South Africans fighting for Temu and Shein

New tax regulations that will apply to small-volume and low-value clothing orders from Shein and Temu as of 1 July have caused a backlash among consumers.

However, National Clothing Retail Federation executive director Michael Lawrence has said that these objections are based on a feeble argument and consumers need to look at the bigger picture.

This follows government’s commitment that SARS will, from 1 July 2024, apply a 45% import duty plus VAT on all packages ordered from Temu and Shein.

Until now, Chinese clothing retailers have taken advantage of a so-called de minimis rule, which has allowed packages below R500 to be imported with a 20% duty and no VAT.

One petition aimed at preventing the tax increase, titled “Petition for SARS not to increase tax on Temu and Shein orders,” had garnered over 15,000 signatures at the time of publication.

In response to the duties, the petition argues that “South Africans cannot afford this. We buy from Shein and Temu because we cannot afford clothes from local businesses. The point of Shein and Temu is affordability.”

Lawrence disputed the claim that people who can make online credit card purchases on these sites are vulnerable consumers.

“We are talking about a fundamentally middle-class consumer here,” Lawrence said in a recent Business Day TV interview.

He argued that his organisation represents “far more vulnerable consumers” in the retail world, many of whom are employed within the manufacturing sector and positively affected by the taxes.

“What is true, of course, is that the household purse for all segments of the population has been under substantive stress for the last decade.”

Lawrence acknowledged that this is an uncomfortable period for consumers but that they must look at the big picture.

One of the main reasons for these duties to be placed on low-value and small-volume imports is to protect the local clothing industry, which cannot compete with the pricing models employed by Temu and Shein.

Because the petition argues that clothing available in South Africa is too expensive, Lawrence was asked why South African clothing brands charge such high prices.

He said that due to the extreme competition within the country’s clothing sector, brands would not charge consumers more than they absolutely had to.

Given the increased competition with offshore companies, Lawrence says, “You’re probably getting the best value you can.”

South Africans love Shein

A recent report by the Marketing Research Foundation found that Shein dominated its competitors in online clothing shopping.

Respondents were asked about how their online buying behaviour over the past month fell into the following categories: clothing, groceries, footwear, furniture, tech and appliances, fast food, and other.

Clothing comprised 42% of the sample’s purchases, whereas fast food took second place with 17%.

The report divided the online clothing category into three groups: women’s, men’s, and children’s.

Shein held a 35% market share in women’s clothing, beating the second and third-place stores, Mr Price (7%) and Superbalist (3%).

In the children’s clothing market, Shein had a 10% share of purchases, double that of second-place Ackermans.

The same can be said about men’s clothing purchases. Sportscene and Other, tied second at a 4% market share, have half the share of Shein.

Shein has maintained its popularity despite allegations of unscrupulous business practices.

Apart from its accusations of dodging tax, Shein was also subject to public scrutiny at the end of 2022 over allegations of excessive “fast fashion” production methods and poor labour conditions.

The allegations against the Chinese clothing manufacturer included copying small businesses, forced labour, and violating other labour laws.

Shein disputed these allegations, saying its model actually helps reduce waste, which lets it cut prices. It also pointed to a 2022 sustainability report containing an audit of the labour practices employed by its manufacturing partners.

“Contrary to some common misperceptions, we keep prices affordable through our technology-based on-demand business model and flexible supply chain,” it stated.

“This reduces inefficiency, helps us to lower wastage of material, as well as reduce our unsold inventory. We pass this cost advantage to our customers, and this is what has driven our success.”