.
Obama's original intention was simple: first, to allow customs to concentrate the limited cost of taxation on commodities and bring more tariff revenue to the Treasury; The second is to promote the sound and rapid development of e-commerce.
The biggest promoter behind this policy is Amazon, after all, in the environment where the United States is dominated by e-commerce, promoting the development of e-commerce is about the same as promoting the development of Amazon.
At that time, Amazon vigorously introduced third-party sellers, and a steady stream of packages entered the United States from abroad. Sebastian Gunningham, Amazon's former senior vice president of marketing, who worked to attract investment in the Chinese market, wrote in an email to other executives in 2015
Chinese factories have been making products for companies like Walmart for the past 20 years, and now they realize they have an opportunity to sell directly to the world without middlemen. And we are this medium" [4].
In the early days, Amazon sellers were not familiar with overseas demand, and they often used "small package direct mail" with low risk and fast payment to complete the fulfillment. The "timely" increase in the minimum terms allowed Amazon's third-party products to quickly have a low price advantage.
Low prices attracted more consumers, and then more sellers poured into Amazon, and Bezos's "flywheel theory" accelerated. Ten years ago, there were fewer than 15,000 Chinese merchants on Amazon, but today that number has exceeded 1 million[4].
In 2014, Amazon's net sales revenue was less than $89 billion, and by 2018, that figure had reached $232.9 billion. During the same period, Amazon's market value soared, becoming the second commercial company to achieve a trillion-dollar market value after Apple in September 2018.
As the biggest beneficiary of the "$800 clause", Amazon not only promoted the birth of the policy, but also paid a huge cost for its continuation.
From 2012 to 2017, Amazon's lobbying spending increased fivefold. In 2018, Amazon not only had the largest lobbying office in Washington, D.C., but also had 4 former members of Congress on its team [5], playing the revolving door clearly. Bezos himself goes to Washington ten times a year, even more frequently than in Seattle, Amazon's headquarters.
There is plenty of argument to support Amazon's relationship with Obama, such as Bezos, who spent $23 million to buy a property in Washington's Carlorama neighborhood in 2016 before the Obamas left the White House and moved to the neighborhood. During his tenure, Obama also visited Amazon's warehouses and praised the latter.
In 2021, Bezos donated another $100 million to Obama's private meeting, and Amazon, which has tried its best to dig deep into the moat, has inadvertently opened a back door for competitors.
During the epidemic in 2020, the ** independent station Shein relied on the "small order quick return" model to quickly increase its volume, and its GMV exceeded the $10 billion mark for the first time. In 2022, Temu relied on its cost-effective advantage to become an instant hit in the United States.
Both platforms use small parcels for direct mail, with categories focused on clothing and small items, and the average order value is usually not high: Shein has an average order value of $80, and Temu has an average order value of no more than $50[6] – well below the $800 tax threshold.
China's cross-border e-commerce fleet sailed through Amazon's moat, but Amazon took the initiative to break away from the shelter of the "$800 clause".
In 2018, Amazon began to focus on the FBA model:Different from small parcel direct mail, FBA means that the seller first sends the goods to Amazon's US warehouse, and Amazon is responsible for sales, customer service, warehousing, distribution, and after-sales, so that the seller can achieve local delivery.
The biggest change in this model is the centralized transportation of goods, which requires normal customs declaration and tax payment. While increasing order costs, there are two clear benefits for Amazon to switch to FBA:
1) Get more revenue from the seller
Since warehousing, distribution, and after-sales are all completed by Amazon, the cost will naturally rise. In order to encourage sellers to use FBA, Amazon will give FBA merchants a higher search ranking. Due to faster shipments and fear of algorithms, 89% of sellers have already adopted FBA services [7].
According to data from the research institute ILSR, in 2019, Amazon earned $60 billion from sellers by relying on platform fees and advertising revenue; Two years later, that figure had doubled to $121 billion, equivalent to 34% of the seller's total revenue [8]. In other words, for every $100 of goods sold, the seller pays $34 in platform tax.
2) Improve the quality of performance services
After years of capital expenditure, Amazon today has 102 fulfillment centers across the United States and an independent distribution system, which can achieve 1 2 day delivery or even same-day delivery.
The ultra-high logistics efficiency undoubtedly enhances the stickiness of users, further leaving competitors behind. By 2022, Amazon will have a 37% share of the e-commerce market in the United States, while its biggest competitor, Walmart, will have a market share of only 6%.
Perhaps Amazon itself did not expect that the back door left behind back then allowed Chinese counterparts to successfully copy the back road. Although the delivery cycle of Temu and Shein is often more than a week, the $3 dress and $8 Bluetooth headset still make American consumers call it true fragrance and quickly vote with money.
By December 2023, the number of unique visitors to temu has reached 46.7 billion, second only to Amazon in the world. In a Forbes report, a postman in rural Pennsylvania who had not heard of temu months ago now delivers at least 20 temu packages a day [9].
John Deighton, a professor of marketing at Harvard Business School, bluntly stated that "Amazon is facing real competition for the first time ever" [3].
The US government and opposition, which have come to their senses, have finally reacted. Democratic Rep. Earl Blumeenauer, who voted for the $800 clause in 2016, has introduced legislation that aims to exclude Chinese goods from the clause and slap himself in the face more than anyone else.
But the problem is that even if the terms are lowered or even eliminated, it is likely that it will not be able to stop the expansion of Temu and SHEIN.
The "$800 clause" has indeed led to the growth of China's cross-border e-commerce, but it has not been the core driving force. With the rapid growth of Temu and SHEIN, the role of this clause has become more and more limited.
According to the data cited in the Forbes report, the clothing category is 12With a 5% tariff calculation [3], Temu still has an advantage of nearly 6% off compared to Amazon after being taxed, which is enough to make consumers excited.
In the European market, which has been deeply cultivated by Amazon for many years and is very good at collecting tariffs, temu is also growing rapidly. According to a survey by the market research platform Appinio, a quarter of Germans will already be users of Temu in the second half of 2023 – and that's just nine months since Temu was introduced.
In the context of Temu's full custody model, the platform directly connects with a large number of factory sellers, compresses the cost of the chain by cutting intermediate links, and then achieves a ** decline; SHEIN has also linked a large number of garment factories, and even penetrated into the material ** link.
In contrast, Amazon sellers are still dominated by ** middlemen, but they have added a circulation link.
In addition, Amazon sellers not only have to pay high platform fees, but also set aside the cost of loss and tear when the goods arrive overseas but are not sold. As a result, Amazon's markup rates are often several times higher.
In addition, in terms of cost control, Amazon's Chinese counterparts still have a lot of room for flexible deployment.
It is reported that Temu is exploring transoceanic transportation by fast ship sea, which can reduce logistics costs by 30% to 60% if it is completed [10].
Temu's high-priced products such as large home furnishings, which were difficult to achieve by air in the past, have also been able to successfully log on to the platform through shipping, and its profitability can also be improved to a higher level.
The "$800 clause" is more like a bargaining chip for Washington politicians to hype up the topic of China than a commercial competitive landscape.
In 2023, two of the three China-related special committees in the U.S. Congress are concerned about the "loopholes" of the "minimum clauses", and in April and June respectively, they issued warnings about Temu and SHEIN using "loopholes" to exempt taxes.
But what is a slight slap in the face is that Temu generously said to ** that he supports the adjustment of the "minimum terms", as long as it is fair and in line with the interests of consumers. In a letter last July, SHEIN executive chairman Donald Tang even called for a "radical change" of the minimum rules[3], which was extremely insulting.
In its global expansion in 2023, Temu has completed the opening of almost all countries in Europe. In the context of limited storage capacity last year, Temu also prioritized supplying goods to other markets outside the United States. In the end, the European market accounted for 40% of TEMU's share, surpassing the 37% of the U.S. market.
For China's cross-border e-commerce, the globe still looks like it's moving around enough.
1] temu spent millions on six super bowl ads as it tries to win back us shoppers，bloomberg[2] u.s.Trade loophole fuels rise of China's new e-commerce firms,WSJ[3] Temu's blazing run could falter in 2024 with changes to unpopular tax break,forbes[4] inside Amazon, temu's rise prompts soul searching,the information[5] Fulfillment, Alec McGillis[6] Temu Runs Wild for a Year: 47 Countries, 200 Million Users, US Monthly GMV Approaching SHEIN, LatePost[7] Depth of the U.S. E-commerce Industry: Rapid Expansion of Emerging Cross-border E-commerce, Guoxin**[8] Profits Exceed 100 Billion US Dollars, Sellers Become Amazon's Main Income**, Hugo Cross-border[9] Will Temu's Wild Run End in 2024, Forbes[ 10] Temu launches sea freight logistics, which will reduce cross-border costs, 36krEditor: Li ZhengVisual Design: Shu RuiEditor in charge: Zheng PengfeiKunpeng Project