526: Temu Is Killing US Businesses! Is Yours Next?

Podcast: Download (Duration: 14:07 — 16.4MB)

Temu is hurting US ecommerce businesses that sell commodity, unbranded products (especially cheap apparel), and it is barely touching brands with a real value proposition. Temu is losing an estimated $30 per order and hundreds of millions of dollars per year to flood the US with $3 t-shirts and $4 sweaters, funded by two structural advantages US sellers do not have: dramatically cheaper (and possibly forced) labor, and the de minimis loophole that lets any shipment under $800 enter the US duty-free.

This is a solo episode where I walk through what Temu actually is, where the money is going, which US categories are getting crushed, and what a real US ecommerce brand should do about it. My friend Jerry Kozak, who runs an eight-figure t-shirt business, has watched his Amazon apparel revenue drop roughly 50% since Temu and Shein hit the US in 2022.

Here is what is happening, why it works right now, and what the actual defense looks like for a US seller.

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Key takeaways

• Temu is losing roughly $30 per order and $588M to $954M per year on purpose. It is Amazon’s early playbook: burn cash to grab household-name status, then raise prices.
• The de minimis loophole lets any shipment under $800 enter the US duty-free. Temu ships direct-to-consumer from China so it pays zero tariffs, while US importers pay full duties on containers.
• Apparel is the hardest-hit category. The entire Amazon apparel category is down roughly 30% year over year per an Amazon rep.
• Commodity, unbranded sellers are in real trouble. Brands with a clear emotional value proposition (True Classic Tees, Dr. Squatch) are barely affected.
• Custom, B2B, and relationship-driven revenue is your durable moat. The half of Jerry’s business that prints for NATO and college sports teams is untouched.

What is Temu and how are its prices so low?

Temu is a Chinese-owned online marketplace, a subsidiary of PDD Holdings (publicly traded on NASDAQ) that ships thousands of products direct from Chinese factories to US consumers at prices that do not add up on paper. Think $3.37 for a pair of shoes or $4.50 for a woman’s sweater, with free shipping in about a week.

Wired’s investigation, confirmed by a company insider, found Temu is losing roughly $30 per order on average. Across the US, Canada, Australia, and New Zealand, the annual loss is estimated between $588 million and $954 million. In under a year of aggressive US expansion, Temu already has about one third of Amazon’s US monthly active users.

Temu can price this low because of two structural advantages, and both matter for how a US seller should think about the threat.

Advantage 1: Chinese labor costs (with a serious asterisk)

Chinese factory labor is dramatically cheaper than any US alternative, and part of the labor going into Temu products may be forced. Per the LA Times, products made in China’s western Xinjiang province are being sold to US consumers through Temu in breach of a US ban on Xinjiang-sourced goods. Former detainees, researchers, and advocacy groups have alleged the Chinese government put more than one million people in detention camps in Xinjiang and that laborers in fields and factories were forced or coerced to produce goods for Temu.

The Chinese government calls the camps “re-education.” I do not believe them and no independent observer has been able to verify their claims. What is not in dispute is that Temu’s cost structure benefits from a labor pool with no US-equivalent floor on wages, safety, or consent.

Advantage 2: the de minimis loophole

The de minimis rule lets any shipment into the US valued under $800 enter with zero tariffs, taxes, or customs duties. Temu ships direct to individual consumers, so every order slips under that ceiling. A US apparel brand importing a container of the same shirts pays full duty on the whole load.

Here is the practical math on t-shirts: a blank tee costs a US brand about $2, plus roughly $4 to ship inside the US. Add printing and margin, and the retail price has to land north of $20 for the business to survive. Temu delivers a printed shirt from China to a US doorstep for under $7, shipping included.

Which US ecommerce categories are actually getting hit by Temu?

Temu is hurting commodity, low-price, unbranded ecommerce most, especially apparel, and the damage tapers off quickly once a category requires trust, brand, or a strong emotional buy. Jerry Kozak (guest on a prior podcast episode, runs an eight-figure t-shirt business on Amazon and Shopify) has seen his Amazon apparel sales drop by about half since Temu and Shein hit the US in 2022. That is a single seller in the most exposed category, so take the number with a grain of salt.

The category-wide signal is more concrete. An Amazon representative said the entire Amazon apparel category is down roughly 30% year over year. Other apparel and ecommerce operators in the communities I belong to are seeing the same drag.

The pattern is clear: the sellers being wiped out are the ones selling generic products with no real differentiation, no brand equity, and no reason for a consumer to prefer them beyond price. If your only pitch was “cheaper than the other guy,” Temu wins that fight forever.

Is Temu going to keep losing this much money forever?

Temu is not going to burn $500M+ per year forever, and the endgame is the Amazon playbook: subsidize into household-name status, then start raising prices. That is exactly what Pinduoduo (Temu’s parent) did to dominate China, and it is what Amazon itself did in the US in the early 2000s.

Two things could disrupt that plan. First, Temu is squeezing Chinese suppliers to price levels that even Chinese manufacturers cannot make money at. One Chinese manufacturer (referred to as “Tai Chi” in reporting) joined Temu in 2022 and quickly found he had no control over pricing. Temu asks you to lower prices, then Temu decides what “lower” means. Refuse, and you get delisted. Suppliers are already leaving.

Second, US regulatory scrutiny is real. TikTok is under active pressure to divest or be banned in the US. Temu is under scrutiny for data collection on US citizens and for Xinjiang sourcing. If Congress closes the de minimis loophole (there are active proposals to do this), Temu loses one of its two structural advantages overnight.

How US ecommerce brands actually beat Temu

You beat Temu by making the price comparison irrelevant. Your customer has to want your product for a reason that a $3 Chinese knockoff cannot deliver. The two categories that are working right now: emotional value propositions and relationship or customization-driven revenue.

How True Classic Tees sells $25 t-shirts against $3 competition

True Classic Tees sells plain solid-color t-shirts (arguably the most commoditized category in apparel) for about $25 each and has crossed $250 million in revenue since launching in 2019. Temu literally sells the same physical product for a fraction of the price.

The reason True Classic Tees wins is the ad. Their commercials open on an overweight guy in a badly-fitting shirt with his belly hanging out, then cut to the same man in a True Classic Tee looking dramatically more flattering (biceps emphasized, midsection hidden). The product promise is not “a shirt.” It is “a shirt that makes you look better.”

Temu can undercut the price. Temu cannot manufacture the mindshare, the ad creative, or the emotional promise. That is the moat.

How Dr. Squatch sells premium men’s soap

Dr. Squatch sells premium bar soap to men, most of whom (myself included) do not think about soap the rest of the time. Their ad creative does not talk about ingredients or lather or exfoliation. It shows a woman getting close to her partner and saying, essentially, “you smell so good I want to jump you right now.”

The product is soap. The purchase is confidence, attraction, and identity. Temu can sell a bar of Chinese soap at half the price. It cannot replicate the reason a man reaches for Dr. Squatch instead.

Jerry Kozak’s other half: custom B2B

Back to Jerry. Half of his t-shirt business dropped in half. The other half of his business (custom prints for NATO, for college sports teams, for other organizations) is completely untouched. That revenue does not compete on Amazon search results and it does not care what Temu is doing.

Those customers stay because of the customer service, the attention to detail, and the years of trust Jerry has built. Temu has no way to enter that market. Every US ecommerce brand needs some version of that non-search, non-price-competitive revenue stream.

How Temu compares to a US ecommerce brand on the same t-shirt

The math does not work for a US commodity seller. It works fine for a brand whose customer does not shop on price.

What US sellers should actually do about Temu right now

Three concrete moves. Do the ones that fit your business.

First, get out of pure commodity plays. If you are selling a generic product with no brand, no design IP, and no customer loyalty, you are not competing with Temu on that product long term. Reposition into a defensible niche or add a real emotional angle to your marketing.

Second, build a non-search revenue stream. B2B custom orders, subscription boxes, wholesale relationships, community-driven direct sales. Any revenue that does not require you to win an Amazon search result at the lowest price is revenue Temu cannot touch.

Third, engage on policy. If the de minimis loophole feels unfair, write your congressional representative. There are active bipartisan proposals to close it. If forced-labor sourcing bothers you as a consumer, do not buy from Temu. Real consumer pressure is one of the few things that moves this fast.

Frequently asked questions

Is Temu really killing US ecommerce businesses?

Temu is hurting US ecommerce businesses that sell commodity, unbranded, low-price products (especially apparel, where the entire Amazon apparel category is down roughly 30% year over year). It is not meaningfully hurting brands with a real emotional value proposition or a relationship-driven customer base. If your only pitch is “cheaper,” you are exposed. If your customer buys you for a reason beyond price, you are largely fine.

How does Temu sell products so cheap?

Temu sells products cheap for three reasons stacked on top of each other. Its parent company (PDD Holdings) is subsidizing an estimated $30 loss per order to buy US market share. It benefits from dramatically lower Chinese labor costs, some of which allegedly involves forced labor from Xinjiang. And it uses the US de minimis loophole to import products duty-free by shipping direct to individual consumers under the $800 per-shipment threshold.

What is the de minimis loophole?

The de minimis loophole is a US customs rule that lets any single shipment valued under $800 enter the country duty-free, with no tariffs or import taxes. Temu ships every product direct from Chinese factories to individual US consumers, so every order qualifies. US brands that import inventory in bulk pay full duty on the container.

Which ecommerce categories are safest from Temu?

Categories that require trust, expertise, customization, safety certification, or a strong emotional connection are safest. Custom B2B printing, high-touch subscription products, premium branded goods with real ad creative (like True Classic Tees or Dr. Squatch), specialty food and beverage, health and supplement brands, and any category where consumers vet the seller before buying. Generic apparel, generic accessories, and generic household goods are the most exposed.

Will Temu keep losing hundreds of millions per year?

Temu will not lose money at this scale forever. The playbook (borrowed from Amazon and PDD’s own Chinese subsidiary Pinduoduo) is to subsidize into household-name status, then raise prices. It could be disrupted early if the US closes the de minimis loophole, if regulators act on data-privacy or Xinjiang-sourcing concerns, or if Chinese suppliers keep leaving faster than Temu can replace them.

Should I be worried about Temu if I run a niche Shopify brand?

If you have real brand equity, emotional ad creative, and a customer who buys you for a reason beyond price, you should not be worried about Temu. Watch your Amazon revenue for the same category compression that hit apparel, and make sure you are not one policy change away from losing your entire business. Build a second revenue stream (custom, B2B, subscription, community) that does not depend on winning search results at the lowest price.

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