Oh, and don’t forget that Temu’s ultra cheap (and possibly toxic) products are almost certainly made using forced labor.
How does a company known for selling everything from clothing and electronics to musical instruments and home appliances at ultra low prices afford to air three ads during the Super Bowl — and even more immediately after the big game? Well, it’s simple if you follow a straightforward formula.
For one, exploit U.S. trade law to ensure you pay nothing to ship your cheap stuff to gullible consumers in the United States.
Second, keep your costs low by utilizing forced labor so you don’t have to bother with things like labor and safety standards and fair wages. If any pesky Members of Congress start to ask you questions about those practices, just shift the blame onto ::checks notes:: your gullible consumers. It’s also fine if those products may end up containing toxins, or if they stand accused of being made from stolen designs.
Finally, don’t bother even worrying about making a profit! Remember your goal is to take over the American market, so it’s fine to lose $30 an order as long as it cuts into the market share of rivals like Amazon and Walmart.
This is the business model of Temu, the super-popular Chinese shopping app that placed three ads during Super Bowl LVIII urging consumers to “shop like a billionaire” by purchasing 99 cent kitchen gadgets and $9.99 skateboards.
Here’s the ad in case you missed one of its three airings during the actual game (it also aired at least twice in the immediate minutes afterward). With Super Bowl ads reportedly coming in at about $7 million for a 30 second spot, Temu spent at least $21 million for the ad. And to cap it off, Temu is offering $15 million in giveaways to further lure in consumers, part of the company’s reported $3 billion (!!!) advertising budget in 2024.
Which makes that shady business model all the more infuriating.
Temu already has reshaped how many Americans shop these days, and not for the better. Part of the reason for its success is that its parent company, Pinduoduo, heavily subsidies Temu in order to gobble up market share. As Wired reported last year, Temu loses an average $30 on every package it sends to the United States, a cost that simply would be unsustainable for most companies. But it’s part of a larger strategy:
“…the company’s long-term target is for Americans to purchase 30 times per year from Temu, with an average order size of $50, meaning each user spends on average $1,500 a year. Data from Zhanglian, a media outlet that reports on China’s logistics and supply chain industries, shows that the average transaction on Temu is around $25.”
Temu’s spend-a-lot-to-monopolize-the-market strategy is a bold move — but the company is getting a big assist from ::checks notes again:: the U.S. government.
The “de minimis” exemption in U.S. trade law allows anything valued under $800 to enter the United States duty-free. It was originally intended for one-off type things, like making it easier for tourists traveling abroad to bring souvenirs back from vacations abroad. But Temu and fellow Chinese e-commerce brand SHEIN have exploited de minimis because they send their merchandise direct-to-consumer, avoiding tariffs because their stuff is so darn cheap (remember, Temu’s average transaction is $25!).
All told, the two brands sent roughly 600,000 packages a day (!!!) in 2022 to the United States without paying a single tariff. Not only does that give Temu a massive advantage compared to many of its rivals — Walmart is paying tariffs on all the stuff it gets from China that arrive by cargo ship, after all — the direct-to-consumer model also allows the companies to dodge U.S. Customs inspections.
That means that along with skipping tariffs, Temu and SHEIN are able to bypass enforcement of the Uyghur Forced Labor Prevention Act, which bans any item connected to forced labor in the Chinese region of Xinjiang from being imported to the United States.
Temu is pouring literal billions of dollars into its effort to dominate U.S. retail, and is willing to lose tremendous amounts of money to get there. If that’s its prerogative, there’s not a whole lot that anybody can do about it.
But right now, the de minimis exemption is giving the company a massive undeserved advantage, one that undermines both American manufacturers and workers and other retail brands who pay by the rules. That same model is shielding Temu from facing any consequences from its alleged reliance on the forced labor that is behind its artificially cheap products.
Rather than prop up predatory companies like Temu, U.S. trade law should work to create a level playing field and take on predatory trade practices like those deployed by Temu and others to unfairly seize market share. It’s time to close the de minimis loophole.