The rise of Chinese e-commerce giants like Temu and Shein is hard to ignore. They’ve already disrupted the online shopping experience with ultra-low prices and trend-chasing speed. But their latest move might be the biggest game-changer yet: investing in U.S. warehousing and fulfillment operations.
It’s no secret that U.S. consumers love a good deal, and these companies have built their brands around satisfying that appetite. However, the question remains: how will their new U.S. warehousing strategy impact American fulfillment, shipping rates, and carrier relationships? Let’s dive in.
Why Are They Investing in U.S. Warehousing?
Faster Delivery, Faster Growth
One reason for this move is speed. While shipping directly from China kept costs low for the Chinese e-commerce giants, it meant longer delivery times that didn’t always meet U.S. consumers’ expectations for quick turnaround. By storing products domestically, they can cut down on delivery windows, aiming to satisfy the “I need it now” mentality.
Avoiding Compliance Headaches
Bringing inventory into the U.S. earlier in the process also helps navigate import compliance issues. With shifting tariffs and regulations (think de minimis thresholds and tariff disputes), this strategy can help reduce costs associated with customs compliance.
Adapting to Market Demand
The e-commerce boom is still driving significant parcel volume in the U.S.; these companies are all about capitalizing on that. However, they still demand rock-bottom shipping rates, creating a unique pressure on the carriers they work with.
Carrier Reactions: A Mixed Bag
With Temu and Shein putting pressure on shipping costs, U.S. carriers feel the squeeze between taking on the volume and determining if it really means good business. Here’s what we’re seeing across the industry:
- Pitney Bowes’ eCommerce delivery handled a decent volume for the two; however, it could not meet business viability and has since shut down operations. The competition stepped in to take over the business, at least in the short term.
- FedEx has been wary of fully committing to low-cost e-commerce partnerships. While they handle some of this volume, they are treading lightly.
- UPS took a more significant plunge, integrating services like SurePost to support e-commerce demands. But they’ve also started scaling back, signaling a more cautious approach.
- USPS is heavily involved in this space but faces ongoing challenges in balancing volume with profitability. They have changed how they work with Consolidators and are actively working with customers to move that Parcel Select volume directly over to the USPS. It is still being determined if this discounted direct volume will continue and if the USPS decides to behave differently once the Temu and Shein volumes include more and more packages from logistics services customers and not just volume sold on their marketplaces.
- Alternative carriers, including regionals and metro/last-mile providers, are stepping up to the plate and are eager to capture as much volume as possible. They face challenges similar to those in their business cases, with constant downward price pressure.
The Big Questions for Temu, Shein, and U.S. Carriers
The shift to domestic fulfillment for Chinese e-commerce giants brings up some critical questions:
1. How Long Will Carriers Offer Discounted Rates?
Carriers that agree to these low-cost partnerships must make it worthwhile in terms of volume and value. At some point, they’ll have to weigh the trade-offs between volume and profitability.
2. Will More Carriers Start Limiting Volume?
As carriers become more strategic about their partnerships, they may start turning away low-profit volume to protect their margins, which could change the dynamics for Temu and Shein.
3. Will leaving some or all of the low-priced volume impact other carrier customers?
With reduced cost and volume density coverage for those carriers who decide to reduce or eliminate low-margin volume, the carriers may need to adjust their networks, including potential service expectations and pricing to other customers.
4. Will Temu and Shein Build or Buy Their Own Carriers?
Given the challenges in securing affordable shipping, Temu and Shein might explore acquiring U.S.-based carriers or building their own last-mile infrastructure, similar to Amazon’s approach.
What’s Next?
As these companies scale up their U.S. warehousing, we’re likely to see continued growth in parcel volume across the board, putting pressure on carriers. High-volume, low-cost partnerships may tempt some carriers, while others will be cautious, focusing on profitability and risk mitigation. This balancing act could eventually force Temu and Shein to either accept slightly higher rates or look for alternatives—such as deeper vertical integration across their delivery networks.
What This Means for Merchants and 3PLs
The competitive landscape for brands and third-party logistics (3PL) providers is shifting. The demand for faster, cheaper delivery is here to stay, and companies like Temu and Shein are proving that it can be done—if the right fulfillment strategies are in place. Merchants might feel the ripple effects as carriers adjust their rate structures, especially if they compete for capacity with high-volume shippers. In addition, Merchants may feel additional competitive pressure because consumers see better delivery times for products bought via Temu and Shein as more inventory moves on-shore and near-shore.
The entry of foreign giants into U.S. warehousing and fulfillment isn’t just a trend; it’s a shift that could reshape logistics strategies for everyone involved. And as we’ve seen time and time again in e-commerce, when one player shakes things up, the ripple effects are felt industry-wide.
At eHub, we’re watching these trends closely, ready to help merchants navigate an evolving logistics landscape confidently. Whether finding the right 3PL, getting competitive shipping rates, or scaling with flexibility, we’re here to ensure your logistics are set up for success—no matter what changes the future brings.
