Temu’s Bargain Empire Meets Its Biggest Test: Can Ultra-Cheap Shopping Survive A Post–De Minimis World?

• In August, Trump ended the de minimis rule, which allowed tariff-free imports under $800 that helped Shein, Temu and Amazon import goods into the United States at lower costs.
• According to Bloomberg News, at least two dozen of Temu’s best-selling products tracked by the firm have seen prices drop by 18% on average in early September compared with late April.
• In June, European Union watchdogs accused Temu of failing to prevent the sale of illegal products on its platform.

Temu has had a spectacular run this year, if you go by the surge in app downloads and its expanding global footprint, which has helped parent company PDD Holdings scale growth. Still, the elephants in the room could not be clearer: tariffs, the end of the de minimis rule, and a ton of regulatory hurdles.

U.S. President Donald Trump, upon taking office, imposed a tariff blitz on global trading partners, mainly South Asian countries, resulting in companies scrambling to figure out how to handle the higher costs that would now be part of their profit-and-loss statements.

Trump also ended the de minimis rule, which allowed tariff-free imports under $800. The rule, which had been in place for 90 years, helped the likes of Shein and Temu by allowing faster, more goods at once, at reduced costs.

What Is Happening With Temu?

According to Bloomberg News, at least two dozen of Temu’s best-selling products tracked by the firm have seen prices drop by 18% on average in early September compared with late April, when small parcels still enjoyed duty-free access.

The report noted that some items have seen cuts as deep as 60%. The report also stated that Temu’s U.S. sales have declined, a trend the company is trying to offset by expanding into Europe.

According to Bloomberg Intelligence, monthly active users plummeted by as much as 46% in the April to June period after the de minimis rule closed.

Regulatory Hurdles For Temu

Temu has come under the radar of several countries. Germany's cartel office in October reportedly said it would examine whether Temu is influencing the pricing of third-party merchants on its e-commerce platform. "We are investigating the suspicion that Temu could impose inadmissible requirements on merchants' pricing on the German marketplace," said office president Andreas Mundt, according to Reuters.

In June, European Union watchdogs accused Temu of failing to prevent the sale of illegal products on its platform. The EU said there was a high risk that consumers in the region would encounter illegal products on Temu.

“Today, with the rapid evolvement of trade barriers and other global events, we are seeing significant shifts in the platform's regulatory environment ... This means we will inevitably face greater challenges and more uncertainties,” Chen Lei, Co-CEO of PDD, said during a post-earnings call in November.

Temu Heating Up Retail Competition

With Temu and Shein in the picture, the retail landscape has seen rising competition, as these two companies have eaten into the shares of larger players, including department store chains Macy’s and Kohl’s, as well as apparel makers Abercrombie and American Eagle.

The ultra-low prices of Temu and Shein’s products primarily resulted from the de minimis rule, which no longer exists. Wall Street has questioned whether these two companies can keep prices low while tariffs are now affecting their parent companies.

PDD has benefited mainly from Temu’s growth, with the retailer able to reach a global audience at lower prices and take market share gains from big names. 

“The e-commerce industry is witnessing even more intense competition, and we will continue to uphold the principles that have guided us for the past 10 years,” Chen Lei said.

How Are Stocktwits Users Reacting?

Retail sentiment on PDD Holdings improved to ‘bullish’ from ‘neutral’ territory compared to a day ago, with message volumes at ‘normal’ levels, according to data from Stocktwits.

Shares of PDD Holdings have jumped over 9% this year and have gained 6% in the last 12 months.

For updates and corrections, email newsroom[at]stocktwits[dot]com.

Also See: Crude Prices Sink, Oil Majors Don't: How Exxon And Chevron Learned To Thrive In A Rough Year

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