Temu and Shein

Cheap goods from China are clogging up the air freight market

Air freight at Vienna-Schwechat Airport

(Bild: Andi Schiel)

The rapid growth of Chinese companies Temu and Shein is not only flooding the European and US markets with cheap clothing. It is now causing bottlenecks in global air transport and driving freight rates to record highs. "Demand from China was still very weak in mid-2023, but from the end of the year it suddenly increased massively," a German logistics expert told Reuters news agency.

"Two companies were behind this, as it turned out: Temu and Shein." The planes would hardly be able to take on additional volumes if companies wanted to transport some goods by air due to the Houthi attacks on ships in the Red Sea. "The biggest trend affecting air freight is not the Red Sea, it's Chinese e-commerce companies like Shein and Temu," says Basile Ricard, responsible for the China business at Bollore Logistics.

With shirts and pants for just a few euros, as well as household goods and toys, the companies have created a strong position for themselves in the online business. According to estimates by market observers such as Coresight Research, Shein alone controls around a fifth of the global fast fashion market. According to a report by the US Congress in June 2023, Shein and Temu together send 600,000 parcels to America every day. In Germany, the figure is now estimated at around 400,000 a day. As all goods arrive within a few days of being ordered, this has serious consequences for air freight.

4000 to 5000 tons - per day
According to industry experts, Shein and Temu each fly out 4,000 to 5,000 tons of goods every day. In other words, over a hundred Boeing 777 freighters have to take off every day for this alone. By comparison, large tech companies such as Apple only manage 1,000 tons a day at best. According to industry circles, they already have to fight for cargo space on the planes. Apple declined to comment when asked.

The strategy of Shein and Temu seems clear: both companies deliver directly from China and have the goods delivered to the doorstep in Berlin, New York or Rio de Janeiro. There are no middlemen, logistics centers or warehouses. Shirts, toasters or toys that are returned are destroyed. Some of the apps are designed like games to encourage more and more purchases. Data protection experts consider them questionable. But consumer advocates also warn against many products due to safety concerns. In addition, product liability does not apply because the manufacturer is based thousands of kilometers away in China and there is no importer.

Goods now also come from Hanoi
The goods are also cheap because the companies make sure that everything is packaged below the respective countries' customs borders. "A pen for Brazil was broken down into four parts and packed individually," says a logistics expert. In order to circumvent the comparatively strict Chinese regulations for exports of electrical products, the goods are now transported to Vietnam by truck and then flown out from Hanoi.

Even Thailand has been a target, as many passenger planes there still have cargo capacity in their bellies and air freight rates are correspondingly lower. In addition, the companies are now trying to procure aircraft themselves: "We have heard that Temu is looking for twelve large transporters to lease. They are scouring the market for any aircraft they can get. We have even received an inquiry directly on our website," reports Marc Schlossberg, Vice-President at air freight transporter Unique Logistics.

Temu wants to look for partners in Europe
Temu explained to Reuters that it is looking for intermediaries in the USA and Europe in order to shorten transportation routes and delivery times. Shein has already started using warehouses in the USA. "Shein is constantly working to improve and become more efficient for the customer," the company explained.

However, logistics experts do not expect the freight boom from China to slow down quickly. Although some freight lines have expanded their capacities, these are also already booked for the long term, says a Schenker spokesperson. "We expect the strong demand to continue in the coming months." However, what should actually be a source of joy in the industry is also viewed critically. It is uncertain whether the business with Temu and Shein is sustainable, says the Asia manager of a logistics company. There is a risk that customers who have been reliable for years will now be squeezed out. "And in terms of environmental friendliness and sustainability, business with Temu and Shein is a disaster anyway."