📦 Shein and Temu Boost Delivery Networks
In July 2023, Shein and Temu each supplied about 900,000 packages daily to U.S. carriers, according to ShipMatrix data. This surge has been a lifeline for companies like UPS, helping them recover from post-pandemic slumps. According to UPS CEO Carol Tomé, the “explosive” growth from new e-commerce customers—believed to be Shein and Temu—was critical in driving a 0.7% increase in U.S. daily volume in Q2 2024. Experts like Alan Amling, a former VP at UPS, affirm that only these two companies could create such an impact.
🛒 E-commerce Giants Push for Low Shipping Rates
Temu and Shein are not just boosting volumes but are also negotiating rock-bottom shipping rates. Their approach allows them to keep product prices low, maintaining competitiveness. For instance, Temu offers free shipping, albeit with delivery times stretching from 6 to 22 days. Shein’s standard shipping is free for orders over $29, with delivery taking 10 to 13 days. These low-cost shipping strategies are a double-edged sword; while they bring volume, they also pressure carriers’ profit margins. UPS saw its per-package revenue fall by 3.3% in Q2 2024, even as volume grew.
📉 Profit Margins Under Pressure
The profitability issue is not just theoretical. UPS has introduced a per-pound fee on all U.S. imports from China, Hong Kong, and Macau starting September 15, 2024, aiming to offset the reduced revenues from handling Shein and Temu parcels. Despite this, companies like Pitney Bowes, which also handled Shein deliveries, struggled to grow per-package revenue before its ecommerce division shutdown in August 2024. The surge in low-cost, lightweight parcels continues to challenge the sustainability of carrier profits.
🌐 Will the Surge Continue?
Despite potential regulatory changes, demand for Shein and Temu products isn’t expected to decline anytime soon. Even if the $800 de minimis threshold is removed, experts like Anthony Pizza of SpeedX believe that workaround routes, like shipping through Mexico, could mitigate the impact. However, any significant increase in shipping costs might drive customers to competitors like Amazon, threatening the volume gains carriers have seen. “Your $10 pair of jeans might just become $12, so are you as willing to wait if you can get them on Amazon the next day for $14?” remarked Derek Lossing of Cirrus Global Advisors.
Are Shein and Temu making U.S. parcel services unsustainable?
