The growth of the two large Chinese e-retailers Temu and Shein, has transformed clothing sales and with it, air freight across much of the world. For the past few years trans-Pacific air cargo has hardly been able cope with the demand from these ‘fast-fashion’ companies.
Things have changed. The US, whose consumers were the prime target for these companies, has indicated its hostility to such ‘Chinese’ companies by attempting to stamp-out their use of the de minimis regulation. The wider issue is America objecting to the Chinese dumping their manufacturing surpluses onto the American market, something which these e-retailers were vulnerable to being accused of.
Both Temu and Shein are now faced with the need to evolve their business models. As the co-CEO of Temu, Chen Lei, explained “for our global business….changes in the external environment have been accelerating and competition is fierce, response includes exploring new business models and experimenting with innovative localised supply chain solutions”.
An agreement reached with DHL on Friday 4th seems to be a reflection of this. DHL Group and Temu said that they had “signed a Memorandum of Understanding (MoU) …to deepen their cooperation and to further expand their successful partnership.”
The statement goes on to assert that “DHL Group will utilize its logistics expertise to support Temu’s operations in Europe, including its local-to-local model, which enables local merchandise partners to sell on its platform and supports local fulfilment. Temu expects up to 80% of its total sales in Europe to come from this local-to-local model”. It also appears that the focus of the relationship is not just in Europe. Temu aspires to use the logistics capabilities of DHL to both sell ‘small and medium enterprises’ products outside Europe and to grow Temu’s e-commerce presence in the Middle East and Africa.
It is uncertain what the potential of this relationship is. Possibly it represents Temu using DHL to rapidly construct a near-global logistics presence that will facilitate the Temu becoming a much larger and more complex retailer. It could represent the evolution away from Temu’s huge reliance on air cargo out of China. Using DHL, which does have enormous capacity, could be a means of accessing the resources necessary to achieve this. Using a third-party logistics provider in this manner is a risk, but if it enables Temu to adapt to a fast-changing world, it may be worth it for both Temu and DHL.
Author: Thomas Cullen
Source: Ti Insight
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