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As Temu stays on the primary spot for prime free apps within the Google Play and App Retailer, the app faces extra scrutiny from customers and lawmakers alike. Youthful consumers take to TikTok to put up Temu hauls and discover cheaper duplicates of well-liked objects they could not be capable of afford.
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For customers on a decent price range, Temu’s ridiculously low costs generally is a tempting, reasonably priced possibility. However how and why is the whole lot Temu sells so low-cost? There are a number of solutions to that query.
1. The de minimis exception
In accordance with a report from the U.S. Home Choose Committee on the Chinese language Communist Get together, Temu depends on the de minimis exception to ship items on to U.S. prospects for a low worth. A cargo beneath the de minimis worth of $800 is not inspected or taxed by U.S. Customs.
Temu and one other Chinese language-owned e-commerce platform, Shein, are liable for round 600,000 (about 30%) of all packages shipped beneath the de minimis worth to the U.S. daily. Consequently, every cargo evades taxes and inspections from U.S. Customs and Border Patrol.
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The Choose Committee’s report says that these firms depend on the de minimis provision to maintain their enterprise fashions. Nevertheless, by counting on the de minimis provision, Temu can evade compliance with the Uyghur Pressured Labor Prevention Act (UFLPA) and different legal guidelines in opposition to pressured labor.
In accordance with the Choose Committee, the Chinese language Communist Get together, which is the ruling political social gathering in China, has subjected the Uyghurs, a minority ethnic group in China, to pressured labor practices. Because of this, the U.S. is making an attempt to attenuate the importation of Chinese language merchandise made out of pressured Uyghur labor. Thus, the UFLPA prohibits transport merchandise into the nation that the U.S. authorities believes have been made by Uyghurs.
But, merchandise shipped beneath the de minimis provision permit Temu to offer inadequate knowledge to U.S. Customs and keep away from UFLPA compliance.
In accordance with the report, U.S. Customs and Border Patrol authorised greater than 685 million de minimis packages in 2022, leaving the federal government unable to confidently decide whether or not Temu and Shein complied with the UFLPA.
2. Low manufacturing prices
In accordance with Wired, Temu loses about $30 per order as a result of the corporate is making an attempt to dominate the U.S. market by providing lower-than-low costs. Temu loses between $588 and $954 million a yr due to its cost-cutting practices, in line with finance firm China Retailers Securities.
Moreover, Temu pressures its producers to decrease their costs even additional to appease discount-seeking prospects, leaving these producers with little to no revenue in return. Wired reported that Temu bears many of the firm’s worldwide transport prices, however depends on American customers to ceaselessly order from Temu to make up for cash misplaced.
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Temu’s producers can design and supply supplies to offer Temu with stylish objects rapidly, which helps Temu promote merchandise which are in excessive demand. Though some producers wish to listing their merchandise at larger costs to make a revenue, Temu makes the ultimate choice and often cuts costs.
3. Knockoff merchandise
Virtually each product on Temu is a knockoff or “dupe” of an actual, brand-name product. Most objects bought on Temu are unbranded and manufactured en masse by producers in China.
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You could find “dupes” of many well-liked merchandise on Temu, from Stanley insulated tumblers to AirPods Max headphones — each for lower than $15.
Temu says it has direct entry to suppliers, eliminating the necessity for a intermediary between consumers and sellers. This financial mannequin is the one cause Temu acknowledges the way it retains its costs low, however a mixture of cheaply made merchandise shipped and manufactured at little to no value might be a extra cheap clarification.