The Cost of “Shopping like a Billionaire”

With the onset of the COVID-19 pandemic, Chinese online marketplaces Temu and Shein have gained significant popularity. By gamifying and glamorizing online shopping, these platforms have revolutionized e-commerce, becoming some of the most downloaded apps worldwide and attracting millions of users. To mitigate concerns over their ties to the Chinese Communist Party (CCP), both companies have sought to downplay their origins. Yet, as the US-China relations continue to deteriorate, scrutiny over the true costs of “shopping like a billionaire” intensifies.   

While much attention has focused on TikTok’s data privacy issues, Temu and Shein present an equally potent, if less obvious, threat. Selling goods at astonishingly low prices, the two platforms have sparked a consumer frenzy, making their way into the electronic devices of millions across the world. While Temu boasts an estimated 167 million monthly active users, Shein is said to have had around 88.8 million active shoppers at the end of 2023, including 17.3 million in the US. Their success has positioned them as key drivers of Beijing’s soft power, according to China’s official state news agency, Xinhua, making them yet another front in the strategic competition between China and the West. 

This success is, however, intertwined with practices that raise serious concerns about forced labor, data privacy, and geopolitical influence. Not only have both companies been accused of failing to comply with the Uyghur Forced Labor Prevention Act (UFLPA), but as entities subject to China’s National Intelligence Law, they both may act as conduits for the Chinese government to access vast amounts of private consumer data for surveillance, collection, and even cyber warfare. Yet, despite efforts by both the US and the EU to investigate these practices, enforce existing forced labor prevention and digital services acts, and raise awareness of risks associated with these apps, the frenzy continues.

The Power of Marketing

While Temu was launched in 2022 and Shein in 2008, they both experienced a rapid uptick in sales during the COVID-19 pandemic as online shopping became the primary means of acquiring products. Though the two platforms employ similar strategies to target their audiences, Shein is primarily a fast-fashion focused platform, whereas Temu sells a wide variety of products, from clothing to home appliances and toys. Temu also operates as a more traditional marketplace, acting as the middleman between consumers and small businesses. In contrast, Shein employs an on-demand business model with its own supply chain, directly linking consumer demand to factory output.

Both companies are known for their marketing strategies, which include gamification, aggressive pricing, cooperation with influencers, use of algorithms and data personalization, and robust social media presence. This is reflected in their yearly marketing and advertising spending, with Shein having reportedly spent between $300 and $400 million on marketing in 2023, while Temu has invested $368 million in advertising in the first few months of 2024. Temu also made headlines by spending more than $21 million on its 2024 Super Bowl ad campaign, offering $15 million worth of gifts to entice consumers into downloading the app and “shopping like billionaires.”

Their marketing strategies combine fun, interactive, and animated elements to induce ‘dopamine hits’ – similar to those experienced during gambling – and create a sense of urgency to purchase more products. Both platforms also use ‘infinite scrolling’ to present a seemingly endless array of products. Moreover, shoppers can play outfit contests, minigames, collect bonus points, and win discounts and prizes by spinning the wheel of fortune. But here is the trick – these prizes are available only for a limited amount of time and exclusive to the apps, thus encouraging consumers to download the apps into their devices. Shein, which is currently the number one brand on TikTok, further leverages its influencer collaborations, partnering with both micro-influencers and major celebrities like Katy Perry or Rita Ora. It launched what is known as ‘Shein Haul,’ with influencers showcasing Shein products. In 2021, the haul attracted over 2.5 billion TikTok views, and in 2023 Shein collaborated with more than 13,000 influencers. These tactics make the apps highly addictive, while fostering customer loyalty.

Too Good to Be True?

As the two companies dominate online shopping carts, questions arise about the sustainability of their business models. Afterall, their ability to maintain operations while continuously selling products at rock-bottom prices has sparked controversies about their exploitation of the US de minimis rule, which stipulates that packages below $800 can enter the US for free, allowing both companies to evade import duties. In 2022, Temu and Shein accounted for approximately 30 percent of all global de minimis shipments into the US, paying no import duties. In comparison, fast-fashion brands GAP and H&M paid $700 million and $205 million, respectively, that same year.

Even more troubling are allegations about the companies’ sourcing practices, particularly in relation to forced labor in Xinjiang. For instance, while Shein was found to have violated the UFLPA by sourcing cotton from Xinjiang, Temu lacks a framework to ensure compliance with the law. Not only does Temu not audit any of its roughly 80,000 third-party sellers and their compliance with the UFLPA, it has also admitted that it “does not expressly prohibit third-party sellers from selling products based on their origin in the Xinjiang Autonomous Region.” Furthermore, Temu’s parent company PDD Holdings has in the past been accused of requiring its workers to work 380 hours per month, which resulted in several deaths. As such, it is possible that the two companies are effectively enabling forced labor and perpetuating human rights abuses linked to the CCP’s repression of Uyghurs.

Data Privacy and Protection

Beyond labor concerns, Temu and Shein raise alarms over their extensive data collection practices. The secret to their success and the key that enables them to continue to frequently switch up their user interfaces and adjust their business models to provide their consumers well-tailored offers, lies in their ability to capture vast amounts of consumer data and use algorithms to fuel personalized marketing.

While data mining for business purposes is common, Chinese apps like Temu and Shein are said to go beyond what is needed for their e-commerce activities. The scale of data that is being collected by the two companies is directly related to their marketing strategies and the emphasis on selling advertisement services. For instance, in 2022, only 20 percent of Temu’s revenue was derived from customer sales, while 80 percent came from advertising, which requires large-scale data capture and processing. Shein’s app also requests consumers to provide it with access to data from other applications, such as social media, in exchange for discounts and special deals.

Another controversy surrounding Temu concerns Pinduoduo, another company owned by PDD Holdings. Its app was removed from Google Play in 2023 after being found to contain malware capable of accessing users’ private messages, altering device settings, and extracting data from other apps. Though Temu has not been directly involved, it currently faces several lawsuits over data misuse and inadequate consumer protection. Experts are also worried about the further invasiveness of these apps, including their ability to access and activate microphones, cameras, GPS, private messages, and emails.

Given their data mining abilities and the growing controversies surrounding apps originating from China, it is no surprise that the two companies made efforts to distance themselves from China and the CCP. However, their efforts to rebrand themselves as non-Chinese entities – such as Shein’s relocation of its headquarters to Singapore and Temu’s to Boston – do little to erase these risks. And even though both Temu and Shein claim that they do not operate inside China, most of their supply chains remain rooted in China, further complicating their claims of independence.

Temu, Shein, and the Geopolitics of Consumerism

Temu and Shein’s meteoric rise to prominence highlights the complexities of modern consumerism, where convenience and affordability often overshadow ethical and security concerns. While their marketing strategies have captivated millions, the underlying costs of their operations – ranging from forced labor allegations to invasive data collection – are all tied to systems that bolster Beijing’s soft power.

Attempts by these companies to distance themselves from China mask their continued reliance on practices that exploit regulatory loopholes and amplify Beijing’s geopolitical influence. For policymakers, this is not just a consumer rights issue but a challenge to mitigate the global spread of exploitative digital ecosystems shaped by Chinese actors. Consumers, too, must grapple with the hidden costs of “shopping like a billionaire.” The choices made today will determine whether convenience and affordability prevail over ethical standards and national security tomorrow.