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Prices of Temu, Shein, Amazon Haul goods likely to rise

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Temu, Shein make up 30% of de minimis parcels entering US

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Both sites have adapted supply chains in preparation

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Small and medium online retailers also face big impact

By Arriana McLymore and Helen Reid

NEW YORK/LONDON, Feb 4 (Reuters) - Shein, Temu and

Amazon Haul prices are likely to rise for American shoppers,

analysts and industry experts said, after U.S. President Donald

Trump this week shut a trade loophole that has been used to ship

low-value packages duty-free from China.

Fast-fashion retailer Shein and online dollar-store Temu,

both of which sell products ranging from toys to smartphones,

have grown rapidly in the U.S. thanks in part to the "de

minimis" exemption enabling them to keep prices low.

Temu and Shein together likely accounted for more than 30%

of all packages shipped to the United States each day under the

de minimis provision, the U.S. congressional committee on China

said in a June 2023 report.

Trump's halt to Section 321 de minimis is part of his

implementation of an additional 10% tariff on China and 25%

tariffs on Canada and Mexico, which were paused for a month.

Nearly half of all packages shipped under de minimis come from

China, according to the same committee report.

"For companies like Temu and Shein this is obviously a very

big deal because de minimis was one of the levers they used to

be able to offer these low prices as well as ensure speed of

products entering the country once they were shipped," said

Juozas Kaziukenas, CEO of e-commerce data firm Marketplace

Pulse.

Temu did not immediately reply to a request for comment.

Shein did not immediately reply to a request for comment. It has

previously said it supports reform of the de minimis provision.

"It's probably about 5 points of margin difference, using de

minimis or not, and e-commerce businesses usually have a 10% or

15% margin, so this is a very significant impact," said Aaron

Rubin, CEO of warehouse management software firm ShipHero.

ShipHero's clients include logistics firms and small and

mid-sized online retailers, which also benefit from the

loophole, and have less financial capacity to absorb the hit.

Amazon ( AMZN ) set up Amazon Haul in November. This allows shoppers

to purchase $5 handbags and $10 sweaters from China-based

sellers, although they face longer shipping times.

While Trump's crackdown on de minimis is likely to bruise

Amazon Haul, said CFRA analyst Arun Sundaram, it is a new, and

very small part of Amazon's ( AMZN ) overall e-commerce business.

And shoppers in the U.S. can buy products similar to those

found on Haul, including $2 pencil sharpeners and $10 pyjama

sets, on Amazon's ( AMZN ) main e-commerce site at more expensive prices.

"If removal of the de minimis exemption disproportionately

hurts companies like Temu and Shein, that should be a positive

for Amazon ( AMZN )," said Sundaram. Amazon ( AMZN ), which reports results on

Thursday, did not immediately reply to a request for comment.

Eliminating de minimis gives Amazon ( AMZN ) the chance to compete on

quality, price and shipping speeds on similar items to the ones

Shein and Temu sell, said Gil Luria, an analyst at D.A.

Davidson.

ADAPTING

Both Temu, a subsidiary of Chinese e-commerce giant PDD

Holdings ( PDD ), and Singapore-headquartered Shein, which plans to list

in London this year, have taken measures such as sourcing more

products from outside China, opening U.S. warehouses and

bringing more U.S. sellers on board, to mitigate the impact.

"So the lifting of de minimis will not impact 100% of the

products they sell in the U.S.," said Kaziukenas, adding: "It

will have an impact, but it's not going to be the end of the

reign of Shein and Temu".

Both companies have brought more U.S. and European sellers

onto their platform and established warehouses in the U.S.

The vast majority of Shein's products are still made in

China, but it has started to diversify its supply chain, adding

suppliers in Brazil and Turkey.

The cancellation of de minimis may add a few cents to the

price of each product sold by Shein and Temu in the United

States, said Sheng Lu, professor of fashion and apparel studies

at the University of Delaware.

But ultimately the change could cause more pain for small

and medium-sized online retailers who source from China, which

have fewer resources to absorb the increased costs and adapt

their supply chain.

"My studies consistently show that, unlike large companies,

which have built an extensive sourcing network worldwide, small

and medium-sized companies are more dependent on sourcing from

China," said Lu.