Sink in the USA: Temu's Drowning Sales
U.S. sales for Temu significantly decline
Get the lowdown on the steep decline of Temu's profits in the States!
Temu, the popular Chinese discount e-commerce platform, has taken a hit in the USA. Sales have plunged due to a crackdown on customs rules, which once gave the company a significant edge. According to Bloomberg, who've crunched the numbers, payments made to Temu from American consumers dropped by more than 25% between May 11 and June 9.
The changes in customs regulations started when Donald Trump abolished a rule called the "de minimis" customs exception as part of his tariff overhaul on April 9, 2024. This exception previously allowed duty-free shipments from China, valued under $800, to reach U.S. customers.
Before the rule change, Chinese traders were estimated to be sending around one million Temu orders to the USA every day, totaling around 1.5 billion deliveries under the de minimis rule in 2004.
America, Say Goodbye to Budget Shopping Bliss
To tackle the issue, Temu announced that they would deliver only from U.S. warehouses in the future. However, efforts to persuade traders to build up stocks in these centers have left the platform with insufficient stock to meet previous demand levels. Prices have also surged due to the new tariffs in some cases.
While advertising remains extensive in other markets, the platform has slashed it in the USA. Prior to Trump's tariff overhaul on April 9, Temu was pumping out tens of thousands of new online ads each day. But that dropped to less than 100 per day afterwards.
Europe, the Land of Cheap Chic
Outside the USA, Temu is thriving, including in the EU, where customs duties apply only to packages worth over €150. With millions of packages shipped under this rule in the EU last year, mostly from China, the competition remains fierce, leading local vendors to grumble about an unfair advantage. Consumer advocates are also raising concerns about Temu products not meeting European safety standards.
The German government has already implemented stricter control of such shipments, and the EU Commission is proposing a customs reform that might end duty-free status for small packages. This shift could pose a challenge to Temu's operations in the EU, although the company is reportedly working with merchants to improve inventory and fulfill orders through local warehouses to better adapt to evolving customs policies.
Sources: ntv.de, mbo
- Online Shopping
- China
- USA
- Customs Policies
- Tariffs
- Europe
Enrichment Data:
Temu's sales in the USA have dived primarily due to new customs regulations that erased a significant cost advantage for the company. In particular, the U.S. Commerce Department closed the de minimis exemption loophole in late 2023, which previously allowed small-value shipments (under $800) from China to enter the USA tariff-free. With this policy change, Temu now faces higher tariffs on its imports, leading to increased costs that it must pass on to consumers. This shift has undermined Temu's ultra-low pricing model, causing a sharp reduction in its competitive edge against rivals like Shein, which source more domestically and maintain stronger marketing efforts [1][2][3].
The impact has been considerable: Temu's U.S. sales dropped by 25% year-over-year in the first half of 2024, while the platform lost 58% of its daily U.S. users after the tariff enforcement. Additionally, Temu drastically cut back on its U.S. advertising from thousands of daily ads in 2023 to just a few in mid-2024, further fueling the decline [1][2]. The parent company, PDD Holdings, has also experienced a roughly 40% drop in quarterly profits partly attributable to these tariffs and the resulting competitive pressures [3].
Regarding the potential impacts in the European Union (EU), while direct details are not provided in the search results, the situation suggests several likely consequences:
- If the EU implements or enforces similar customs regulations or tariff policies targeting low-value imports from China, Temu could face analogous cost pressures there, pressuring its pricing strategy and sales.
- PDD Holdings appears to be pivoting toward expanding in Europe to offset U.S. losses, but it risks incurring further losses if similar tariff or customs reforms occur without mitigating strategies, such as increased local warehousing or diversified sourcing [1][3].
- The company is working with merchants to improve inventory and fulfill orders through local warehouses to better adapt to shifting policies, which may help stabilize operations in the EU despite potential regulatory challenges [2].
In sum, Temu's U.S. sales collapse is largely due to the removal of tariff exemptions, which raised prices and reduced consumer demand. The company’s future in the EU will depend on how customs regulations evolve there, with a critical need to mitigate tariff impacts through operational adjustments to maintain competitiveness [1][2][3].
- With the new customs regulations abolishing the de minimis exception, the steep increase in tariffs for Temu's imports in the USA has led to higher costs passed on to consumers, causing a reduction in sales and a decline in its competitive edge against domestic rivals such as Shein.
- As Europe's customs duties apply only to packages worth over €150, the platform continues to thrive in the EU market, but any future regulations targeting low-value imports from China could place similar cost pressures on Temu, potentially impacting its sales and profitability in the region.
