As Temu, Shein pivot to Europe, they again meet regulatory scrutiny

Temu and Shein are pivoting to Europe as their business in the U.S. takes a major hit from unfavorable trade policies. But the China-founded budget e-commerce apps may not receive a warm reception in their new target markets. 

In recent weeks, complaints have been filed against Temu and Shein in the EU, accusing them of unsavory business tactics. That comes as the bloc prepares a new two-euro flat fee on previously customs-free small packages from online marketplaces like Temu and Shein. 

Experts say the new developments could be ominous signs for the platforms, as their business has already suffered from the May closure of a small package tariff exemption in the U.S., as well as new duties at 54%, or $100 for those sent through the postal service. 

“As regulatory and trade pressures intensify in the U.S., Temu and Shein are increasingly turning to Europe and the UK as critical growth markets,” Anand Kumar, associate director of research at Coresight Research, told CNBC. 

However, Kumar said that the companies have begun to face regulatory headwinds in Europe and the U.K. that echo the scrutiny they’ve encountered in the U.S. 

“The EU’s proposed €2 customs fee is more than a minor surcharge—it’s a strategic regulatory move aimed at curbing the unchecked growth of ultra-cheap cross-border e-commerce, and it could reshape how platforms like Shein and Temu operate in Europe over the next 2–3 years,” he added. 

Temu and Shein have boosted their ad spending in Europe, particularly in the U.K. and France, according to a report from Reuters, reflecting their shift away from the U.S.

The growing importance of the EU and U.K. to the two companies has also been reflected in data from Consumer Edge Research, which traces consumer trends based on a sample of credit and debit card info. 

According to the data it sent to CNBC, Temu’s consumer spending in the U.S. fell about 36% in May from a year earlier, while Shein’s fell 13% over the same period. The company added that its data shows that some of Temu and Shein’s U.S. customers have shifted their spending toward legacy department stores and fast fashion retailers. 

Those trends coincide with data from market intelligence firm Sensor Tower showing that app usage of Temu and Shein in the U.S. is slowing significantly.

However, the opposite trends for the platforms were observed in the U.K. and EU. In May, year-over-year consumer spending growth reached 63% in the EU and 38% in the U.K. Shein experienced growth of 19% in the EU and 42% in the U.K. over the same period. 

For Temu, Consumer Edge data showed that growth was especially pronounced in the key market of France, Europe’s second-largest economy.  

To capitalize on the momentum in Europe, Temu and Shein have been aggressively…