Shein takes drastic action against Temu

Online fast fashion has become extremely popular as American consumers appear to be spending more wisely as prices rise, opting for quality over luxury.

The demand for trendy clothing at affordable prices has seen fast fashion overtake its more luxurious counterparts, increasing competition among online fast fashion retailers.

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On August 19, 2024, the company Shein filed a complaint in a federal court in Washington against Temu, a brand of PDD Holdings.

According to the lawsuit, Shein is suing Temu for posing as an e-commerce marketplace where independent sellers can sell their products. Instead, Shein claims that Temu has complete control over every aspect of its sellers’ operations, as it has authority over what products its sellers can list and the prices at which each item must be marked up.

Additionally, Shein alleged that Temu infringes on its sellers’ intellectual property rights and prevents them from removing products even if the products are shown to be identical to those of other companies.

Shein also claims that Temu does not profit from its products; instead, it loses money on every transaction. The company sets its prices so low that it has to subsidize every sale to minimize its losses, which is considered illegal in the U.S.

When asked for comment on the matter, Shein made the following statement to The Street:

“Temu massively, continuously and illegally violates the rights of SHEIN, directly and through its suppliers, which Temu controls. Temu uses deceptive and unlawful tactics, including theft of trade secrets, trademarks and copyrights. SHEIN believes that evidence will show that Temu is engaged in infringing activities that wrongfully mislead consumers, suppliers and the public.”

ONTARIO, CA – OCTOBER 19: Shoppers Cristopher Lewis, of Fontana, and his CFO Raysa Rubio, of Rancho Cucamonga, are among the first group of shoppers to grab the chance to shop on opening day for fast fashion e-commerce giant Shein, which is hosting a physical pop-up store at Forever 21 at Ontario Mills Mall in Ontario on Thursday, October 19, 2023. (Allen J. Schaben/Los Angeles Times via Getty Images)

Allen J. Schaben/Getty Images

An endless battle between mass e-retailers

Shein and Temu have been enemies for years, making accusations against each other on multiple occasions and even taking legal action.

In 2023, Shein and Temu filed a lawsuit against each other, alleging copyright infringement and antitrust laws. Both parties eventually dropped the lawsuit in October.

Later in December 2023, Temu filed another lawsuit against Shein, this time for “mafia-style intimidation.” The e-retailer alleges that Shein deliberately sought personal information about the company’s employees and merchants, infiltrated merchant accounts, and stole trade secrets.

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Shein’s Controversial Practices

Shein, however, is no stranger to lawsuits of its own. The e-retailer has been accused of profiting from and stealing designs from other brands and engaging in unethical labor practices.

Earlier this year, the brand was sued by Uniqlo for copying the company’s designs, and in July 2023 by multiple fashion designers for extortion and organized crime, to name a few.

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The similar business models of Shein and Temu

Temu and Shein’s business models are similar, but not identical. Temu sells a variety of Chinese-made goods to its consumers abroad, while Shein contracts with manufacturers, primarily in China, whose products it sells and ships to its global consumers.

Both online retailers can quickly respond to trends through mass production and sell their products at extremely low prices.

Shein is a China-based global online retailer focused on women’s fashion. Although privately held, it was valued at around $68 billion at the end of 2023.

The company has over 74.7 million annual users, 13.7 million of whom are in the US. Its largest markets are the US, Mexico and Brazil.

This fast-fashion online retailer adds an average of 2,000 new items to its website every day. Its ability to keep up with demand is said to have overtaken Amazon as the top shopping app in the U.S. in May 2021.

As for Temu, it is owned by a Chinese technology company called PDD Holdings. The online retailer was valued at around $15.33 billion in 2023 and had a trading value of $6.62 billion.

The online retailer has 167 million monthly active users worldwide, 50.4 million of whom visit the site at least once a month from the U.S. In May 2024, the site had 213.2 million website visits.

When asked for comment on the matter, Temu made the following statement to The Street:

“The audacity is mind-boggling. SHEIN, buried under its own mountain of IP lawsuits, has the audacity to fabricate accusations against others for the very misconduct for which they are repeatedly accused.”

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