Shein and Temu – China’s new shopping giants face accusations

© daviles / Fotolia.
The online retailers Shein and Temu are currently aggressively pushing their way onto the market. However, they have come under massive criticism in both Europe and the USA – among other things due to alleged counterfeiting. Supposedly, they also use artificial intelligence (AI) to market cheap counterfeits.

The newly established Chinese e‑commerce giants Temu and Shein are under critical scrutiny from many sides. With major marketing campaigns, the two e‑tailers are currently trying to break into the market in Europe and the U.S. – apparently with some success, as the many downloads of the respective apps illustrate. However, it is not only the dumping prices of the two online retailers that raise questions. Negative effects on the environment, poor production conditions and, notably, suspected counterfeits in their offers are also criticized.

The e‑tailer Shein (pronounced “She‑in”), known especially as a fashion retailer, is alleged to have copied designs for clothing from other manufacturers using artificial intelligence (AI) and then sold them on its platform. Supposedly, an algorithm uses AI to scan designs on the websites of original manufacturers – and apparently, only a short time later, exact copies are available in bulk on the Chinese marketplace at knockdown prices. There is already a respective lawsuit filed by three smaller companies in the USA. In addition, more than 50 lawsuits are pending against the company for IP infringements, including from major brands such as Levi Strauss and Ralph Lauren. One of the lawsuits, from the European H&M group, was even filed in Hong Kong; for Shein, it might be less easy to evade a judgment in its own jurisdiction, according to one expert.

The competitor Temu (pronounced “Tee‑Moo”) is facing similar complaints. Temu offers a wide range of different consumer goods at dumping prices, which – just as at Shein – are generally shipped directly out of China. However, many Amazon sellers from China, for example, complain that their listings are being copied on the platform. The technology magazine Wired has investigated dozens of such cases and indeed repeatedly found copied offers, including product images, descriptions, and even the so‑called browse trees, a method for optimizing product listings. Reportedly, Temu did not respond to complaints from those affected. The company is a subsidiary of PDD – the Chinese Internet group also owns the e‑commerce marketplace Pinduoduo, which itself has been suspected of offering counterfeits and other illegal products. Pinduoduo has been included on the US government’s Notorious Markets list for several years.

In the United States, a congressional commission, the U.S.-China Economic and Security Review Commission (USCC), published a heavily critical report on Shein and Temu in spring 2023. The USCC report alleges that the two marketplaces might distribute potentially harmful materials, misuse user data, and violate intellectual property rights. Earl Blumenhauer of the U.S. House of Representatives Commerce Committee now wants to ensure that higher tariffs are imposed on fast-fashion imports from China. Shein and Temu are taking advantage of a loophole in U.S. law, especially for shipments valued at less than 800 dollars (about 748 euros) – no duties have to be paid on these. In the European Union, this exemption limit is currently at 150 euros, but the EU wants to eliminate the exemption threshold in the course of a customs reform.

In Europe, too, many are critical of Shein. In France, for example, an online petition against Shein is calling for the trading platform to be banned. Currently, the petition has around 260,000 signatures (as of 02 Oct. 2023). The French government also launched an investigation to assess whether Shein is damaging to the environment and possibly spreading toxic products. And a group including the French EU parliamentarian Raphaël Glucksmann called on the government to enact laws and regulations against the marketplace, whose low prices would pose a threat to European companies.

Experts estimate that Shein already holds a 28% share of the fast‑fashion market in the U.S. and as much as nearly 40% of the ultra‑fast‑fashion market. They currently value the company at a market value of 68 billion dollars (around 63.5 billion euros). Reports also suggest 75 million active customers worldwide and around 61 billion orders per year.

The Temu app is ranked number one among the free apps in Apple’s App Store, with Shein not far behind at number 12. The Shein app apparently had 200 million global downloads last year alone, more than any other app.

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