To take a step again: Shein doesn’t function like conventional client manufacturers. As a substitute of proudly owning factories that make merchandise for it completely, the corporate works with an enormous community of impartial Chinese language factories. Most instances, these factories create the designs, manufacture the merchandise, and promote them to Shein, entrusting the platform to cope with different processes, like itemizing, customer support, and transport. 

Shein provides these suppliers a gentle stream of abroad orders. In trade, it buys the merchandise at very low costs and requests that the suppliers stay loyal to the model. “Because the dominant ultra-fast-fashion retailer, Shein is aware of that producers want Shein’s quantity and its entry to the US market and it’s, subsequently, in a position to coerce producers into preparations that drive producers to not do enterprise with Temu,” says Temu’s submitting. 

This has apparently created a giant headache for Temu. The brand new participant’s enterprise mannequin seeks to copy the success of Shein’s in some ways. Each have capitalized on low-cost worldwide transport, China’s sturdy manufacturing capability, and, crucially, the provision chain that Shein pioneered.

For some time, the businesses differentiated themselves by the type of merchandise they offered: Shein is extra about attire, whereas Temu is extra about family merchandise. However every platform is now wanting on the different’s main product traces too, making the businesses extra direct opponents—which means that they’re going after the identical suppliers.

Since each of them rely closely on sustaining an expansive community of low-cost suppliers, it will be devastating if one platform—particularly the extra established one—compelled producers to decide on between the 2. That is primarily what Temu is accusing Shein of doing.

(To be truthful, Temu itself isn’t any stranger to accusations of coercion towards suppliers. Many Chinese language sellers have complained that the platform forces them to simply accept extraordinarily low costs or arbitrarily ends their enterprise when it finds a less expensive provider.) 

Traditionally, exclusivity agreements haven’t been unusual in Chinese language tech fights. For greater than a decade, firms like Meituan and Alibaba’s Taobao forbade distributors from working with competitor platforms, till the Chinese language authorities explicitly banned such offers in an antitrust push in 2021.

However publicly exposing this apply at the moment within the US doesn’t look like a clever factor to do, not less than in my view. The recognition of Shein and Temu has already caught the eyes of politicians and coverage consultants in Washington, who see them as the subsequent privateness or intellectual-property risk from China. And what they’re accusing one another of doing will nearly actually change into ammunition for future criticism. In that case, perhaps neither of them will have the ability to survive within the US market.