Temu under fire

If Chinese clothing manufacturer Shein’s allegations against competitor Temu are proven correct, the company could be forced to go back to the drawing board and change its entire business model.

This follows Shein filing a civil complaint in Washington D.C. federal court on August 20, claiming Temu encourages counterfeiting other designs and disallows the removal of admittedly copied products.

The complaint also accused Temu of relying on a business model that priced products so low that they needed to be subsidised, causing the business to lose money with every transaction.

“If Shein is correct in saying that Temu’s business model only works because it is involved in these unlawful business practices, it would be prevented from doing so going forward and would have to go back to the drawing board,” legal analyst Werina Griffiths told Newzroom Afrika.

“It will entirely come down to if Shein can prove these claims, and it would need to succeed on all or at least some of them.”

Griffiths said the fashion industry is intellectual property-centred and that businesses compete to set the latest trends. However, this must be done within the legal boundaries.

“Depending on what changes can be made to its supply chain, if Temu really is unable to sustain a business model, then we might see a revision of the jurisdictions in which it chooses to operate,” she argued.

Both retailers have been battling for market share in the fast-fashion market, following the meteoric growth of their businesses in the wake of the Covid-19 pandemic.

“According to the papers that Shein has filed, they state that Temu entered the US market in 2022, and by May 2024, Temu had already acquired a user base of between 150 and 160 million users,” Griffiths said.

“In a very short space of time, it has established quite a strong foothold in this very competitive market. And being a direct competitor of Shein, a part of that market share lost would have gone to Temu.”

Temu slammed Shein’s complaint.

“The audacity is unbelievable,” a Temu spokesperson told MyBroadband.

“Shein, buried under its own mountain of IP lawsuits, has the nerve to fabricate accusations against others for the very misconduct they’re repeatedly sued for.”

Large fashion brands, such as H&M, Victoria’s Secret, Levi Strauss, and Uniqlo, have accused Shein of copyright infringement.

Many fashion designers, graphic designers, and small businesses have done the same.

However, this is not the first time the two bargain retailers have taken legal action against each other.

Temu accused Shein of using intimidation and threats to stop suppliers from doing business with it.

Next, Shein claimed Temu had contracted social media influencers to make false statements about it in its advertisements.

Both lawsuits were eventually dropped, but the furious exchange did not stop there. Shein was then accused of detaining and threatening merchants who did business with Temu.

In South Africa, the companies have been making enemies by disrupting the local clothing sector with prices significantly below those of the country’s budget retailers.

Local manufacturers have accused Shein of the same thing they are accusing Temu of — having a business model that couldn’t charge such low prices without being unethical.

Shein has been available in South Africa for several years, while Temu is a relatively new entrant. It launched locally in January 2024.

Both e-commerce platforms have seen immense growth in 2024. However, local retailers accused them of exploiting import tax loopholes to undercut local clothing prices.

South African Revenue Service (Sars) commissioner Edward Kieswetter has committed to cracking down on the Chinese retailers.

Sars previously committed to closing the loophole on 1 July 2024 to address the issue. However, it delayed its implementation of the change, citing a need for more stakeholder engagement.

Kieswetter later said that Sars would implement interim tax changes for e-commerce players from 1 September.