The US app market is seeing a significant shift as Chinese e-commerce giants Temu and Shein lose their grip on the top spots. With the May 2 deadline looming for the end of the de minimis exemption, both apps have dropped in the US App Store rankings. Temu fell from third to fifth, while Shein slipped from seventh to eighth.
Changing Market Dynamics
The decline is largely attributed to a sharp reduction in advertising spend. According to a Reuters report, Temu cut its daily ad spend in the US by 31% in April compared to March, while Shein reduced its ad spend by 19%. This decrease in marketing efforts has led to a significant drop in their visibility and downloads. The apps’ business model, which relies heavily on cheap imports from China, is being challenged by the impending end of the de minimis exemption.
The exemption, which was increased from around €185 to €740 in 2016, allowed Chinese platforms like Temu and Shein to offer extremely low prices, making it difficult for US retailers to compete. US Customs data shows that de minimis imports surged from €8.5 billion in 2016 to €50.5 billion in 2023, with Chinese merchants accounting for 60% of all imports.
Pricing Strategy Under Pressure
Both Temu and Shein have announced price increases starting April 25, indicating that their low-price model is unsustainable in the face of impending tariffs. Without the de minimis exemption, they will be subject to the same tariffs that have affected US retailers for years. This move is expected to impact their competitiveness in the US market.
Other Chinese e-commerce platforms are gaining traction in the US. DHgate, for example, reached the number two spot in the US App Store, capitalizing on viral TikTok videos showcasing Chinese manufacturers’ products at discounted prices. The demand for affordable Chinese products remains strong in the US, but the market is adjusting to the changing regulatory landscape.
Impact on US Retailers
The shift in the market is likely to bring some relief to US retailers who have struggled to compete with Chinese platforms’ low prices. However, many are delaying their orders due to uncertainty over tariffs, which could lead to inventory shortages.
Shein, meanwhile, has received approval from the UK’s Financial Conduct Authority for an initial public offering (IPO) in London. The company’s valuation is expected to be around €46.5 billion, down from an initial estimate of €61 billion.