Two years ago, Shein and Temu were fighting each other in US courts over supplier contracts and trademark disputes. Today, they are both fighting something bigger: a complete restructuring of cross-border e-commerce rules in every major market they operate in.
The US ended the $800 de minimis exemption for Chinese-origin packages in May 2025. The EU tightened its €150 customs threshold. Both platforms face product safety investigations in multiple jurisdictions. And Shein’s IPO attempts — first New York, then London — have stalled amid regulatory and political scrutiny.
For brands and e-commerce operators watching China’s global expansion, the Shein-Temu story in 2025 is not about their rivalry anymore. It is about what happens when ultra-low-cost direct-from-China commerce hits a wall of protectionist policy — and how both companies are adapting.
What Shein and Temu Built: A Quick Recap
Both companies exploited the same structural advantage: sourcing from China’s Pearl River Delta manufacturing ecosystem, shipping directly to consumers via air freight under de minimis customs thresholds, and spending heavily on digital advertising (particularly Meta and Google) to acquire customers at scale.
Shein pioneered ultra-fast fashion with a model that could go from design to consumer in 7-10 days. It accumulated over 150 million registered users globally and was generating an estimated $30+ billion in annual revenue by 2023 — making it larger than Zara and H&M combined in certain market metrics.
Temu (operated by PDD Holdings, the parent of Pinduoduo) launched in the US in September 2022 and expanded to 50+ markets within 18 months. Its model is a general merchandise marketplace — not just fashion — with an aggressive below-cost pricing strategy aimed at achieving market share before any profitability requirements. Temu’s US spending in the first year exceeded $1 billion on marketing alone.
The Legal Battle Between Shein and Temu
Before the regulatory pressures dominated, the two companies were fighting each other. Three rounds of litigation between 2022 and 2024:
- Temu sued Shein in the US for anti-competitive practices — specifically, alleging that Shein used contracts with Chinese manufacturers that prevented them from selling on competing platforms including Temu.
- Shein counter-sued Temu for copyright infringement, claiming Temu’s platform facilitated the sale of products that copied Shein designs. Shein filed over 50 similar suits against individual Temu sellers.
- Both suits were eventually settled in 2024 under undisclosed terms. The litigation was widely interpreted as a proxy war for supplier exclusivity — whoever controls the manufacturer relationship controls the product pipeline.
The Regulatory Reckoning: 2024-2025
US De Minimis Rule Change
The single biggest blow to both platforms came from US trade policy. The de minimis exemption — which allowed packages valued under $800 to enter the US without customs duties — was a structural cost advantage that made the Shein-Temu pricing model possible. A $12 dress shipped directly from a Chinese factory to a US consumer paid no import tariff. The same dress imported through traditional retail channels paid 12-32% duties plus all associated logistics costs.
In May 2025, the US eliminated this exemption for packages of Chinese and Hong Kong origin. The impact was immediate: average Shein and Temu prices in the US increased 20-40% as the platforms passed through the new duty costs. Both companies have been restructuring their supply chains in response — Shein has accelerated its sourcing diversification to Turkey, India, and Brazil; Temu has been building US-based seller programs to reduce direct-from-China shipments.
EU Digital Services Act and Product Safety
In Europe, both Shein and Temu came under scrutiny under the EU’s Digital Services Act (DSA). The European Commission opened formal investigations in 2024 into Temu’s product safety practices, algorithmic recommendation systems, and counterfeit product controls. Temu was designated a Very Large Online Platform (VLOP) — a classification that triggers stricter compliance requirements, audit rights, and substantial fines for violations.
Shein similarly faces EU pressure around textile product safety certification and labeling compliance. The EU’s forthcoming Extended Producer Responsibility rules for textiles — targeting the environmental cost of ultra-fast fashion — will add compliance costs that fundamentally alter Shein’s unit economics in the European market.
Shein’s IPO Difficulties
Shein filed confidentially for a US IPO in 2023, then withdrew after US Congress members raised national security concerns about its data practices and supply chain. It then pivoted to a London listing, filing in 2024. The London IPO process has moved slowly, complicated by ongoing scrutiny of Shein’s Xinjiang cotton sourcing claims, corporate governance structure, and geopolitical pressure from the US on UK regulators to scrutinize the listing.
As of mid-2025, Shein’s valuation has declined from its peak of $66 billion in 2023 to estimates in the $30-40 billion range as regulatory headwinds and the de minimis rule change weigh on growth projections.
How Both Platforms Are Adapting
Shein: Supply Chain Diversification
Shein’s response to the regulatory environment has been to reduce its dependence on Chinese manufacturing for Western markets. It has partnered with manufacturers in Turkey (serving the EU market), India, and Brazil (serving local markets). This is not a retreat from China — Chinese manufacturing remains core to Shein’s product pipeline — but a geographic diversification of final-country-of-manufacture to reduce tariff exposure and geopolitical risk.
Temu: Localizing Seller Base
Temu has launched “local seller” programs in the US, UK, and EU — allowing domestic merchants to list on the platform and fulfill locally. This reduces the de minimis dependency and allows Temu to compete on product categories where local availability matters (large items, fragile goods, items requiring fast delivery). It also gives Temu better optics with regulators: a platform with 40% local sellers is politically easier to defend than a pure direct-from-China model.
What This Means for Other Brands Selling Internationally
The Shein-Temu story has implications beyond these two companies. They demonstrated what is possible at the intersection of Chinese manufacturing scale and Western digital advertising — but they also revealed the regulatory ceiling of that model.
For brands that sell in China and also export internationally: the de minimis rules are changing in multiple markets simultaneously. Cross-border e-commerce (CBEC) cost structures that worked in 2022 need to be recalculated. Localizing inventory in destination markets — using bonded warehouses in the EU or US fulfillment centers — is increasingly the right answer even for brands that previously shipped direct from China.
For e-commerce operators in China looking at cross-border channels: Douyin’s global expansion (TikTok Shop) faces similar regulatory headwinds to Shein and Temu in Western markets. The window for low-cost direct-from-China CBEC in the US and EU is narrowing. The brands that adapt fastest to the new cost structure will hold ground; those that do not will lose margin and eventually market position.
For more on China CBEC strategy, see EAC’s e-commerce services or contact our team for a free consultation.
FAQ: Shein and Temu in 2025
Are Shein and Temu still growing despite regulatory pressure?
Both platforms are still large and generating significant revenue, but growth has slowed materially in markets where de minimis rules changed. In the US, Temu’s monthly active users peaked in Q3 2024 and declined through early 2025 as price increases reduced the platform’s core value proposition. Shein’s US revenue declined an estimated 15-20% in the months immediately following the de minimis change. Both platforms are still growing in markets where CBEC rules remain favorable — Southeast Asia (via Shopee partnerships), parts of Latin America, and Middle East markets where import thresholds remain high. The global story is one of geographic diversification offsetting US and EU headwinds.
Source: Bloomberg Intelligence retail analysis (Q1 2025); Earnest Analytics US consumer spending data (2025); CNBC reporting on Shein valuation (March 2025)
How did Shein and Temu affect incumbent e-commerce platforms?
The impact was significant and measurable. In the US, Amazon responded to Temu’s growth by launching its own direct-from-China discount storefront (initially called “Amazon Haul”) in late 2024 — a de minimis-dependent model that Amazon had previously resisted. Fast fashion retailers ASOS, Boohoo, and H&M all reported revenue declines in 2023-2024 that analysts attributed partly to Shein’s aggressive customer acquisition. In China, Pinduoduo (Temu’s parent) benefited domestically from the low-price positioning that Temu validated internationally — Pinduoduo’s domestic GMV grew 30%+ in 2024 even as Temu faced international headwinds. The strategic lesson: Shein and Temu proved that Chinese manufacturers + aggressive digital marketing + below-cost pricing is a viable acquisition strategy for market entry. The question is whether the unit economics can survive once regulatory arbitrage closes.
Source: Euromonitor Fast Fashion Market Report 2024; Bloomberg BNEF e-commerce analysis (2025); Amazon Q4 2024 earnings commentary
Want to understand how international trade policy changes affect your China e-commerce strategy? Get a free audit from our team. For more on Chinese platforms expanding globally, see EAC’s guide to Douyin e-commerce. De minimis rule tracking at US International Trade Administration. EU DSA enforcement updates at European Commission DSA portal.
Harry Huang, E-Commerce Performance Manager at EAC Ecommerce China Agency. Harry’s job is simple: make your China store profitable, fast. He runs platform accounts on Tmall, JD, and Douyin with one metric in mind — revenue per RMB spent. No wasted cycles, no bloated retainers.
His approach is diagnostic. He identifies the exact conversion blockers — pricing, listing copy, promotion timing, traffic mix — fixes them in order of impact, and moves to the next lever. Brands working with Harry typically see their first measurable ROI improvement within 30 days.
Harry has managed accounts across health, beauty, consumer tech, and lifestyle categories. He thinks in dashboards, acts on data, and delivers results ahead of schedule. If you need execution with accountability, Harry is who you call.
Ready to improve your China e-commerce ROI? Get a free audit from our team.
Connect with Harry Huang: ecommercechinaagency.com/author/philip/
