The Biden administration is planning to change the de minimis provision, which could significantly impact prices for retailers like Shein and Temu, both of which have strong ties to China. Analysts predict that prices for these fast-fashion brands could rise by at least 20%. As of June 1, 2024, Shein's average dress price was reported at $28.51, while competitors H&M and Zara had average dress prices of $40.97 and $79.69, respectively. This price increase comes as Shein is expected to generate over $30 billion in annual revenue, and Temu's parent company, PDD Holdings, reported $34.9 billion in revenue for fiscal 2023. [a4757397]
The scrutiny of Shein and Temu over their supply chain practices began over a year ago, with bipartisan investigations led by the House Select Committee on the Chinese Communist Party (CCP). These investigations are part of a broader effort by U.S. lawmakers to limit the influence of Chinese retailers in the American economy. Gavin Marks, CEO of DM Merchandising, has emphasized the need for policy changes to level the playing field, advocating for the elimination of the de minimis rule, which currently exempts imports under $800 from taxes and inspections, thereby disadvantaging U.S. retailers. [7456a176] [a4757397]
In response to the proposed changes, Shein has expressed support for de minimis reform and is participating in a pilot program with U.S. Customs to ensure compliance. However, Temu is projected to incur a $3.65 billion loss in 2023 due to its aggressive pricing strategies, which have raised concerns among American retailers about the factory-to-consumer model that bypasses traditional supply chains and reduces economic benefits for U.S. businesses. [7456a176] [a4757397]
As Shein continues to navigate its IPO plans, the uncertainty surrounding its potential listing in the U.S. remains. The company's previous efforts to go public have been complicated by geopolitical tensions and scrutiny regarding its supply chain, particularly concerning materials sourced from the Xinjiang region in China. Despite these challenges, Shein is now focusing on a potential IPO in London while also addressing concerns raised by U.S. lawmakers. [23a4576e] [a4757397]
In light of the changing regulatory landscape, Shein and Temu are expected to adjust their pricing strategies to accommodate the anticipated increase in import duties. This shift could affect their market share and competitiveness in the U.S. retail sector, especially as they strive to maintain their customer base amid rising costs. Marks underscores the importance of supporting American businesses and the potential economic benefits of such policy shifts. [7456a176] [a4757397]