Core Insights - Temu and Shein are shifting their focus to Europe due to declining business in the U.S. caused by unfavorable trade policies [3][4] - Both companies are facing regulatory challenges in Europe similar to those encountered in the U.S., including a proposed €2 customs fee on small packages [2][4] Business Performance - In the U.S., Temu's consumer spending fell by approximately 36% year-over-year in May, while Shein's spending decreased by 13% [6] - Conversely, in the EU, consumer spending growth for Temu reached 63% and for Shein 19% year-over-year in May [7] Strategic Moves - Temu and Shein are increasing their advertising expenditures in Europe, particularly in the U.K. and France, as part of their strategic shift [5][8] - The companies are expanding operations in Europe by increasing warehouse capacity and experimenting with localized business models [8] Regulatory Environment - The EU's proposed customs fee is seen as a strategic move to control the growth of ultra-cheap cross-border e-commerce, which may impact how Temu and Shein operate in the region [4][9] - Both companies are facing scrutiny from European regulators, including complaints regarding deceptive practices and compliance with consumer laws [11][12] Compliance Challenges - The EU is moving towards stricter regulations on product safety and human rights, which will require Temu and Shein to invest in compliance and operational transparency [9][15] - The Corporate Sustainability Due Diligence Directive will impose stringent compliance demands on companies operating in the EU, affecting Temu and Shein's operations [14][15]
Temu and Shein are pivoting to Europe to deal with U.S. tariffs. But they may not get a warm welcome