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Shein Singapore branch: No middlemen, no logistics centers, no warehouses

Photo: Chen Lin / REUTERS

The Chinese shipping giants Temu and Shein are not only flooding the European and US markets with cheap goods. They are now also causing bottlenecks in global air transport and driving freight rates to record highs. “Demand from China was still very weak in mid-2023, but from the end of the year it suddenly increased massively,” says a logistics expert. “Turns out Temu and Shein were behind it.”

The planes would hardly be able to accommodate additional quantities if the companies wanted to transport some goods by plane because of the Houthi attacks on ships in the Red Sea. “The biggest trend that influences air freight is not the Red Sea, it is Chinese e-commerce companies like Shein and Temu,” says Basile Ricard, responsible for the China business at Bollore Logistics.

With shirts and trousers for just a few euros, but also with household goods and toys, the companies have gained a strong position in the online business. According to market observers such as Coresight Research, Shein alone controls around a fifth of the global fast fashion market. Shein and Temu together ship 600,000 packages to America every day, according to a June 2023 US Congress report. In Germany the number is now estimated at around 400,000 per day.

Delivery directly from China

According to data from industry experts, Shein and Temu each fly 4,000 to 5,000 tons of goods abroad every day. Large tech companies like Apple only manage 1,000 tons per day. According to industry sources, they are already having to fight for cargo space on the planes. Apple declined to comment when asked.

Shein and Temu's strategy seems clear: both companies deliver directly from China and have the goods delivered to your home in Berlin, New York or Rio de Janeiro. There are no middlemen, nor are there logistics centers or warehouses. Shirts, toasters or toys that are returned will be destroyed. Some of the apps are designed like games that are intended to encourage new purchases. Data protection advocates consider them questionable. But consumer advocates also have safety concerns about many products.

The goods are also cheap because the two companies keep an eye on every cost factor: This also includes the limits for duty-free imports in the respective recipient countries. “A pen for Brazil was broken down into four parts and individually packaged,” says a logistics expert. In order to avoid the comparatively strict Chinese export regulations for electrical products, the goods are now transported to Vietnam by truck and then flown out from Hanoi.

Even Thailand was a target because many passenger aircraft there still had cargo capacity in their belly and the air freight rates were correspondingly low. In addition, the companies are now trying to procure planes themselves: “We heard that Temu is looking for twelve large transporters to lease. They're scouring the market for every plane they can get. We even received an inquiry directly on our website,” reports Marc Schlossberg, vice president at air freight transport company Unique Logistics.

Demand will continue for a long time

When asked by Reuters, Temu said it was looking for intermediaries in the USA and Europe to shorten transport routes and delivery times. Shein has already started setting up warehouses in the US.

Logisticians do not expect the freight boom from China to subside quickly. Although some freight lines have expanded their capacities, these are also already booked for the long term, says a Schenker spokesman. »We expect the strong demand to continue in the coming months.«

However, what should actually bring joy in the industry is also viewed critically. It is uncertain whether the business with Temu and Shein will be permanent, says the Asia manager of a logistics company. There is a risk that customers who have been reliable for years will now be pushed out. »And in terms of environmental friendliness and sustainability, the business with Temu and Shein is a disaster anyway.«