The rapid growth of the Chinese companies Temu and Shein is not only flooding the European and American markets with cheap clothing. It is now causing bottlenecks in global air transport and sending freight rates to record highs. “Demand from China was still very weak in mid-2023, but it suddenly increased dramatically from the end of the year,” a German logistics expert told Reuters news agency.
“It turned out that there were two companies behind it: Temu and Shein.” The planes would hardly be able to accommodate additional quantities if the companies wanted to transport certain goods by air due to the Houthi attacks on ships in the Red Sea. “The biggest trend impacting air freight is not the Red Sea, but Chinese e-commerce companies like Shein and Temu,” said Basile Ricard, responsible for China operations at Bollore Logistics.
With shirts and trousers for a few euros, but also with household items and toys, the companies have built a strong position for themselves in the internet business. According to market observers such as Coresight Research, Shein alone controls about a fifth of the global fast fashion market. According to a June 2023 report from the US Congress, Shein and Temu together ship 600,000 packages to America every day. In Germany the number is now estimated at around 400,000 per day. Since all goods arrive within a few days immediately after ordering, this has serious consequences for air freight.
4000 to 5000 tons – per day
According to data from industry experts, Shein and Temu each fly out 4,000 to 5,000 tons of goods every day. In other words: this requires more than a hundred Boeing 777 freight planes to take off every day. By comparison, large technology companies like Apple process only 1,000 tons per day. According to industry sources, they are already having to fight for cargo space on planes. Apple declined to comment when asked.
The strategy of Shein and Temu seems clear: both companies deliver directly from China and have the goods delivered to your home in Berlin, New York or Rio de Janeiro. There are no middlemen, nor are there logistics centers or warehouses. Returned shirts, toasters or toys will be destroyed. Some apps are designed as games intended to encourage new purchases. Data protection advocates consider them questionable. But consumer advocates also warn against many products due to safety concerns. Moreover, product liability does not apply because the manufacturer is located thousands of kilometers away in China and there is no importer.
Goods now also come from Hanoi
The goods are also cheap because the companies ensure that they package everything under the respective customs borders of the countries. “A pen for Brazil was divided into four parts and individually packaged,” says a logistics expert. To circumvent China’s relatively strict regulations on the export of electrical products, the goods are now transported to Vietnam by truck and then flown from Hanoi.
Even Thailand was a target because many passenger planes there still had cargo capacity in their bellies and air freight rates were correspondingly lower. In addition, the companies are now trying to purchase aircraft themselves: “We heard that Temu is looking for twelve large transporters to lease. They scour the market for every plane they can get. We even received a request directly on our website,” reports Marc Schlossberg, vice president at air freight transport company Unique Logistics.
Temu wants to look for partners in Europe
When asked by Reuters, Temu said it was looking for intermediaries in the US and Europe to shorten transport routes and delivery times. Shein has already started using warehouses in the US. “Shein is continuously working to improve and become more efficient for customers,” the company said.
However, logistics professionals don’t expect the freight boom from China to slow down anytime soon. Although some freight lines have expanded their capacity, these are also already booked for the long term, says a Schenker spokesperson. “We expect strong demand to continue in the coming months.” But what should actually be a source of joy in the sector is also being viewed critically. It is uncertain whether the business with Temu and Shein will be permanent, says the Asia manager of a logistics company. There is a risk that customers who have been reliable for years are now being pushed away. “And in terms of environmental friendliness and sustainability, things with Temu and Shein are a disaster anyway.”
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
