509: Temu And Shein Decimated His Business. Now What? With Jerry Kozak

Podcast: Download (Duration: 52:57 — 60.9MB)

Temu and Shein are decimating US ecommerce sellers because they ship direct from Chinese factories to US consumers under the $800 “de minimis” import loophole, which means the same $20 t-shirt an American seller has to price to cover cotton, printing, labor, tariffs, and Amazon fees can be sold on Temu for $6 with no duties, no customs inspection, and no meaningful IP enforcement. Ann Arbor Tees founder Jerry Kozak has watched his eight-figure printing company’s apparel category fall 30% in 2022 and another 30% in 2023 as a direct result, and in this episode he lays out why the current legal setup is a one-way trade agreement no one voted for.

Jerry Kozak founded Ann Arbor Tees in 2008 out of his college apartment and grew it into a full-service print and embroidery operation doing eight figures a year, with roughly 70% of top-line revenue running through Amazon FBA. In this episode of the My Wife Quit Her Job podcast we dig into why the entire apparel category on Amazon is down 30% year over year, what Temu and Shein are actually doing differently from Wish, and the strategic moves Jerry is making to fight back through brand, direct-to-consumer, and political action.

Below you will find the core mechanics of why Temu and Shein have a structural cost advantage, the specific numbers from Jerry’s business, and a practical playbook for US ecommerce sellers on how to compete.

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Key takeaways

• Ann Arbor Tees is down roughly 50% from its 2020 peak (2M units) to 2018 levels (~1M units), driven mostly by Temu and Shein taking share in apparel.
• An Amazon insider told Jerry the Amazon t-shirt category is down 30% year over year, with 99% confidence that Amazon’s own numbers are included in the decline.
• Temu can sell the same shirt Jerry sells for $20 on Amazon at $6 delivered. That is below the cost of a blank shirt shipped USPS across the street in the US.
• The $800 de minimis loophole lets roughly 2 million packages a day enter the US uninspected from China, with no duty collection and no customs enforcement of intellectual property or forced-labor rules.
• A Bloomberg-commissioned isotope study found nine Shein cotton samples traced to Xinjiang, the region under US sanctions for forced Uighur labor. Under $800 packages are almost never inspected, so the sanctions do not bite in practice.
• According to Wired, Temu is reportedly losing about $30 per package shipped, extrapolating to roughly a billion dollars a year in subsidy. Grizzly Reports flagged the Temu app for aggressive on-device data collection.
• Two bills are moving in Congress (led by Senator Cassidy in the Senate and Rep. Neal Dunn in the House) to close the de minimis loophole for non-market economies. A bipartisan letter from 12 senators asked the Biden administration to act.
• Jerry’s plan: build brand and direct-to-consumer to insulate on the micro, and lobby your congressional reps on the macro. Do not fight Temu on price.

Who is Jerry Kozak of Ann Arbor Tees?

Jerry Kozak is the co-founder and CEO of Ann Arbor Tees, an eight-figure print-on-demand and embroidery company based in Ann Arbor, Michigan, that services universities, artists, corporate uniform accounts, and Amazon FBA at scale. He started the business in 2008 out of his college dorm with a $15,000 loan (at ~18% interest) from local professors he had landscaped for during college.

The company grew from an illegal apartment print shop to a 40,000-square-foot warehouse, added a manual screen press, then an automatic press, then embroidery, then giant car-length automatic presses. At their 2020 peak they shipped 2 million units. In 2023 they were back to 2018 volumes.

Today about 70% of top-line revenue comes through ecommerce, and the majority of that is Amazon FBA on fixed apparel designs, with the remainder in custom brick-and-mortar work for universities, local businesses, and corporate uniforms. They were also, briefly, the biggest t-shirt printer for NATO in Afghanistan before the drawdown.

How much have Temu and Shein hurt US apparel sellers?

The US t-shirt category on Amazon is down roughly 30% year over year, and Ann Arbor Tees is down about 50% from its 2020 peak, and Jerry attributes almost all of it to Temu and Shein pulling US apparel demand off Amazon and onto direct-from-China marketplaces. An Amazonian sourced by Jerry said they were 99% sure the 30% category decline includes Amazon’s own retail apparel numbers.

Jerry’s own top-line trajectory tells the story cleanly. 2020 was the pandemic peak at 2 million units. 2021 dropped as expected. 2022 dropped another 30%. 2023 dropped another 30%, putting them back at 2018 volumes.

The obvious macro story (gas at $5 a gallon, groceries eating a mortgage payment) does not fit the data. T-shirts historically sell better in a recession because they are an “affordable luxury.” Jerry called around to peers in the Ecommerce Fuel forum and no one else in adjacent categories was seeing 30% two years in a row.

Why can Temu and Shein sell so cheap? The $800 de minimis loophole explained

Temu and Shein can sell so cheap because US law waives all import duties, tariffs, and customs inspection on packages worth less than $800 declared value, and roughly 2 million such packages enter the US every day, predominantly from Temu and Shein shipments out of China. That is the “de minimis” loophole, and it is the single largest structural cost advantage Chinese direct-to-consumer sellers have over US ecommerce sellers.

Historically the de minimis rule was written for returning travelers bringing home souvenirs. In practice today it is a de facto one-way free trade agreement that Congress never voted on, because the packages never touch normal customs enforcement.

Why the de minimis loophole matters for US sellers

• No duty collected. Apparel tariffs are typically 15-25%. Under de minimis, that revenue is not collected on Temu or Shein shipments.
• No customs inspection. Forced-labor cotton (Xinjiang), counterfeit goods, and unsafe products enter uninspected because CBP does not test sub-$800 parcels at scale.
• No IP enforcement. Search “Rolex” on Temu and near-clones under alternate brand names (like “Oleg”) show up immediately. Enforcement requires inspection.
• No level playing field on regulations. US sellers must comply with CPSC, FTC, prop 65, and hundreds of category-specific rules. Direct-ship parcels do not get checked.
• US is a global outlier. Most countries set de minimis at $500 or lower. China’s own de minimis is about $7. The US is one of only a handful of countries above $500.

Temu vs Shein vs Wish: what is actually different this time

Temu and Shein are not “just Wish 2.0” because Wish never got mainstream American shoppers comfortable with buying direct from Chinese factories, and Temu and Shein together now do roughly a third of Amazon’s daily traffic with 100 million-plus US downloads apiece. The behavioral change is the important part, not the specific apps.

Shein proved the model. Temu blew past it with a Super Bowl ad, aggressive referral bounties, and creator payouts. Jerry says he personally gets Temu outreach almost every day offering top dollar for a one-minute TikTok, and the referral program is unusually generous even by influencer-marketing standards.

The Temu price problem: a $20 shirt vs a $6 shirt

Jerry’s top-selling shirt on Amazon retails for $20 to $22, and the same design listed on Temu goes for $6, which is less than the wholesale cost of a blank shirt plus USPS shipping across town. The pricing is not something a US apparel seller can respond to on the merits.

There is no lever in a US supply chain that closes a $14 gap on a $20 shirt. Cotton, blanks, printing, labor, warehousing, Amazon fees, and returns each cost real money. The Wired reporting that Temu is losing about $30 per package extrapolates to roughly a billion dollars a year in subsidy, which suggests the goal is either market share or data harvesting, not near-term profitability.

Do not try to compete on price. Compete on brand, direct relationships, service, and the parts of the customer experience Temu structurally cannot deliver.

Is Temu safe? Data collection and forced-labor concerns

Temu’s Android app was flagged by short-seller Grizzly Reports and referenced by Wired as the most egregious mainstream shopping-app spyware they have analyzed, with the reported ability to compile its own code on device after installation. Bloomberg commissioned isotope testing on nine cotton samples pulled from Shein orders and found the cotton traced to Xinjiang, the region under US sanctions for forced Uighur labor.

Both stories rely on reputable outside experts and neither has been meaningfully rebutted in the trade press. The mechanics matter less than the pattern. Under the current enforcement setup, US customs does not inspect the parcels that would surface either problem.

For US shoppers this is a personal decision. For US sellers this is a competitive one. It is very hard to argue “buy American-made because our cotton is not from a forced-labor region” when nothing at the border enforces the sanctions regardless.

What US ecommerce sellers should do about Temu and Shein

The right response is a two-track plan: on the micro, invest in brand, direct-to-consumer channels, and service quality that Temu structurally cannot copy, and on the macro, contact your congressional representatives to support closing the de minimis loophole for non-market economies. Jerry describes the brand track as your “micro-moat” and political action as the “macro-moat.”

Step 1: Build a real brand, not a commodity SKU

Temu and Shein win on interchangeable commodity SKUs, and they cannot easily copy a brand people already trust, subscribe to, or feel a story about. If you sell plain white t-shirts, you are exposed. If you sell True Classic Tees with a $100M brand behind it, you are not.

Step 2: Move traffic and repeat business off Amazon and onto direct-to-consumer

Jerry admits Ann Arbor Tees never invested in its own site because Amazon was easy, and he is now working backwards to build that channel out. Direct-to-consumer gives you customer email, purchase history, and pricing power Amazon and Temu both take from you. Own the relationship.

Step 3: Compete on the parts of the experience Temu cannot deliver

Fast shipping, easy returns, in-person or phone customer service, and trust are the four experience gaps Temu cannot close under a 10-15-day cross-Pacific model. Lean on speed, service, and returns hard. A percentage of shoppers will pay a premium for it.

Step 4: Diversify beyond a single platform

70% of Ann Arbor Tees revenue running through Amazon left them structurally exposed when Amazon apparel demand fell 30%. The generic ecommerce rule (“do not put all your eggs in one basket”) is hard to follow when you are growing 4-5x a year on one channel, but it matters at inflection points like this one.

Step 5: Contact your congressional representatives on de minimis

Two bills are moving to close the de minimis loophole for non-market economies (which would primarily affect China, Russia, and potentially Vietnam). A bipartisan letter from 12 senators pushed the Biden administration on it in mid-2023. A phone call or email to your congressional office is one of the highest-leverage low-effort things a US ecommerce owner can do this year.

What happens if the de minimis loophole gets closed?

If Congress closes the de minimis loophole for non-market economies, apparel imports from Temu and Shein would face roughly 15-25% duties, packages would slow at the border, and Temu and Shein would have to open US warehouses, import in bulk, pay duties, and follow US laws the same way domestic sellers do. That closes most of the pricing gap.

Jerry is careful to say he is not an isolationist. Chinese factories that want to sell into the US would still be welcome. They would just have to play by the same import, tariff, and IP rules everyone else follows.

Even without legislation, the underlying behavior change (US shoppers becoming comfortable ordering direct from Chinese factories) is durable. Sellers should build brand and direct-to-consumer regardless of what happens in Washington.

Frequently asked questions

What is Temu and how does it work?

Temu is a Chinese-owned marketplace (parent company PDD Holdings, formerly Pinduoduo) that ships goods direct from Chinese factories to US consumers, typically in 10-15 days, using the US de minimis import exemption to avoid tariffs and customs inspection on packages worth under $800. Prices are dramatically lower than Amazon on comparable items because Temu bypasses import duties, US warehousing, and (per Wired) reportedly subsidizes shipping by around $30 per package.

What is Shein and how is it different from Temu?

Shein is a Chinese direct-to-consumer fast-fashion marketplace focused mostly on apparel and accessories, especially for women, and was the most-downloaded shopping app in the US in 2022. Shein and Temu use the same de minimis import mechanics, but Shein is narrower on category (fast fashion) while Temu is a broad cross-category marketplace.

What is the $800 de minimis loophole?

The de minimis rule is a US law that lets any package worth $800 or less enter the country without duties, tariffs, or normal customs inspection. Roughly 2 million such packages enter the US every day, predominantly from China, and Temu and Shein are the two largest users of the exemption at scale.

Why are US apparel sales down so much in 2023?

US apparel sales, especially on Amazon, are down roughly 30% year over year because Temu and Shein together are pulling meaningful demand off Amazon and onto direct-from-China channels, and the underlying pricing gap (a $6 Temu shirt vs. a $20 Amazon shirt) is structural, driven by the de minimis exemption. Peer businesses in adjacent categories are not seeing declines anywhere close to 30%.

Is Temu selling counterfeit or unsafe products?

Temu hosts many near-clone products (search Rolex and you will get “Oleg” watches with the Rolex crown), and enforcement of intellectual property, product-safety, and forced-labor rules is very limited because sub-$800 packages are almost never inspected by US Customs and Border Protection. A Bloomberg-commissioned study also traced cotton in Shein garments to Xinjiang, a region under US sanctions.

Is the Temu app safe to install on my phone?

Short-seller firm Grizzly Reports and outlets like Wired have flagged the Temu app for unusually aggressive on-device data collection compared to other mainstream shopping apps, including reports that the app can compile its own code on device after installation. Whether that is disqualifying is a personal call, but the reporting is meaningfully worse than the industry norm.

How can US ecommerce sellers compete with Temu and Shein?

Do not compete with Temu and Shein on price. Compete on brand strength, direct-to-consumer relationships, shipping speed, returns, and service quality (the parts of the experience Temu structurally cannot deliver under a 10-15-day cross-Pacific ship model). At the policy level, contact your congressional representatives to support closing the de minimis loophole for non-market economies.

Will Congress close the de minimis loophole?

Two active bills (one in the Senate, one in the House) target closing the de minimis loophole for non-market economies, and a bipartisan letter from 12 senators asked the Biden administration to act on behalf of the US apparel industry. Timing is uncertain, but political attention is meaningfully higher than at any prior point in the last decade.

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