We Are Buying So Many Things From Temu and Shein That There Aren't Enough Planes and Prices Are Skyrocketing
The successes of the low cost Chinese e-commerce sites, Shein and Temu, are causing prices to go through the roof.
The Chinese retailers Temu and Shein sell products that are manufactured directly by Chinese companies. This business model allows them to avoid intermediaries and well-known American brands, and also offer exceptionally low prices. However, these companies rely heavily of air transport to deliver to customers quickly.
They are revolutionizing the air transport market, sending 9000 tons of cargo daily. This is the equivalent of sending 88 Boeing 777 cargo planes each day to various destinations across the world. Due to this considerable volume, there has been an increase to transportation prices. Some companies are deciding to bear these costs in order to expand globally.
Niall van de Wouw, Director of Air Transport at logistics company Xeneta, highlights that nine months ago he didn't know about Temu. Today, along with Shein, Temu has such high demand that it has changed global trade routes and created a cargo crisis in the air transport sector, according to Forbes.
This increase in demand has raised air transport rates to nearly unprecedented levels. In May, the average air freight rate from southern China to the US was approximately 4.37 euros per kilogram, more than double the value in 2019. Some logistics companies, such as Atlas Air, are adding more flights to meet the increase in demand.
The growth of Temu and Shein's operations has also impacted global freight shipping routes. New maritime and air routes have been established, changing traditional trade patterns and raising transportation rates. Despite the high costs, Shein and Temu still offer free shipping for orders above a certain value, absorbing the costs to accelerate their growth.
As the holiday season approaches, carriers are concerned about high demand. "If we're like this now and it's early May, imagine what it will be like in September, October, November, and December?" questions Brian Bourke, Chief Commercial Officer of SEKO Logistics, according to the same source.
It is important to remember that companies like Temu and Shein have a negative impact on the environment, thanks to their fast-fashion business models which encourage overconsumption. With their long distance transportation network, there are large amounts of packaging, greenhouse gas emissions and air pollution involved. Whilst they are affordable, there are major concerns about their sustainability and environmental impact.