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The rivalry between Temu and Shein, two Chinese online platforms that have disrupted the garment industry with their affordable clothing, has escalated to a legal battle in the US.
Known for their “ultra-fast fashion” approach, where clothes are designed, produced, sold, and discarded within days, Temu and Shein offer consumers unprecedented convenience and affordability. Regardless of the outcome of this legal dispute, it is the consumers who truly benefit.
Temu accuses Shein of unfair supply arrangements that deliberately excluded Temu from the US market when it entered in 2022. Shein denies these allegations, claiming the lawsuit lacks merit.
Inditex and H&M, major players in the fashion industry both online and offline, face a growing threat from Shein and Temu’s rapid success in the online space.
Shein reportedly dominates over 75% of the ultra-fast fashion market in the US, but Temu is catching up rapidly. In April, Temu’s monthly general merchandise value tripled to $635mn, surpassing Shein’s US sales in May.
Both Shein and Temu are among the world’s fastest-growing start-ups and have garnered impressive private valuations. Shein’s valuation stands at approximately $66bn after a May fundraising, while Temu’s estimated value exceeds $100bn, surpassing the market value of its parent company PDD Holdings.
Efficiently sourcing products from reliable manufacturers is a crucial factor behind their success. Shein has established partnerships with over 8,000 suppliers, which Temu claims represent about 80% of businesses capable of supplying ultra-fast fashion goods.
The relentless pursuit of lower prices and faster supply chains has driven a margin squeeze in China’s declining e-commerce sector, leaving retailers constantly scrambling for supplies.
PDD Holdings, the parent company of Temu, has experienced a 16% decline in share value over the past six months due to slower growth in China. Despite trading at a discount compared to global peers with a forward earnings multiple of 18, investors face the challenge of ultra-fast fashion platforms competing primarily on speed and affordability, leading to constant margin pressure and transient competitive advantages.
For insights on the future of social media, listen to Lex deputy editor Elaine Moore’s discussions with creators, companies, and critics in the new Tech Tonic podcast series by FT.
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