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

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You’re listening to the My Wife Could Her Job podcast, the place where I bring on successful bootstrap business owners and delve deeply into what strategies are working and what strategies are not with their businesses. Today I’m doing a Seller episode to talk about TEMU and how it’s affecting e-commerce businesses in the United States. Is TEMU going to take over? Is it game over for e-commerce? Well, listen on to understand what’s going on and what you can do about it. But before we begin, I wanted to let you know that tickets for the 2024 Seller Summit are almost sold out over at sellersummit.com.

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The Seller Summit is the conference that I hold every year that specifically targets e-commerce entrepreneurs selling physical products online. And unlike other events that focus on inspirational stories and high-level BS, mine is a curriculum-based event where you will leave with practical and actionable strategies specifically for an e-commerce business. Every speaker I invite is deep in the trenches of their business. Entrepreneurs who are importing large quantities of physical goods and not some high-level guys who are overseeing their companies at 50,000 feet.

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I personally hate large events, so the Seller Summit is always small and intimate. Every year we cut off ticket sales at around 200 people, so tickets sell out fast, and we’ve sold out every single year for the past 8 years. Now if you’re an ecommerce entrepreneur making over $250k or $1 million per year, we also offer an exclusive mastermind experience with other top sellers, but as of right now we actually only have 5 of those tickets left. The Seller Summit is going to be held at Fort Lauderdale, Florida from May 14th May 16th, and right now,

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This is the last time you’re going to be able to get your tickets because they’re almost sold out. Also, if you haven’t picked up my Wall Street Journal bestselling book, The Family First Entrepreneur yet, it’s actually available on Amazon at 50 % off right now. My book will teach you how to achieve financial freedom by starting a business that doesn’t require you to work yourself to death. Plus, you can still grab my free bonus workshop on how to sell print on demand and how to make passive income with blogging, YouTube, and podcasting when you grab the book over at mywifecoupterjob.com slash book.

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So go over to mywifequitterjob.com slash book, fill out the form and I’ll send you the bonuses right away. Now on to the show.

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Welcome to the My Web Coder Job Podcast. In this episode, we’re going to talk about the phenomenon known as Tmoo and how it’s taking the e-commerce world by storm. if you’ve never heard of Tmoo before, Tmoo is an online marketplace that offers extremely low prices on thousands of products shipped directly from China. And the company is a subsidiary of PDD Holdings, a Chinese company which is publicly traded on the NASDAQ. And Tmoo is one of many Chinese companies trying to break into the American market and their prices are

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Possibly low according to Wired magazine team who is losing hundreds of millions of dollars to send you cheap stuff from China in order to grab mass market share from US shoppers and it’s working their growth has been beyond Exponential in less than a year team who already has one-third the monthly active users of Amazon from $3 and 37 cents for a pair of shoes to just $4 and 50 cents for a woman’s sweater Their prices just seem too good to be true and it turns out that they are

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An analysis of the company’s supply chain cost by Wired magazine, which was confirmed by a company insider, shows that Tmoo is losing an average of $30 for every order made. In addition to the U.S., Tmoo also operates in Canada, Australia, and New Zealand and is estimated to be losing $588 million to $954 million every single year. But the real reason for this episode today is whether this is affecting U.S. businesses. Now, if you’ve listened to the archives,

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Recently, I interviewed my friend Jerry Kozak on the podcast who runs an online store selling t-shirts both on Amazon and Shopify that makes over eight figures per year. And according to Jerry, he believes that companies like Tmoo and Shien are taking sales away from his company, especially on Amazon. Shien is one of these Chinese fast fashion companies. Ever since both Tmoo and Shien burst onto the US scene in 2022, Jerry’s business has cratered by nearly 50%.

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Now granted, Jerry’s in the t-shirt business, which as you know is one of the most saturated and most competitive niches to sell into. So you should probably take his numbers with a grain of salt, but according to an Amazon representative, the entire apparel category on Amazon is down 30 % year over year. Meanwhile, other apparel and t-shirt companies and e-commerce communities that I belong to are down year over year as well. Right now, companies like Tmoo and Shien seem to be mainly hurting lower end apparel businesses

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and companies without a powerful brand or intellectual property. And here’s why. Both Tmoo and Shien have two gigantic advantages that US companies do not when it comes to making and selling apparel. Now for one thing, they have a huge cost advantage over US sellers because of extremely low labor costs. Now according to the LA Times, products made in China’s western province of Xinjiang are being sold to US consumers through Tmoo in breach of a ban.

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that forbids goods from being imported from the region due to links to forced and slave labor. The statements were former detainees and reports from an array of researchers and advocacy groups have alleged that the Chinese government put more than one million people in detention camps in that region and that laborers in fields and factories were forced or coerced to make cheap products for Tmoo. Now the Chinese government said the camps are for re-education purposes, but I don’t really believe them. And no one knows for sure.

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but slave labor could be one way that Tmoo is commanding such low prices. Now just for some context, a blank t-shirt costs about two bucks and shipping within the continental US is about four bucks for a shirt. This is the rough cost for a business in the US and in order to make a decent profit after printing a custom design on the shirt, you gotta be able to sell the shirt for at least 20 bucks. Meanwhile, Tmoo is selling a printed t-shirt direct from China to a US address for less than seven bucks and that includes shipping.

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so they can literally sell apparel at or below the minimum cost. Now the second reason Timo has an advantage is due to the de minimis loophole that allows Chinese sellers to not have to worry about paying taxes, tariffs, or customs duties. Now the de minimis loophole is that any shipment sent to the US that is valued at less than 800 bucks does not have to pay any taxes whatsoever. And because Timo is shipping individual products into the US, they don’t have to pay any customs duties or taxes at all. Meanwhile,

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In order for a US apparel company to get low pricing, they have to import a large quantity of t-shirts into the US and pay both customs duties and tariffs on the products. Now whether this is fair or not is really up to you, but let me just put it in simple words to sum it up. A product on Tmoo is seven bucks, no import duties, and arrives in one week with free shipping. Now the wholesale cost for the same item made in the USA is 10 bucks, retails for 20 bucks, and this price differential is a problem.

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because the math doesn’t work out for the consumer. Now at the same time, Tmoo is squeezing small manufacturers in China to cut prices to even lower levels that makes it even impossible for Chinese manufacturers to make a profit. Now one Chinese manufacturer who goes by Tai Chi was approached by Tmoo to sell on the platform when it launched in 2022 and he joined, but soon found out that he had little control over prices. Tmoo will often ask to lower prices and if you agree, the platform will decide what the lower price is.

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You don’t have say over your pricing, and if you refuse to lower your price, you simply won’t be listed on the platform. This is their method of operation. Tmoo’s parent company, Pinduoduo, burst onto the scene in China by providing deep discounts to gain market share as well. And heck, Amazon did the same thing back in the day, and the formula works. Offer impossibly low prices to shut everyone out and lose a ton of money for many years, and then once you’ve become a household name, raise prices and turn a profit.

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This is what Amazon did and this is what Tmoo is trying to do right now. But the difference this time between Tmoo and Amazon is that Chinese companies like Tmoo have the advantage of favorable taxation and impossibly cheap labor compared to U.S. companies. They don’t have to pay any taxes at all and they can get away with paying their staff pennies on the dollar. Now the real question though is whether they can keep this up. As I mentioned earlier, Tmoo’s low prices is costing the company a ton of money.

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and they’re estimated to be losing $30 per order and hundreds of million dollars per year. Tmoo is also squeezing their suppliers to get the lowest pricing possible, and many Chinese sellers are leaving Tmoo. Meanwhile, Tmoo is also gathering data from millions of US citizens, which is attracting the scrutiny of the US government. So in my eyes, something has to give. And right now, TikTok’s about to be banned. Who knows Tmoo might be next. But on the flip side, we just happen to be living in a very interesting period right now. The average American

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is carrying a record amount of credit card debt and the savings rate is at an all-time low, which makes for the perfect storm for a company like Timo to thrive. Now as a small business owner, what can you do to fight back? You all know that I teach e-commerce over at mywebquaterjob.com and I run a seven-figure store over at bumblebillindens.com. Is it all doom and gloom? And here’s what I have to say, and I’m going to be quite frank and honest with you guys. If you are selling commodity products,

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that do not have a strong value proposition, you probably aren’t going to survive regardless of whether Tmoo and Shien exists or not. So for example, if you’re selling generic t-shirts that are easily copied by manufacturers from China who have a cost advantage over you, you’re just not going to make it. But if you can tap into the emotions of your buyer and establish a strong brand, you will survive regardless of pricing pressure. And since we’ve been talking about t-shirts and apparel so far, I’d like to talk about

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one of my favorite companies, is called True Classic Tees. True Classic Tees is a company that sells generic solid color t-shirts, which is probably one of the most saturated and competitive niches out there. But they brought in over 250 million bucks since they opened in 2019. Now, how does a blank t-shirt company that sells plain t-shirts for 25 bucks a pop make so much money? Well, it’s all about the marketing and how they make consumers feel about their product. Now, if you’ve never watched one of their True Classic Tees commercials,

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Basically, they show an overweight guy wearing a shirt with his beer belly hanging out and the shirt doesn’t really fit well at all. Then they flash forward to a picture of the exact same overweight guy in a true classic t-shirt and all of sudden he looks buff. The t-shirt emphasizes his biceps and hides his Buddha belly. Now, can T-Muscle a plain t-shirt for three bucks? Yes, but it cannot replicate the mind share that true classic tease has created. Selling online is all about triggering the emotions of your consumer.

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and it’s not all about price. I’d much rather pay 25 bucks for a t-shirt that makes me look and feel good rather than a cheap throwaway $3 t-shirt. And incidentally, this is exactly how Dr. Squatch sells men’s soap. Now as a dude, I don’t really care about what soap did I use in the shower. When I’m in a hotel, I’ll use whatever soap that’s there. But Dr. Squatch hooked me with their commercials. Instead of telling consumers about how good their soap smells or how well the soap cleans and exfoliates, Dr. Squatch sells soaps

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by catering to the sexual desires of men. Now in almost all their commercials, they show a woman smelling her man saying words like, man, you smell so good. I want to jump you right now. And as a guy, when you watch a commercial like that, you’re probably thinking to yourself, wait a sec, if I use Dr. Squatch, I’m going to get more action? Well, sign me up. Now can T-Mu sell a bar of soap at half the price? Definitely. But can they compete with Dr. Squatch? Probably not. Right now,

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Tmoo is a junkyard that sells cheap generic products from China, and their rock bottom pricing is affecting the apparel industry the most because apparel is a commodity, and most clothing, especially on Amazon, is generic and unbranded. Now what I didn’t tell you about my friend Jerry Kozak earlier is that even though his business has dropped around 50%, he’s going to be just fine because the other half of his business does not depend on sales from Amazon or being price competitive.

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The other half of his teacher business is where he custom prints products from NATO, college sports teams, and other organizations. The other half of his business is where he’s established a solid repeat customer base and strong relationships with his customers. And these are customers that he will never lose. His added value is his customer service, his attention to detail, and the loyalty he’s built over time. And this is what it takes to create a lasting e-commerce business.

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So while Tmoo is probably destroying the low end apparel market, as a small business owner, you can succeed by niching down and going for the high end. If you were competing purely based on price, you’ve already lost. Now as for the other unfair advantages that Tmoo currently possesses, that’s up to the US government to decide. If you feel as though the de minimis rules that prevent Chinese sellers from having to pay US taxes sounds unfair, well then you should write a letter to your local representative in your state. And if you are against

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possible slave labor practices in the creation of Tmoo’s products, then you can show your support by not buying these products as well. But for myself and my e-commerce store, I’m not really worried about Tmoo at all. Now, if you want to learn more about Tmoo, there’s a lot of episodes on my YouTube channel. And if you want to listen to Jerry Kozak’s episode, just go back and look through my archives at the podcast. Hope you enjoyed this episode. Now with all the Google AI changes, Tmoo, Shein and TikTok Shop, e-commerce is going to change dramatically this year.

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For more information about this episode, go to MyWifeCoderJob.com slash episode 526. And once again, tickets to the Seller Summit 2024 are now on sale over at SellerSummit.com. If you want to hang out in person, in a small intimate setting, develop real relationships with like-minded entrepreneurs, and learn a ton, then come to my event. Go to SellerSummit.com. And if you are interested in starting your own e-commerce store, head on over to MyWifeCoderJob.com and sign up for my free six-day mini course. Just type in your email and I’ll send you the course right away.

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Thanks for listening.