China’s low-cost e-commerce export sector is coming under increasing pressure as rising air freight costs and weakening demand from budget-conscious consumers in Western markets, partly linked to economic uncertainty surrounding the Iran conflict, erode margins for platforms such as Temu, Shein and AliExpress.
Already hit by U.S. tariffs and the end of duty-free exemptions for low-value parcels, China’s low-cost e-commerce exporters are now facing higher shipping costs as Middle East tensions drive up fuel prices and carrier surcharges.
As a result, low-cost e-commerce exports fell 10.9% year-on-year in April to $9.81 billion, marking a fifth consecutive month of decline.
Passing On Costs To Consumers
Diana Qiao, a Shenzhen-based seller of women’s clothing on Temu, said she had raised her selling prices by $2 because her shipping cost per garment had increased on average by $1.
Falling export values are an indication not just of the cost squeeze, but also that the era of hyper-growth for the large low-cost shopping platforms may be over, analysts and industry insiders say.
They are likely moving more products in bulk into warehouses to dispatch locally rather than flying everything direct from China, said Frederic Horst, Trade and Transport Group’s managing director.
Shein has been expanding its warehouse capacity in Europe, last month opening its third warehouse in Cannock, near Birmingham in Britain.
A spokesperson at AliExpress owner Alibaba told Reuters it remained focused on “maintaining value-for-money pricing for consumers and providing a stable environment for sellers and consumers despite the volatility in global transportation costs”.
Platforms Face Weaker Demand As Business Matures
Although exports remain well above levels seen two years ago, growth is slowing as Temu and Shein face market saturation, weaker consumer spending due to inflation, and new costs such as the EU’s planned €3 fee on low-value parcels. Industry experts also expect air freight rates to remain elevated because of high jet fuel prices, potentially forcing companies to shift to cheaper transport options or reduce shipments.
(With inputs from Reuters)
