Shein and Temu Will Adjust Tactics to Counter Deminimis - Like Amazon Before It
Even if the US ends up regulating deminimis, many are hoping Chinese founded marketplaces will lose their relevance in the West. Forgetting that Amazon went on a similar journey too.
It’s not like these firms are only dependent on the small demiminis margin difference. There are 3 advantages:
- ability to decide what to sell and manufacture to begin with based on consumer data.
- ability to generate at scale in small batches
- ability to air freight directly from Asia’s to consumers doorstep, injecting as deep as possible into the US.
Setting aside compliance issues - because any gaps must be handled - the biggest savings is not duties. It’s inventory. As a result adjustments can and will be made by Shein and Temu.
The cure is local logistics - and there is no shortage of firms or companies that would want to help any business that can generate demand, regardless of where they are headquartered. However, it will also take a lot of duties charges to deplete a $39B growing Temu cash pile, don't you think?
The idea here is simple - realism. This is not to cheer the business model or anything else, but if you engage in fanciful thinking regarding outcomes, you will make worse decisions as business owners.
Recall another powerful firm famously skirted rules for years fighting tax and other jurisdiction laws - Amazon. I remember for years Amazon employees could not visit certain places even for fear of generating nexus for tax purposes.
Many predicted doom for Amazon saying no way consumers would keep choosing them without the tax benefit. Their profitability would plummet they say if Amazon was forced to pay its fair share.
How did that prediction turn out? In short major multinational corporations are often able to run rings about regulators - not that they cannot force compliance, it’s just that the effects of that compliance aren’t destruction.
There can be debates about what regulators can do with and without congress. Ultimately true enforcement I feel will require funding from Congress. Regardless.
The future will look more like modification of behavior and coexistence with Shein, Temu, and similar models. And not elimination of the threat to American industry or business.
