The big supply chain disruptor is the regulators, say shippers
Shippers need their supply chain partners to collaborate in order to speed up processes and ...
XPO: BUILDING BLOCKSHLAG: BIG ORDERLINE: REACTIONLINE: EXPENSES AND OPERATING LEVERAGELINE: PIPELINE OF DEALS LINE: DEMAND PATTERNS LINE: LANDSCAPELINE: CONF CALL STARTSDSV: UNTOUCHABLEEXPD: NOT AS BULLISH AS PREVIOUSLYFWRD: SPECULATIVE RALLY MAERSK: INTEGRATED LOGISTICS WIN MAERSK: TRUMP TRADEKNIN: THE SLIDELINE: DEBUT AAPL: ASIA CAPEXDHL: THE HANGOVERXPO: ELECTION DAY RALLY
XPO: BUILDING BLOCKSHLAG: BIG ORDERLINE: REACTIONLINE: EXPENSES AND OPERATING LEVERAGELINE: PIPELINE OF DEALS LINE: DEMAND PATTERNS LINE: LANDSCAPELINE: CONF CALL STARTSDSV: UNTOUCHABLEEXPD: NOT AS BULLISH AS PREVIOUSLYFWRD: SPECULATIVE RALLY MAERSK: INTEGRATED LOGISTICS WIN MAERSK: TRUMP TRADEKNIN: THE SLIDELINE: DEBUT AAPL: ASIA CAPEXDHL: THE HANGOVERXPO: ELECTION DAY RALLY
The ecommerce titans are quickly adapting their business models in the face of greater regulatory oversight and heavy competition.
Executive action, announced by the White House last month, to tighten scrutiny of ecommerce and de minimis shipments has triggered changes by Chinese platforms – although implementation of some new rules has been delayed.
Law firm Sandler, Travis & Roseberg last week noted the plan to reject “vague cargo descriptions” in Air Cargo Advance Screening submissions would be postponed until 12 November.
US Customs & Border Protection (CBP) said it would extend the ‘warning period’ – an email is sent pointing out ‘vague’ descriptions such as “gift”, “parts” or “daily necessities”. After 12 November, the warnings stop and shipments described like that will be rejected.
However, Temu is exploring a new business model which could eliminate concerns over de minimis shipments. Earlier this year, it announced it would bring US-based third-party sellers onto its platform.
They must store products in US warehouses and manage their own delivery – essentially targeting Amazon vendors. And they must list it cheaper than on Amazon – the savings for sellers will rely on them avoiding Amazon’s service fees.
Focusing on the domestic US market will allow Temu to circumnavigate US CBP scrutiny. But for its Chinese sellers, not being able to reliably use de minimis, they could see Chinese-made goods rise in price by up to 20%.
Jagath Narayan, CEO at ecommerce software company Ordoro, noted on social media that the strategy “makes perfect sense” for Temu.
“They’re facing negative perceptions over de minimis misuse and cheap overseas products harming US small businesses. This move helps shift and expand their business model.”
He added that Temu had just 1% of the US retail market, but is the second most-visited shopping site globally, after Amazon.
“This is a big revenue opportunity for Temu. Amazon earned $140bn in fees from third-party sellers.
“It’ll be interesting to see how this plays out, but one thing is clear: increased competition in the 3rd party seller space is a win for US SMB ecommerce retailers.”
The news comes as Temu, according to data from Earnest Analytics, saw a 25% fall in shopper activity in August, compared with January.
Amazon, meanwhile, is copying Temu’s strategy and is developing a direct-to-consumer from China option, as well as promoting its Fulfilment by Amazon service, which it claims cost two-thirds less than similar delivery services.
But its ‘direct from China’ option may be too late to the party, as it will not be able to exploit the de minimis ‘loophole’ in the same way that triggered an influx of cheap Chinese goods from the likes of Temu and Shein.
Meanwhile, the Chinese ecommerce sector continues to thrive: according to ecommerce specialist Soapbox, 75 new Chinese companies open up daily – that’s one every 20 minutes – and now has more than 80,000 companies focused on cross-border ecommerce.
These new companies will undoubtedly add pressure on the US CBP. Ram Ben Tzion, co-founder and CEO of Publican, told The Loadstar: “Ecommerce shipments contain an incredibly diverse range of products from countless sellers and manufacturers around the world. This diversity makes it difficult to ensure compliance with all relevant product safety, labeling and admissibility regulations for each type of imported product. Up to 75% of ecommerce products may breach safety rules.
“Logistics operators facilitating this massive ecommerce play must rethink their compliance strategy. They can no longer rely solely on third-party compliance and accountability, whether from the platform, the seller, or the buyer.”
Listen to today’s News in Brief podcast, covering rates; airfreight; and the Gemini alliance – among other things
Comment on this article