Shein and Temu scare South African retailers

South African retailers are concerned about Shein and Temu exploiting tax loopholes to sell products at prices that local shops cannot compete with.

Chinese eCommerce marketplace Temu has rapidly grown in the country following the launch of its South African site last month.

The online shopping platform is taking on established players with its cheap products and free delivery.

Temu is owned by and operated by PDD Holdings, which also owns Pinduoduo, a popular online eCommerce platform in China.

It has rapidly expanded around the globe. It launched in the United States in September 2022 and quickly became the most frequently downloaded app in the country.

At the beginning of 2024, Temu topped the most downloaded free app charts in the US and some European countries, including the UK.

On 17 January 2024, Temu launched in South Africa. It is taking on established players like Superbalist, Bash, and its compatriot, Shein.

Temu’s biggest advantage is price. It sells products at prices that South African retailers cannot match. It includes its popular coupon discount and free shipping services.

Most of the product prices range from R10 to R300, with some more expensive products, such as inverters and batteries, crossing the R1,000 mark.

Temu used Buffalo Express, the same courier used by Shein. Buffalo integrates seamlessly with the South African customs system, the local banking system, and several express companies.

With a fleet of 300 self-owned transportation vehicles, it has established a fully self-operated cross-border eCommerce logistics and distribution service from China to South Africa.

There is so much demand for Buffalo’s service that it purchased a 25,000-square-meter sorting centre with a 6,000-square-meter bonded warehouse in October 2022.

The success of Shein and Temu may be seen as a logical consequence of the globalisation of eCommerce services.

However, South African retailers have sounded the alarm that there may be more to the low prices than meets the eye.

A prominent eCommerce player, who asked to remain anonymous, told Daily Investor that Shein and Temu are dodging import duties.

News24 reported that South African retailers have urged the government to plug tax loopholes used by Temu. Similar concerns have been raised about Shein.

Etienne Vlok, a national industrial policy officer for the Southern African Clothing and Textile Workers Union, shared these concerns.

He told News24 that the government should consider urgent changes to tax rules on small items to ensure fair competition for local businesses.

Temu disagreed with the suggestion that it relied on the so-called de minimis rule that lets goods of low value enter South Africa while avoiding Customs declarations or duties.

“The primary drivers behind our rapid expansion and market acceptance are the supply-chain efficiencies and operational proficiencies we’ve cultivated over the years,” Kieran Powell, a Temu spokesperson, told Bloomberg News.

“We are open to and supportive of any policy adjustments made by legislators that align with consumer interests,” Powell said.

“We believe that as long as these policies are fair, they won’t influence the outcomes of competitive business dynamics.”

Reporting with Bloomberg.