What happened
Chinese fast fashion e-tailer Shein is going all in on South America with newly announced plans to make Brazil its export hub for the rest of the continent. After sharing that it will invest 150 million in establishing a manufacturing network in Brazil, Shein says it will expand its network of 336 suppliers in the nation to 2,000 manufacturing partners across South America over the next three years.
Meanwhile, rival low-cost e-commerce app Temu saw its founder Colin Huang move ahead of billionaire Alibaba founder Jack Ma, claiming the title of China’s third-richest person on October 24. Huang, the founder of Temu’s parent company PDD Holdings, has a net worth of 37.2 billion, according to the 2023 Hurun China Rich List, thanks to the meteoric rise of his businesses Temu and group-buying platform Pinduoduo.
The Jing Take
Shein’s move to expand its functions in Latin America takes place as the Chinese brand comes under fire for sidestepping import taxes, a strategy the brand has also adopted in the US. Brazil charges import taxes for items valued up to 50, and with local manufacturing capabilities in place, Shein will be able to continue shipping items domestically at affordable prices.
Shein claims the move will create 100,000 jobs in Brazil and that the goal is to generate up to 85 percent of sales from locally produced items by 2026.
As Shein diversifies its business away from North America and into South America, Temu is aggressively expanding in the US.
Temu is more competitively priced than Amazon and other US platforms. The low-price shopping app is even edging out Shein. Its sales in the US topped Shein’s by 20 percent in May this year, according to Bloomberg Second Measure.
Analysts say that while Temu earned around 13 billion in 2023, the Chinese e-commerce app may still realize a loss of 3.65 billion due to its “loss leader” strategy.
Temu has reached more than 100 million downloads on the Google Play store, and has seen its estimated value surge to over 100 billion since it was rolled out in September 2022, according to CNBC.
Shein reported remarkable financial gains in the first half of 2023, according to CNBC, thanks to a host of marketing campaigns on TikTok. This success comes as Shein faces scrutiny regarding its influencer programs and is embroiled in an ongoing legal dispute with Temu, which has filed a lawsuit against the fast fashion giant alleging “false and deceptive business practices,” along with copyright and trademark infringements.
The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.