The battle between Temu and Shein: fight reaches the court

The antitrust battle between Shein and Temu companies reaches the US courts. Temu argues that Shein holds a monopoly in the ultra-fast fashion market, offering lower prices and newer styles than traditional fast fashion. Temu also accuses Shein of forcing producers into exclusive deals and threatens to impose fines if they don’t comply.

Shein

Shein, the popular ultra-fast fashion brand based in China and Singapore, is known for offering a wide selection of fashionable clothing, accessories and beauty products at very affordable prices. It primarily targets a young audience, with an emphasis on the latest fashion trends and a significant presence on social media for the promotion of its products. In his message to investors, Donald Tang, the executive vice president of Shein, said that the company reported its highest net profit in its history in the first half of 2023, a significant achievement compared to the near breakeven in the same period of 2022 He also highlighted that the company’s continued momentum in the United States is solidifying its leadership position in the market. The Chinese e-commerce giant is known for its rock-bottom prices and campaigns targeting Generation Z on social media platforms, including the hugely popular TikTok. We talked about Shein here:Dangerous chemicals, Inside factories, False statements.

Temu

Temu is a new Chinese platform that recently entered America, launched in September last year by parent company Pdd Holdings, linked to Chinese e-commerce Pinduoduo. Behind there is the Chinese founder and businessman Colin Huang, 43 years old, who according to Forbes has a fortune of over 32 billion dollars. Today he is the 39th richest person in the world according to Forbes’ Real Time Billionaires. Temu offers a wide range of products, from clothing to household items, from surveillance tools to household utensils, and the prices initially seem cheaper even than those of Shein. “Shop like a billionaire,” says the new platform. Temu is known for undercutting competitors like Shein and Wish and also offers free shipping and returns, creating the illusion of lower costs overall. Consumers appear to have spent about 20% more Temu products than Shein in May this year. Unlike Shein, Temu sells a wide range of products, not just fashion, and is appreciated by fans for the slightly higher quality of its products compared to rivals. The key to their low-cost model is the direct connection between consumers and suppliers, with Temu mainly taking care of the shipping process. However, there has been criticism regarding the pressure placed on small producers to lower prices at levels that make it difficult to achieve sustainable profits.This practice has raised concerns about possible ethical implications, such as pay cuts and extended working hours for workers. Additionally, Temu has received criticism for lacking formal brand affiliations, often selling knock-off products that raise issues of copyright infringement and quality control. The Better Business Bureau (BBB) gave Temu a C-minus rating amid complaints from customers, who often complain that the cheap prices hide delivery or quality issues. Reviews on TikTok vary greatly, with some extremely negative and others full of praise, some of which appear to be influenced by discount codes or affiliate links, raising questions about the degree of objectivity of the reviews.

The fight

Shein and Temu focus on ultra-fast fashion, producing thousands of new items a day, and can offer lower prices thanks to the lack of expensive physical stores like those of Zara and H&M. Shein is the market leader, but there are signs that its smaller rival is catching up or even racing ahead: in May, total U.S. spending on Temu eclipsed that of Shein by 20%, according to Second Measure. Both companies are locked in an antitrust battle in a growing industry, expected to reach $185 billion in global sales by 2027.

Temu’s lawsuit claims that Shein dominates more than 75% of the U.S. ultrafast fashion market, exercising a monopoly. Shein will likely try to demonstrate that the ultra-fast fashion market is not distinct and that the company competes in the traditional fast fashion market. A Shein spokesperson responded that Temu’s lawsuit is “baseless and we will defend ourselves vigorously.” Temu also accuses Shein of forcing major manufacturers to accept exclusive deals and threatening to impose fines if they don’t comply.

In recent months, the two have increasingly clashed with each other. Shein obtained a temporary restraining order, in a separate case accusing Temu of using its copyrighted images in product listings, to stop sales of products offered for sale on Temu. Additionally, Shein sued Temu alleging that Temu had enlisted online influencers “to make false and deceptive statements” about Shein to promote its products or statements such as: “Shein is not the only affordable option for clothing ! Check out Temu.com, cheaper and much better quality.”

“For a long time we have exercised considerable restraint and refrained from pursuing legal action,” Temu told CNN in a statement about the new lawsuit against Shein. “However, Shein’s escalating attacks leave us with no choice but to to take legal measures to defend our rights and the rights of merchants who do business with Temu, as well as the right of consumers to have a wide variety of products at affordable prices.”

The battle could last years and require significant resources on both sides. However, it is also possible that the two companies will reach an out-of-court settlement.

The question of whether the ultra-fast fashion market exists or not seems to be fundamental, a group of companies that only market a huge number of low-priced products.

Temu and Shein in comparison

Temu:

• Customers can purchase a variety of products at rock-bottom prices that not only fall into the category of fashion but also household utensils, electronics, etc.
• It includes various styles in the catalog, such as casual wear, formal wear, sportswear, outerwear and seasonal collections. There is also a section dedicated to plus sizes.
• It focuses on affordable prices and tries to offer a sense of luxury and indulgence through its Shop like a Billionaire marketing campaign.
• It does not produce its own items but operates as a marketplace.
• It has not been fully scrutinized for its ethical practices. It emphasizes the promotion of sustainable and ethical brands, focusing on quality and responsible consumption. It claims to offer unique, eco-friendly products while supporting small businesses and artisans.
• It offers more affordable prices than Shein, with seasonal discounts lowering prices even further, and some customers find the quality of their products to be slightly better, but it can vary between sellers.
• Target Audience: Focuses primarily on the average consumer in the United States. It has around 17 million active users, although it is a newer platform.
• It presents itself as a large online retailer and offers a discovery platform based on users’ individual preferences.
• It uses marketing tactics such as discounts, offers and user incentives, with a marketing budget of $1 billion for 2023. Use hauls on TikTok and collaborate with influential figures. Cross-dressing and unboxing aim to influence consumers and create a strong connection with the brand.
• Customer Satisfaction: Has an average rating of 3.4 stars from 820 reviews.
• It provides free returns within 90 days and the possibility of changing products.
• It has customer service described as mediocre, but often offers vouchers as compensation for any inconvenience.

 

Shein:

• It is a fast fashion brand that mainly targets young women, offering fashionable and trendy clothing at low and accessible prices.
• It offers a wide variety of clothing, including dresses, tops, bottoms, activewear, swimsuits and more. The catalog also includes a wide range of accessories such as jewellery, sunglasses and bags to complete different outfits.
• It is headquartered in China and Singapore, with R&D and logistics centers in several locations.
• It is not considered an ethical or sustainable brand. It claims to produce small quantities of each design, but puts thousands of styles on the market every day. Applying an ultra-fast fashion business model, it prioritizes speed and convenience, aiming to meet the ever-changing demands of fashionable consumers.
• It offers cheap prices but with questions about the durability and quality of the products.
• Target Audience: Target Gen Z and Millennials worldwide. It has around 43 million active users.
• It offers a curated user experience with an algorithm-based recommendation system.
• Primarily use micro-influencer marketing with a few hundred to a few thousand followers on platforms like Instagram, YouTube, and TikTok. It has a large social media presence, with influencers often showing off their purchases made from the brand. Shein offers them free products on a monthly basis. Some of these influencers receive commissions of 10 to 20% of sales.
• It tends to be less convenient than Temu.
• It has an average rating of 2.6 stars from 4,380 reviews, indicating lower satisfaction among customers.
• It provides free returns within 45 days.
• It has automated customer service that may not always effectively resolve specific customer issues.

Ultra-fast fashion

Ultra-fast fashion is an identifiable business model compared to fast fashion. The global ultra-fast fashion market was valued at $17 billion in 2020 and is expected to continue growing. According to MarketResearch.Biz, ultra-fast fashion differs from fast fashion in supply chain strategies, avoids excess inventory, focuses on internal sourcing, on-demand production and shorter delivery times, from a few days to a week, with a combination of agile and responsive procurement strategies. Times become even faster, weeks become days. New styles are increasing, up to thousands per day.

Ultra-fast fashion companies adopt a pull model instead of the conventional push model: from the data continuously collected on customers, products are made within a couple of weeks, unlike the traditional model in which products are offered on the market by pushing retailers to sale, with an accumulation of warehouse stocks. Ultra-fast fashion brands  incite consumers to buy quickly with digital marketing tactics like fast fashion companies but with much more and more precise data. Furthermore, ultra-fast fashion companies follow a “trial and repeat” logic. They produce a small batch of products according to the current trend. If the response from the market is good, they move to mass production, otherwise they do not continue production. Furthermore, they have an even faster supply chain, prefer a national production base to shorten delivery times, offer a wider range of sizes and with the lowest possible prices.

In the supply chain of ultra-fast fashion companies, the influencer culture is deeply rooted. These companies rely on TikTok, Instagram and YouTube, where they offer shopping as entertainment. While fast fashion has often taken inspiration from high fashion catwalks, making the latest runway trends accessible, ultra-fast fashion brands follow popular figures more on social media.

Which companies can be considered ultra-fast fashion?

• Shein
• Boohoo Group plc
• Missguided
• ASOS
• Fashion Nova
• PrettyLittleThing
• Cider

Ultrafast companies have been criticized for unethical practices, including piracy, mass pollution, and a disposable production and consumption model. Most clothes are made from unsustainable materials, such as polyester, and of questionable quality, quickly ending up in landfills. Since the offering is based on micro-trends, people are encouraged to wear these items a few times before throwing them away. Furthermore, there are accusations of human exploitation and practices that do not respect workers’ rights. Despite this, we continue to buy from these companies and drive them to record revenues.

Sources: BBC; YourSustainableGuide); CNN; Forbes; Euronews; Market.biz.