Deminimus Eliminus Causes Business Model Explodimus
Sometimes it seems like eliminating deminimis is the only thing the two parties in the US agree on. Perhaps it will all be a dog's dream and prove to be a negotiating tactic, only to be cancelled by the President in another few days.
As for now, the recent elimination of de minimis with China by executive order plans to roil the entire world.
The losers will be, especially in the short-term:
* The international air freight market prices should drop and the revenue of these carriers will be hurt significantly.
* US consumers. Who have never really had to know or care about duties. They will soon know what the rest of the world already knows - it's not fun and limits selection.
* American companies that have used the rule similarly (Quince is one example but there are many others, including recently Amazon Haul)
* Supply chains, including -- air-freight providers who were swamped with de minimis volume, and first leg US providers in the United States who handled the volume coming in from overseas, connecting it often with the US Post Office.
* USPS who will lose some mid and late network injection traffic (although prices have gone up recently).
* Regional networks specializing in this kind of volume like Uniuni and SpeedX could be challenged as well in this new environment.
Last year, Amazon, Shein, Temu and Walmart captured most of eCommerce volume growth in the United States. The question is, will tailwinds accrue and to who?
But how much will it affect Temu and Shein? Given the explosion of deminimis shipments into the US over the past several years, it's clear this will peak and start to trail off. How quickly depends on pricing.
Supply chains could continue scramble to source from beyond China in response. Temu and Shein could continue to test whether more traditional bulk imports to the US, which would likely mean slightly "less fast" fashion would still propel growth. Temu in Europe for instance with a 150€ de minimis is still growing at a healthy clip (>68% at last measure I saw).
This could embolden Europe to take further action. This could even embolden the United States to penalize Europe for continuing to offer a higher than zero de minimis. Times are changing and quickly.
Next week this could all be rolled back, but for now, traditional US retailers and brands with a solid value prop should finally breathe a sigh of relief. The question is -- is your product good enough to benefit from the playing field changes? This could expose the pretenders even more if consumers don't respond.
In any event, the excuses are gone. What remains to be seen is the consumer behavior, and any administration walk-backs.
Still the most likely outcome however? Temu and Shein continue to grow unabated. Much like Amazon before Ecommerce itself was taxed. Ultimately an early advantage that disappears, still advantages that early mover. In this case our old friends Temu and Shein.
