How Shein and Temu are changing the face of China’s export machine, making life easier for an army of small businesses
- China’s exports via e-commerce are surging, boosted by apps like Shein and Temu
- Newcomers are tapping China’s vast manufacturing capabilities and using their technology to connect producers directly with overseas consumers
The arrival of Chinese shopping apps like Shein and Temu, which bring made-in-China goods directly to overseas consumers, is changing the face of Chinese commerce and making the world’s most powerful export machine even more formidable, according to data and merchants.
Kenny Li, who runs a garment factory in Guangzhou, capital of southern Guangdong province, is typical of the new breed of Chinese exporters. His business has been simplified thanks to fast-fashion app Shein, as he can now delegate pricing, marketing and customer service to the platform. Li says he sold about 70 million yuan (US$9.6 million) worth of clothes to Shein last year.
Li is also trying to diversify his operations by providing goods to Temu, a discount shopping app backed by PDD Holdings. “Having just one client can bring uncertainty, so we decided to try Temu too,” Li said. As a result, he says business is booming.
His story is just one anecdote from a Chinese export landscape that is being transformed by e-commerce apps, which are taking advantage of China’s vast manufacturing capabilities and using their new technology to connect producers directly with overseas consumers.
Temu’s competitors include the likes of TikTok Shop, a service rolled out by Beijing-based ByteDance, as well as e-commerce giant Alibaba Group Holding, owner of the South China Morning Post. Temu is growing fast though, and is present in 38 countries since its launch in the US last year when it ran an advert during the Super Bowl.
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China’s deputy commerce minister Guo Tingting said at a conference last month that online cross-border business expanded elevenfold in the first eight months of this year compared to the same period of 2019.
China’s exports via e-commerce surged 19.9 per cent in the first half of 2023 from a year ago when China’s overall exports actually fell. In 2022, China’s e-commerce exports increased 10 per cent year-on-year, accounting for 6.4 per cent of total exports, according to government data.
Behind that growth is the emergence of apps like Shein, the 15-year-old company founded in Nanjing and headquartered in Singapore, with a so-called “agile supply chain” model that manages to quickly churn out new products in small order quantities each day with relatively low prices.
Discount app Temu is also expanding quickly. Compared with Shein, which started out with self-branded fashion products, Temu sells a wider range of products at very competitive prices.
Bridge Zhang, who runs a sock factory in eastern Zhejiang province, supplied Shein once in 2021 with around 10,000 pairs of colourful socks. While that transaction did not turn into a long-term relationship, that one exchange left Zhang with a positive impression of Shein as a client.
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“The staff I talked to were professional, and everything worked out smoothly. They offered reasonable prices, and did not delay with their payment. That is a big plus for suppliers like us,” Zhang told the Post. “I got a call from Shein a few days ago, and I hope things also work out this time.”
Shein said it has been investing a lot of effort in building long-term working relationships with suppliers, with “over 84 per cent of new suppliers continuing cooperation with Shein after their first year”, according to a company representative.
“Shein’s average cooperation period with our suppliers is three years, with the longest cooperation period with a supplier being over 10 years,” the company said in a statement to the Post, adding that it works with about 5,400 third-party manufacturing suppliers for its own brand.
The fashion retailer announced the launch of full-category sales in June, moving closer to the territory served by Temu and US giant Amazon.
Shein said it opened its platform to third-party sellers as a marketplace and has expanded into more lifestyle product categories, ranging from remote control protective cases to heart-shaped sofas.
Chinese electronics maker Anker, one of the biggest “Made in China, sold on Amazon” brands, and American footwear company Skechers were among the first batch of established sellers to join Shein’s marketplace.
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Allen Mao, a sales manager at Jiangshan Changxiang Outdoor Products in Zhejiang, said the company is evaluating the possibility of joining Shein, hoping to add a sales channel for the source factory behind several popular camping equipment merchants on Amazon.
“It would save us a lot of trouble if Shein takes responsibility for pricing, marketing and delivery of the products, allowing us to focus on getting the goods ready,” Mao said. “It’s a big challenge for traditional business-facing manufacturers to understand and sell to consumers directly.”
Meanwhile, Temu has expanded aggressively into new markets. It launched its platform for the Philippines in late August – its first stop in the Southeast Asia market – just months after entering Japan and South Korea.
Some early movers on Temu are enjoying the initial expansion. Queenie, a Zhihu user who has worked in the cross-border e-commerce business for 10 years, said she opened a store on Temu in April.
“Recent weeks have been very exciting, just like when I started the business in 2014,” Queenie wrote on Zhihu, China’s Quora-like platform in April. “I feel like I’m standing on a new growth track … and wondering whether my business is going to fly.”
In Queenie’s last update in June, she said her business now makes about 30,000 to 40,000 yuan a month. “I can’t say the income is stable because that money does not go directly into my pocket [yet]. It’s also hard to calculate your bill on Temu. However, the worst case scenario is that we will not lose any money if we quit,” she wrote.
