China’s low-cost e-commerce boom is losing momentum as higher air freight costs and softer demand in Western markets squeeze margins for platforms such as Temu, Shein and AliExpress.
The business model behind the companies relies heavily on shipping inexpensive products directly from Chinese factories to overseas customers. That model was already under pressure after U.S. President Donald Trump imposed tariffs and ended customs waivers on low-value parcels last year.
Now, the conflict involving Iran has added another challenge. Industry executives and data point to rising transport costs, with carriers including DHL Express introducing fuel surcharges.
Exports post fifth straight monthly decline
Chinese low-cost e-commerce exports fell 10.9% in April from a year earlier to $9.81 billion, according to an analysis of Chinese customs data by Luxembourg-based consultancy Trade and Transport Group.
It marked the fifth consecutive month of year-on-year declines.
Even so, export levels remain well above those seen two years ago. Early 2025 also saw a rush of shipments ahead of U.S. tariffs.
Sellers pass higher costs to shoppers
Diana Qiao, a women’s clothing seller in Shenzhen using Temu, said she raised prices by $2 after shipping costs climbed by about $1 per garment.
“The final burden is ultimately borne by consumers,” Qiao said.
She said the increase was needed to protect profit margins. Sales have slipped slightly, but she has not changed her shipping arrangements.
Warehouses gain importance
Analysts and industry insiders say the rapid expansion seen in recent years may be fading.
Instead of flying individual packages from China, companies are increasingly moving goods in bulk to overseas warehouses and delivering orders locally.
Frederic Horst, managing director of Trade and Transport Group, said the economics of air freight are becoming less attractive.
“If you’re buying a top that is 300-400 grams you’re getting to the stage where air freight is 60% of the cost,” he said.
Shein has been expanding its European logistics network. Last month, the company opened its third warehouse in Cannock, near Birmingham in Britain.
Multiple pressures hit growth
Several factors are weighing on the sector:
- Rising jet fuel prices linked to the Middle East conflict.
- Higher air freight charges and fuel surcharges.
- Slower spending by lower-income consumers in the United States and Europe.
- Existing U.S. tariffs and the removal of customs waivers on low-value parcels.
- A planned €3 fee on low-value e-commerce packages entering the European Union from July 1.
A spokesperson for Alibaba, which owns AliExpress, said the company remained focused on maintaining “value-for-money pricing for consumers and providing a stable environment for sellers and consumers despite the volatility in global transportation costs”.
Shein and Temu did not respond to questions from Reuters.
Freight costs may stay elevated
A China-based freight forwarding executive said the platforms are entering a slower-growth phase and overseas consumption has weakened because of inflation.
Judah Levine, head of research at freight platform Freightos, said high jet fuel prices could keep air freight rates elevated even if the Iran conflict ends.
Martin Habisreitinger, chief operating officer for airfreight at Hellmann Worldwide Logistics, said companies could shift to other transport methods or reduce shipments if costs remain high.
“If the costs stay very high, or even increase further, companies may switch to other modes of transport or hold back some of their shipments,” he said.
TL;DR:
China’s low-cost e-commerce exports fell 10.9% in April as higher freight costs linked to the Iran conflict and weaker consumer demand put pressure on Temu, Shein and AliExpress. Companies are increasingly relying on overseas warehouses to manage costs.
AI summary:
- China’s low-cost e-commerce exports dropped 10.9% in April.
- Higher freight costs are squeezing platforms such as Temu, Shein and AliExpress.
- Sellers are raising prices to offset rising shipping expenses.
- Shein is expanding warehouse capacity in Europe.
- Analysts say the sector is entering a slower-growth phase
