Online trading: Who are Temu and Shein?

Offers and discount campaigns around Black Friday (November 29th) attract numerous bargain hunters. According to a survey by the price comparison portal Idealo, more than 40 percent of customers in Germany no longer need the promotion – because Asian providers such as Temu and Shein offer offers all year round. For example, you can get a T-shirt for four euros, a backpack for little more and wireless headphones for ten euros. But what makes the providers special? And what criticism is there of them? Important questions at a glance:

Temu is an online marketplace – a portal on which numerous companies sell things. The Chinese company has been active in Germany since spring 2023 and has been causing a stir ever since with mini prices and high discounts. Temu tries to retain customers with games. Temu provides the platform for the sales process. Products are often delivered directly from the manufacturer to the customer.

The fashion group Shein, founded in China and now based in Singapore, is both a manufacturer, retailer and marketplace. According to retail experts, as a direct supplier he can react quickly to fashion trends. Because Shein ships its products worldwide and has no stores and little inventory, Shein is able to keep its prices extremely low.

What do the portals do differently? How were they different?

Both providers rely on playful elements such as wheels of fortune, loyalty programs and coupons. With this so-called gamification, you can reach an above-average number of young buyers compared to the entire non-food market in Germany. Competing for users’ attention has another advantage: the more time they spend in the app, the less time and money is left for the competition.

Shein and Temu are not just competing with Amazon & Co. for buyers. They recently opened their online marketplaces to German retailers. However, the offer is different. At Shein, customers can find almost exclusively fashion. The portal has made a name for itself in particular as a provider of “fast fashion” – i.e. as a provider of clothing items that are produced cheaply, especially in China, and are usually replaced by new ones after a short period of time. Shein has a strong presence on social media platforms and is able to quickly adapt production to current trends. The Temu marketplace, on the other hand, has a wider range.

How popular are Temu and Shein in Germany?

The shopping portals have recently enjoyed growing popularity. According to recent surveys, nine out of ten people in Germany knew them. In the first half of 2024, around 1.3 million people in this country ordered from Temu and around 900,000 from Shein. This is shown by a study by Consumer Panel Services GfK, which is part of the opinion research institute YouGov. Measured by the number of orders, Temu landed in sixth place among the top online retailers in the first half of 2024. The list is topped by Amazon, eBay and Otto, followed by Zalando and Kaufland. Shein finished in 19th place.

According to a study by the German Trade Association (HDE), Temu and Shein together send around 400,000 packages to the Federal Republic every day. Each of the portals therefore accounts for around half. Shein boss Donald Tang called the number “a huge exaggeration” in an interview with Handelsblatt.

However, there are also significant concerns among customers. According to a survey by the Institute for Retail Research (IFH), 62 percent see a great risk that the items ordered from Temu and Shein are of inferior quality. Two thirds cannot imagine buying from this type of provider. 83 percent cite the poor quality of the products as the reason, 60 percent are afraid of counterfeit products. Up to 50 percent of Temu and Shein have the feeling that they are being manipulated. Only one in four people shop there without hesitation. The success of Temu and Shein is strongly driven by price, said IFH managing director Kai Hudetz.

Why are they controversial? What criticism is there?

Sales representatives, politicians and consumer advocates criticize, among other things, manipulative purchasing incentives, product quality, a lack of controls and unfair competition conditions. There are also complaints that providers benefit from exception rules such as the 150 euro duty-free limit. The Asian online platforms primarily use air freight. For orders from non-EU countries, no fees need to be paid upon import for packages with a value of less than 150 euros. The accusation: Many shipments were incorrectly declared in order to comply with the 150 euro limit.

The consumer advice center warned both Shein and Temu in the spring. Among other things, she criticized manipulative designs and seemingly arbitrary discount levels. Temu and Shein independently signed cease-and-desist declarations and promised improvements. The magazine “Öko-Test” recently examined articles by Shein. According to a report published in August, many garments failed the test and some contained toxic chemicals.

What do the providers say about the allegations?

The companies contradict the allegations. They emphasize adhering to applicable rules. According to them, they require companies whose goods are sold through the portal to comply with strict security standards. Child labor will not be tolerated.

Shein most recently stated that it had discovered and solved two cases of child labor in its own supply chain in 2023. Regarding the Öko-Test article, the company stated that it took the results seriously. Strict controls and standards are required from suppliers that are based on European and global regulations, said a spokeswoman. Last year, 400,000 chemical tests were carried out to ensure this.

What plans do politicians have?

The federal government recently put pressure on Brussels to take a closer look at platforms like Temu and Shein. The European Commission should rigorously enforce existing EU law. There was also support for this from other member states. An action plan from Economics Minister Robert Habeck (Greens) said: “Providers like Temu and Shein are undermining the standards of the EU internal market while their market share is increasing.” German and European safety standards would have to be met and enforced. Companies in Europe should not be disadvantaged by others circumventing the applicable rules. The plan provides, among other things, for closer cooperation and more powers for national and European market surveillance authorities.

Shein and Temu have been classified by the EU Commission as a “very large online platform” within the meaning of the EU Digital Services Act. Particularly strict requirements apply to these. Among other things, the law is intended to ensure that platforms remove illegal content on their sites more quickly than before. This makes it easier for users to report such content. If companies do not adhere to the DSA rules, they face high fines.

In October, the Commission announced that it would investigate Temu for possible breaches of EU law. A formal procedure should, among other things, check whether the platform is doing enough to combat the sale of illegal products. Certain dubious traders would repeatedly appear on the platform after they had been blocked. The potentially addictive design of the service will also be examined. There are currently no similar proceedings against Shein.

What do consumers need to pay attention to?

The consumer advice center advises consumers to be careful when shopping online. She recommends checking customs regulations, additional taxes and customs fees may apply. Consumers should also only pay for the goods upon receipt. For electronic devices, attention should be paid to approved quality seals such as the CE mark. Overall, it is important to be well informed before purchasing and to also check the return conditions.