Two wildly popular stores are preparing their customers for a massive fast-fashion shift. Temu and Shein said they will raise prices in response to major shifts in US trade policy. The online shops -- which relied on a trade loophole to supply Americans with products like $7 dresses, $4 home goods, and even some sub-$100 heavy equipment -- said their prices will rise on April 25.
For years, the China-based companies relied on the de minimis exemption, a workaround that allowed shipments under $800 to bypass US tariffs. President Donald Trump has announced plans to remove that loophole on May 2 in an attempt to even the playing field for US companies. He also slapped massive 140 percent tariffs on imports from China.
'With tariffs and the ending of de minimis, the cost of doing business in the US is rising for Shein and Temu,' Neil Saunders, the managing director of retail at GlobalData, told DailyMail.com. 'Given their business models are low margin they have little choice but to increase prices for consumers.'
The price changes are a shocking admission for both companies that is sure to change their main advantage.
Both stores operated an extremely tight supply chain that offered lower prices to consumers and undercut other clothing retailers. Their dirt-cheap prices were fundamental to their explosive growth. But even as prices rise on the online store, Saunders said this isn't a deathknell for either company.
'For the shopper, this means goods won't quite be so cheap,' he said.
'However, both Shein and Temu will remain relatively low-priced sites compared to others.'
For years, both online stores had ruffled the feathers of multiple American clothing companies. Forever 21, for example, pointed its fingers at the rapid rise in popularity of the online brands in its second bankruptcy filing.
Even dominant American brands, like Amazon, reported losing millions of American customers to the Chinese brands. Steve Dennis, the president of SageBerry Consulting, also said the tax change is 'welcome news' for value-based American retailers.
'However, two things should be kept in mind,' he added.
'Many of their direct competitors source products from China (and other markets that may face significant, persistent tariffs), so they will almost certainly be raising their prices even if the de minimus exemption is a non issue.'
'And, Temu and Shein's advantage stems from both low cost labor and the strength of their innovative business model (little or no markdown merchandise, ability to deeply understand consumer trends and respond, very short time to market).'
Dennis said the taxes will amount to a 'material headwind,' but not a destruction of the company's price advantages.
On social media, shoppers remain divided on the exemption's removal in message boards. Some consumers are parroting what dozens of consumer advocates have told DailyMail.com about tariffs: they will increase prices at stores .
'At the end of the day, we, the consumers, lose out,' one Redditor said in a thread about the price hike announcement.
Analysts estimate that tariffs will add between $3,200 and $4,400 to American's yearly spending. Some shoppers have already noted the price changes. Victoria Alario, a TikTok user, posted a video after noticing unexpected charges on her order from another competitor, Meshki, a boutique clothing store that ships from China.
Her two items totaled $304, but after duties and sales tax, the final price jumped to $441.88 - including an extra $101.85 in duties. 'This had me gasping,' Alario said. 'This caught my eye so quick because I was like, where did that come from.' Others, however, are saying the products weren't worth paying the absurdly low prices. 'That's a good reason to not buy from Temu,' another Redditor chimed. 'I still have crap I haven't opened.'