read more
Ago and Shein: cheap goods can become much more expensive
Very large online platforms Temu and Shein
The European Commission (EC) classified Temu and Shein as part of the DSA. VLOP (Very Large Online Platforms). This involves additional responsibilities on the part of sellers.
The EC demands additional information regarding the fulfillment of obligations regarding not using user-manipulating interfaces, protection of minors, transparency of recommendation systems, traceability of sellers and enabling users to report illegal products – we read in the PIE Economic Weekly. These actions are the result of a complaint filed by consumer organizations.
In recent years, Chinese trading platforms have been expanding to Western markets. In just a year, Shein increased its revenues by 43%, from USD 22.7 billion. in 2022 to USD 32.5 billion. in 2023. An aggressive marketing strategy combined with extremely low prices have made the company a leading player in the fast fashion sector with over 45 million users in the EU and higher sales in Europe than H&M or Zara operating in the same market segment.
Temu, the younger of the two sister companies, is a platform that directly connects Chinese producers with consumers, eliminating the middleman. This is part of a new strategy of Chinese companies to produce, sell and introduce cheap products to the market, completely bypassing Western competitors.
Expansion of Chinese platforms Temu and Shein
The expansion of Chinese platforms results in an inflow of cheap products, the low price of which may result from human rights violations and non-compliance with environmental standards. To counteract this, the EC plans to impose customs duties on products purchased from Chinese sellers. It intends to abolish the threshold of EUR 150 below which products are duty-free.
Sales of selected fast fashion brands in Europe in 2022 (in billion dollars)
Ago Shein.png
Source: PIE's own study based on ecommerceDB data.
To illustrate the scale of the business, last year over 2 billion products below this threshold were imported into the EU. At the same time, in recent years, EU member states have recorded an increase of as much as 50% in 2022-2023. the number of reports of dangerous products within the EU – mainly cosmetics, electronics, clothes and toys that do not meet European safety standards.
The platforms' practices violate national and EU regulations and exploit various legal loopholes, which is why the actions proposed by the EC are necessary. Unfortunately, Member States may not agree to the introduction of new regulations, as their customs services are already overloaded with the work related to the inflow of e-commerce parcels – states the PIE Economic Weekly.
