Transcription
Hello everyone, you can see me on the streets of Melbourne.
Today, I visited a fish market for a meal, then went to check out a library, and also visited the Royal Botanic Gardens. I will only be staying here for two days before heading back to Taiwan. Of course, I believe I will miss Xiao Miao Miao and Xiao Dang Dang.
Today, I want to talk to you about the issue of small packages.
Alright, the Trump administration issued a ban, stopping the exemption for small packages under $800 from needing customs declaration. Three days later, they continued the exemption. Why? One simple reason is that they couldn't handle it. I mentioned before, when so many packages go from not needing customs declaration to needing it, it's no joke. Customs declaration is overwhelming.
In my previous videos, I talked about the number of exempt packages sent to the U.S. each year, which is 1.35 billion. Many of these are sent privately. We all send things to relatives and friends, or some products to the U.S. Now, customs declaration will be required. However, only Shein and TEMU account for about 30% of that number, around 500 million.
How many packages do they ship daily? These two companies ship about 9,000 tons a day, which requires 88 Boeing 747s to transport. The problem is that TEMU and Shein simply do not have the infrastructure to support this. They are essentially outsourcing.
People understand why Shein, such a simple operation, doesn't hire directly but outsources. There are valid reasons for this. Outsourcing is the most flexible option. Now that the system has changed, requiring customs declaration and training staff on how to fill out forms, when you receive a package, you need to understand it to fill out the form.
It belongs to the customs declaration, and you need to know which customs code applies. There is a lot of information to fill out, and then you have to classify it for shipping. It's not just the U.S. Postal Service; customs cannot handle it, and the courier companies also cannot manage it.
This 1.35 billion packages turning into needing customs declaration is something TEMU and Shein cannot handle. How long will this chaos last? It won't be sorted out in two or three months. I estimate that about a month from now, the U.S. will again cancel this exemption, and everything will need customs declaration.
At the very least, they need to train employees, manage the assortment of shipments, and upgrade the software to handle this.
Now, let's talk about the impact on Shein. There are many blows to TEMU, but I think they are slightly less severe. The impact on Shein, according to experts, is significant. They will have to add many costs that were previously exempt from taxes, effectively imposing a 20% tax, plus an additional 10%, along with state sales tax, and then customs fees.
Currently, the customs fee for each order has increased by $20. Not only are customs fees rising, but your shipping costs will also increase. This means UPS, DHL, and Federal Express will all raise their prices. Experts estimate that an order could see a cost increase of about 60%.
In this situation, there are two major impacts. First, prices have gone up, which means people will buy less. Second, the process will slow down because all the documentation must be completed before delivery. It will definitely take longer, which will also lead to fewer purchases.
TEMU is different; many of their products are daily necessities and electronics. Can Shein, with its fast fashion, survive?
Shein has been trying over the past year or two to move part of its production line away from relying solely on China, relocating some to places like Brazil, Turkey, and Bangladesh. However, the results have not been good. To be frank, this system is hard to replicate.
Why is this system difficult to replicate? The 5,000 companies under it need to have a lot of autonomy. These people must know how to do business, find enough materials, and appropriate components, then design clothes quickly. They can copy others' designs and propose them to Shein, producing 100 or 200 pieces in a very short time.
If the response is good, can they scale up to 1,000 or 10,000 pieces that quickly? I can say that this high level of entrepreneurship and business acumen is something only Guangzhou can achieve. I believe it wouldn't work in Shanghai either.
Guangzhou has been doing foreign trade for many years, inheriting the spirit of Hong Kong's fashion industry. Hong Kong has produced this kind of work. It has been ongoing for not just a short time; for thirty years, it has been a leading center for fashion accessories.
This is not something a central system can achieve; it relies on the leadership of each department.
Now, Shein will definitely be severely impacted. I can assert that Shein is heavily injured, but the result is that no one is competing with them, so they can still survive.
However, what is their market value? They are still trying to go public in London. At one point, their valuation was over $70 billion, then they aimed for $65 billion, and now it's said to be $50 billion. I think this number is too early to determine. We need to see how much impact they actually face before we can assess Shein's valuation.
Regarding the Trump administration, the people he appointed have connections to Shein. There are two individuals involved, which is a serious conflict of interest.
First, one of the people providing services to the FBI holds 5 million shares of Shein, and the FBI will be responsible for overseeing Shein's labor practices. He refuses to sell his Shein shares.
But now, whatever Trump does is right; other media dare not speak out, and no one finds it strange. Additionally, the Attorney General used to lobby for Shein, which is also a serious conflict of interest.
If I were to talk about political correctness, these people should not be in their positions because Shein is likely to get caught up in many lawsuits. The Attorney General's role clearly presents a conflict of interest.
Can Shein use a second method? That is, to centralize shipping, using air freight and container shipping to the U.S., for example, to Seattle or LA, and then ship it out.
This model is theoretically possible, and I don't see anyone who can compete with Shein. However, it is inevitable that Shein will be severely impacted.
The person responsible for Shein established this system and is a genius. I must say that, but it is also in line with the business acumen of the Guangdong bosses and the quick and flexible methods of the Hubei workers that made it possible.
It is one of a kind. Now, we will see if they can survive.
That's all for this segment.