Temu shifts focus from US – but air cargo still bullish on ecommerce

Temu shifts focus from US – but air cargo still bullish on ecommerce

© Anastasiia Yanishevska

The net is tightening around China’s ecommerce platforms – the current drivers of air cargo. But despite signs of change, carriers remain committed to those volumes, and the expected Q4 peak. 

About 25% of Americans use the Temu app, according to September data, but concern over possible restrictions by the US government – following the TikTok decision – is leading Temu to diversify into new markets, according to the Wall Street Journal. 

Temu, which is catching more established players in the US, like Amazon and Walmart – and already is 20% bigger than Shein in the US – gets 42% of its business from the US, Mexico and Chile. 

But it is turning its attention to Europe, amid Washington data concerns and worries over the impact on US businesses, and wants to do so rapidly, said the WSJ.  

Temu has spent billions acquiring a US market. Its parent, PDD, paid Meta nearly $2bn for ads last year and was also a top advertiser on Google, said WSJ. But it has redirected its ad spend to Europe and other markets – including Mexico, from where it can deliver parcels to US consumers. 

Aside from data concerns, governments and consumers have accused the platform of using forced labour from China’s Xinjiang region. One teenager told The Loadstar: “Some of those Chinese platforms makes you feel a bit gross, because you know people are being exploited.” 

But there are also worries that Temu’s business model – it does its sorting in China then sends direct to the consumer – has an unfair tax advantage as that system allows it to make full use of the US de minimis tax exemption, now also also being reviewed by US lawmakers. 

Rival Shein, meanwhile, has decided to continue its focus on the US, and has been attempting to ensure compliance. It has even tried to join the National Retail Federation, but has been rejected several times, according to CNBC. 

Increased scrutiny of China’s ecommerce platforms could also lead to changes in the air cargo industry. Tom Crabtree, director of Trade and Transport Group, told The Loadstar Podcast the China-direct-to-US-consumer model may need to change. 

“It’s a distinct possibility, simply because transportation is always the cost that most shippers are striving to manage,” he explained.

“The margins have got to be very, very thin for a lot of products. So one could argue that Temu and Shein are doing their utmost to grab market share. To be fair, I think Amazon may have done the same thing with its Prime product years and years ago.” 

Listen to this clip of Tom Crabtree explaining how the business models of Chinese e-tailers such as Temu and Shein are transforming air cargo

But other air cargo executives remain confident in the sheer volumes from ecommerce; even those that are normally cautious, such as Cargolux CEO Richard Forson, who is searching for more capacity to ensure he can ship the expected volumes. 

A “significant percentage” of Cargolux’s loads ex-Asia are ecommerce, he admitted.

“It’s Asia-Europe, Asia-US, Asia-Mexico, Asia to Canada. So it just shows you the spread of cross-border e-commerce. We’ve seen no slowdown in the demand for cross-border ecommerce. Rather it’s increasing. 

“They ship directly without having to establish infrastructure in countries, like Amazon would do, setting up warehouses, etc. They are shipping directly from source to final buyer. It takes a bit longer, but for the prices that are being charged I think people are prepared to wait.” 

Mr Forson didn’t believe a lowering of the $800 de minimis threshold in the US would make any difference. 

“In the EU, it’s €150, and that’s still a viable market. I think the current model allows them to sell cheaper, and probably make a better margin than by shipping in bulk, paying the tariffs and then selling and distributing within the country.” 

Caregolux has often taken an ethical stance on shipping certain goods, in March it banned the transport of disposable vapes, for example, but Mr Forson said decisions on the sustainability – or otherwise – of ecommerce should be taken by the consumer, not the carrier. 

“So long as the volume is out there as a business, obviously we have to participate in the flows that do occur.” 

Other volumes are, of course, available. Despite ecommerce being cited as the current key driver for airfreight, according to Mr Crabtree it likely accounts for only about 20% to 25% of global volumes. 

“That means the vast preponderance of air freight is still industrial support. It’s kit moving between factories. Normally, between 10% and 15% of air cargo is related to automobile and light vehicle production, simply to keep factories running at smooth efficiency.” 

Nevertheless, the squeeze on capacity by the ecommerce players on normal cargo flows continues. 

Mr Forson said: “Forwarders dealing with the normal general cargo carried on board aircraft might find themselves in a bit of a capacity crunch.”


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