Aggressive advertising. Extremely low prices and fast deliveries. Goods that do not comply with European safety standards. Subsidies from the Chinese state. These are some of the key characteristics of the business model of Chinese online trading platforms Shein and Temu, which businesses in Bulgaria are concerned about.
They voiced their concerns at a roundtable discussion "Chinese platforms for fast fashion and goods - a threat to health and business", organized by the Bulgarian Chamber of Commerce and Industry (BCCI) and the Bulgarian Association Circular Textile (BACT).
Store closures and reputational damage
The rapid and uncontrolled entry of the two Chinese e-commerce companies is creating problems for Bulgarian companies, said participants in the meeting. "In the last 18 months we have seen a decline in sales, with things worsening every quarter. At first we thought this was a post-COVID effect, then I looked for the cause in my own management but eventually realized that there is no way to compete with prices of 10 levs (5 euro) for 10 T-shirts and a toolkit for zero levs," said Sevdalin Spasov, chairman of BACT and owner of M Holding, which manages second-hand clothing store chain Mania. He noted that within a year nine out of 40 Mania stores had to close. "The situation in the sector is no better. Our association unites 50 companies and provides employment to around 5,000 people. More than 10% of second-hand clothing stores have closed in a year and the overall drop in trade turnover is 15%," he added.
According to him, the reason for all this is the cheap offering from Chinese platforms Shein and Temu. "In 2022, 1 billion parcels from China, each valued under 150 euro, entered the EU. The following year, this number increased to 2 billion. In Bulgaria 2 million parcels were delivered in a year, with an average price of about 7 dollars," said Spasov. According to EU regulations, shipments from third countries valued below 150 euro apiece are exempt from import duties.
The Bulgarian Retail Association emphasized that the aggressive behavior of Chinese traders is causing reputational damage to businesses in the country. This is because customers believe that these dumping subsidized prices represent the real value of the products and Bulgarian retailers are perceived as "greedy speculators".
Dangerous ingredients
The biggest concern expressed during the discussion was for consumer health. Suppliers of Chinese platforms are not subject to EU consumer goods control criteria. Their products are sold abroad without the necessary quality information. The platforms formally claim to comply with the required standards but the lack of recipient verification allows even dangerous goods to reach consumers, noted BACT.
"At Temu, we use a comprehensive approach to quality control on our platform, which aligns with the requirements of the markets in which we operate," the platform stated in an official stand. "The process begins with seller onboarding, where they are required to submit the necessary documentation. Additionally, they sign agreements confirming their commitment to product safety and compliance with regulations applicable to their intended markets.
Physical inspection is another critical component of Temu's quality control measures. Ongoing monitoring and collaboration are also integral to maintaining quality control. Accountability and penalties are clearly defined within Temu's quality control framework. Violations can result in warnings, penalties, product removals, account closures or even referral to regulatory authorities for serious or repeated violations," Temu said.
Selling below cost
According to BACT data, Temu subsidizes its orders and sells below cost to gain market share. The loss on each Temu order amounts to 30 to 35% for shipments to the US and around 40% for those globally, including to the EU, said Sevdalin Spasov. According to meeting participants, both online platforms receive significant support from the Chinese state, although this cannot be proven.
Consumers benefit from the low prices in the short term but that model kills competition and could lead to price increases in future due to the lack of local alternatives, the industry association said. At the same time both platforms rely on aggressive advertising. Temu was Meta's largest advertiser in 2023, investing 2 billion dollars in Facebook and Instagram. Both platforms are private but the Chinese state has declared its active support for them, including "facilitating financing channels."
Demands
BACT called on Bulgarian authorities to push the EU to eliminate the duty exemption for third-country shipments valued up to 150 euro each and to introduce ecological or product fees similar to those in France.
"The effects of Chinese platforms' online trade are being felt by Bulgarian and European companies, which have invested in premises, equipment and labor. Unfortunately, there are already numerous examples of reduced trade volumes, production shutdowns and job losses, affecting not only entrepreneurs, workers and their families but also Bulgaria's budget in terms of revenue and social security funds. We want clear rules, we want the goods offered on Chinese platforms to meet the requirements of the World Trade Organization. Bulgarian businesses are not afraid of competition but in the case of Chinese online traders, it's not competition," BCCI chairman Dobri Mitrev stated.
Aggressive advertising. Extremely low prices and fast deliveries. Goods that do not comply with European safety standards. Subsidies from the Chinese state. These are some of the key characteristics of the business model of Chinese online trading platforms Shein and Temu, which businesses in Bulgaria are concerned about.
They voiced their concerns at a roundtable discussion "Chinese platforms for fast fashion and goods - a threat to health and business", organized by the Bulgarian Chamber of Commerce and Industry (BCCI) and the Bulgarian Association Circular Textile (BACT).
