Temu against Shein, war between the two Chinese fashion giants: the accusation

While Italy is withdrawing from the Silk Road, the “fast fashion war“. The one that is taking place between the two Chinese online clothing giants Temu and Shein it has all the colors of an open conflict, conducted even with illicit weapons, which is being fought overseas but which, inevitably, could have repercussions here too. Temu is a rapidly growing e-commerce market in the USA. His business model is very different from that of Shein, a historic online retailer that has tried in every way to reinvent itself.

Temu, the greatest threat to Shein

Temu allows Chinese sellers to sell to buyers and ship directly without having to store products in US warehouses. Its aggressive marketing, data in hand, seems to be working: Comscore data reported by Modern Retail shows that the giant surpassed its record of unique monthly visitors in January 2023 and has steadily increased its monthly active users in the United States, surpassing Shein in October 2022. For its part, Shein, valued at around $100 billion, overtook Amazon in terms of shopping app downloads in the US in 2021.

To better understand what type of market we are talking about, according to Insider Intelligence projections, in 2023 18.8% of total e-commerce sales in the United States, worth $214.09 billion, will come from the category clothing and accessories. And this category is expected to grow to $321.46 billion in 2027. Clothing accounts for more than 90% of Shein’s sales, and Temu sells in the same category at a 10-40% discount.

The two immediately did not like each other, despite both being the maximum expression of the most advanced Chinese capitalism, the one that has strategically redesigned the global geopolitical chessboard for some time. Since Temu’s launch in the US in September 2022, the company has been seen by Shein as its biggest threat.

Following the post-pandemic boom, Shein was valued at more than $100 billion in early 2022 and announced its intention to become a publicly traded company. But After Temu entered the American market, Shein’s valuation fell by more than $30 billion: for this reason Shein would have “devised a desperate plan to eliminate the competitive threat represented by Temu”.

Temu sued Schein

Now, Temu takes Shein to court over copyright issues and “mafia-style intimidation of suppliers”. An incandescent climate for some time, since December 2022 already, when Shein filed a lawsuit against Temu, claiming that she had enlisted influencers to denigrate her on social media, in particular on TikTok.

In a document delivered to US authorities, Boston-based WhaleCo, which operates in the US as Temu, said the fast fashion brand Shein allegedly violated its intellectual property rightsforcing suppliers who also work with Temu to abandon the platform and taking a whole series of measures to stop Temu’s advance.

It states that “Shein’s efforts to unlawfully interfere with Temu’s business, abuse the US legal process, and violate its intellectual property rights have intensified in recent times and require immediate action.”

Recently, Temu accuses in the dossier, Shein would have reached the point of “imprison” traders who do business with Temudetaining them in his offices for hours, confiscating their cell phones and computers, threatening traders with sanctions for doing business with the giant and gaining access to Temu’s confidential and proprietary information.

Shein’s plan to take down Temu

Shein’s plan, according to the accusations made by its rival, would have led to copyright infringement, leading to “deceptive misuse of the US legal system and to one anti-competitive conduct“.

The e-commerce giant would have implemented a very complex scheme to slow down the growth of Temu in the United States, with actions clearly in violation of competition rules. It would have forced thousands of suppliers to sign membership agreements that allow Shein to seize the intellectual property rights of suppliers worldwide, through invalid assignments and often without the suppliers’ knowledge.

He allegedly accessed and appropriated illegally seized intellectual property rights and obtained knowingly false information to obtain improper copyright registrations with the US Copyright Office. He also literally “abused” the US legal system by instigating and supporting dubious copyright infringement lawsuits against Temu.

Leveraging its dominant position in fast fashion, the market on which Shein built its previous success in the United States, would have attempted with every opportunity to preclude access to Temu’s suppliers through exclusive distribution agreementsreal “mafia-style intimidation and anti-competitive minimum prices”.

To give an example, we read again in the document on file, in the months preceding Temu’s advertising campaign for the famous American Super Bowl in February 2024, Shein would have resorted to measures defined as “even more desperate and coercive”, including physical detention of the traders who dare to work with Temu, personal threats and illegal kidnappings of merchants’ personal devices to gain access to merchants’ Temu accounts and the company’s confidential information and trade secrets.

The issue of intellectual property

In numerous public statements, Shein has gone to great lengths to convince the public that it is a champion of intellectual property rights, but according to the accusations of rival Temu it would be a “farce”: a real “fraud”. To top it off, Shein also allegedly copied Temu’s logo, causing confusion in the market.

And there’s more. Between January and October 2023 alone, approximately 63% of the copyright removal requests received by Temu, approximately 33 thousand, came from Shein; only the remaining 37% came from approximately 2,200 other copyright holders combined.

In summary, the document finally reads, “Shein’s conduct has irreparably harmed and continues to harm Temu, US consumers, hard-working suppliers of ultra-fast fashion, and intellectual property and the US justice system as a whole.”