Background on Shein and Temu
Shein and Temu are online fast-fashion platforms based in China that have gained significant popularity in the United States for offering affordable clothing and accessories, often undercutting competitors like Old Navy (Gap), Zara (Inditex), and H&M. Both companies have rapidly expanded their presence in the US market, selling items such as $12 dresses and $5 accessories.
Impact of US Tariffs
Under pressure from tariffs imposed by the United States, Shein and Temu have drastically reduced their digital advertising in the US. These tariffs, enforced by President Donald Trump, targeted cheap imports and led to an increase in the cost of bringing low-priced goods into the country. This change affected Shein and Temu’s ability to maintain their competitive pricing strategy in the US market.
The “De Minimis” Policy Prohibition
Previously, the “de minimis” policy allowed packages valued under $800 to enter the US duty-free. This policy played a crucial role in Shein and Temu’s rapid growth in the US market. However, Trump’s prohibition of this policy on May 2nd has forced both companies to adjust their strategies.
Increased European Ad Spending
According to data from market intelligence firm Sensor Tower, Shein and Temu have significantly increased their digital advertising expenditure in Europe, particularly in France and the UK. Shein’s ad spending rose by 35% in both countries, while Temu increased its ad spend by 40% and 20% respectively.
Reasons for the Shift
The shift in advertising focus from the US to Europe is due to the challenges posed by the tariffs. Both companies are now raising prices to offset the increased costs, and they aim to retain their existing US customer base while expanding in other markets.
Ad Performance and User Engagement
The increased European ad spending has led to more app downloads for both Shein and Temu. Shein’s app downloads have risen by 25% month-over-month, and Temu has seen more than double the downloads. However, daily active users have only slightly increased from one month to another.
- Shein: Daily active users in the UK increased by 5%
- Temu: Daily active users in the UK increased by 10%
Annual Ad Spending Trends
On an annual basis, Temu’s ad spending in the UK rose by 20%, while it increased by 115% in France. Shein’s ad spending went up by 45% in France and 100% in the UK compared to the previous year in April.
US Ad Spending Decline
Sensor Tower estimates that Shein and Temu’s average daily ad spending on Facebook, Instagram, TikTok, Snap, X, and YouTube in the US dropped by an average of 31% during the two-week period between March 31st and April 13th, compared to the previous 30 days.
Shein’s average daily ad spending on Facebook, Instagram, TikTok, YouTube, and Pinterest fell by an average of 19% during the same period.
Key Questions and Answers
- Who are Shein and Temu? Shein and Temu are online fast-fashion platforms based in China, known for offering affordable clothing and accessories.
- Why are they increasing ad spending in Europe? They are shifting their focus to Europe due to tariff pressures in the US, aiming to retain existing customers and expand into new markets.
- How has their ad performance been affected? Increased European ad spending has led to more app downloads for both companies, but daily active users have only slightly increased.
- What are the implications of reduced US ad spending? Reduced ad spending in the US has led to a decline in average daily ad spending on various platforms, reflecting the companies’ adjustments to tariff-related challenges.
