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The Trump administration’s current tariff threats have elevated uncertainty over the enterprise mannequin of Temu and different giant ecommerce teams. The White Home reversed its preliminary closure in 2025 of a loophole that allowed low-value parcels shipped from China to enter the US with minimal fuss and no import taxes. However the chance of a everlasting transfer lingers.
Opinion is split over the ensuing menace to the enterprise. The FT’s Lex Column argued: “Chinese language on-line retailer doesn’t want a tax quirk to be an enormous menace to bricks-and-mortar retailers.”
Nevertheless, for the Economist, “Many American shoppers have been keen to miss the usually shoddy high quality of merchandise from Shein and Temu as a result of they’re so low-cost. It will change when tariffs and different customs charges are added, which in some circumstances will double the costs for shoppers.”
Which evaluation is extra compelling? Temu is owned by PDD Holdings, a Chinese language firm. Temu operates a web based B2C platform that went reside within the US in September 2022. Worldwide enlargement has been fast: by 2024, it was working in virtually 80 international locations. Annual revenues have been estimated at $50bn, a three-fold improve over 2023.
Check your self
That is a part of a sequence of normal enterprise school-style educating case research dedicated to enterprise dilemmas. Learn the textual content and the articles from the FT and elsewhere instructed on the finish (and linked to throughout the piece) earlier than contemplating the questions raised. The sequence types a part of a wide-ranging assortment of FT ‘on the spot educating case research’ that discover enterprise challenges.
Most descriptions of Temu’s enterprise mannequin emphasise its capability to leverage decrease labour prices in China to make thousands and thousands of family merchandise accessible to prospects overseas. Temu sells merchandise made by firms that don’t have internationally recognised manufacturers. Whereas reviews differ, Temu has been discovered to have costs as much as 80 per cent decrease than rival ecommerce platforms and nonetheless presents free delivery and returns.
The expansion slowdown in Chinese language consumption has pressured the nation’s producers to look to different markets for his or her current capability, promoting nearer to marginal prices. Temu has been effectively positioned to capitalise on this case.
Throughout 2024, effectively earlier than President Trump’s most up-to-date transfer, Temu would have picked up on alerts from officers in Washington and Brussels that low price imports can be topic to harder import regimes. Antagonistic coverage strikes are usually not confined to Western economies. Indonesia was an early mover, imposing restrictions on international ecommerce platforms in September 2023.
But coverage modifications take time to be promulgated and rolled out. Generally mooted commerce coverage modifications don’t occur in any respect and, even when they do, restrictive measures may be reversed after a backlash from these prospects which have been harmed. Tens of thousands and thousands of Individuals and Europeans use Temu’s app.
Sensible concerns intrude as effectively. In the intervening time, US customs officers merely don’t have the capability to course of the extra paperwork. These concerns are factored in as firms assess their publicity to additional protectionism. Temu took them into consideration in a sequence of swift responses:
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A world gross sales diversification push to cut back dependence on the US market to lower than half world revenues
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The sourcing of merchandise bought within the US market from non-Chinese language areas
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Providing to promote on its platform the merchandise of different firms, which retain duty for delivery their merchandise to the US
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Establishing warehouses within the US and delivery full containers from China, forgoing customized obligation exemptions
These strikes spotlight the varied levels of freedom accessible to ecommerce platforms that function internationally. Commerce tensions and commerce wars are typically bilateral or confined to a small variety of international locations. With greater than 200 customs territories around the globe, Temu has many choices for reconfiguring its industrial footprint and its operations.
However are the strikes outlined above sufficient to make sure that the corporate continues to thrive? And what prices — specific and hidden — are concerned? Since competitors is at all times relative, consideration must be given to the relative strengths of different ecommerce platforms, to bricks-and-mortar retailers and to firms reaching prospects by an omnichannel technique, which supplies a seamless expertise throughout web sites, apps, social media and different channels.
Since ecommerce enterprise fashions have a “winner takes all of it” strategy, may Temu have already grown so massive that it might take protectionism in its stride?
Questions for dialogue
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What’s the most tasty worth proposition that Temu will have the ability to supply its prospects primarily based within the US in future?
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Apart from the at the moment introduced US tariff modifications, what different coverage dangers characterize a first-order menace to Temu’s enterprise within the nation and why?
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How would possibly Temu cowl the extra prices of establishing warehouses within the US and of forgoing US customized obligation exemptions?
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Do you suppose the steps taken by Temu are ample to handle emergent coverage dangers in a fashion that protects and advances its world enterprise?
Carlos Cordon is Professor of Technique and Provide Chain Administration at IMD. Simon J. Evenett is Professor of Geopolitics & Technique at IMD and Co-Chair of the World Financial Discussion board’s World Futures Council on Commerce & Funding.
