Temu and Shein Growth Stalls as EU Parcel Duty Squeezes Sales

The discount model meets its ceiling

For three years, Temu and Shein grew on one idea: ship items so cheap that nothing else matters. In the autumn of 2026 that idea is running out of room. In Europe, regulators have taken away the customs exemption the model depended on. In the US, shoppers are drifting away. And Shein's first accounts as a public company show what happens to profit when a business built on cheap goods can no longer keep its costs down.

The effects reach well beyond the two Chinese-founded platforms. Amazon and Walmart are cutting fees and recruiting sellers. Temu itself is turning into something that looks more like a conventional marketplace. All of this is being shaped by regulation that sets prices as much as any company does.

What the numbers show

Shein reported first-half 2026 net revenue of $20.1 billion, up only 1% from a year earlier. Adjusted earnings before interest and taxes fell 50.4% to $538 million.4142 Second-quarter revenue grew 0.9% to $11.08 billion, while adjusted profit for the quarter dropped 66.6% to about $228 million.44 The headline net income figure looks better: it more than doubled to $2.3 billion. But that rise includes a $1.86 billion non-cash gain from revaluing convertible preferred shares, so it says nothing about how the core business is trading.46

The regional figures are the clearest. In the second quarter, European revenue fell 13.9% to about $3.77 billion and US revenue fell 6%. Other markets, led by Latin America, grew 21.6%.4844 Shein said the drop in Europe came from fewer customers after it raised prices and cut advertising ahead of the EU customs changes.48 It also noted that more of its sales now run through its marketplace, where it books only service fees rather than the full value of the goods.46

Investors reacted quickly. Shein listed in Hong Kong on September 1 at a valuation of about $26 billion, far below the roughly $100 billion it was valued at in 2022.1 After the results, its shares hit a record low that left the company worth about $17.5 billion.47

Temu is harder to measure because its parent, PDD Holdings, reports all of its businesses together. The group's direction is still visible. Revenue grew 90% in 2023, 59% in 2024 and 10% in 2025. In the second quarter of 2026 it rose 8%, while net income attributable to shareholders fell 12%.6 Temu's own filings under the Digital Services Act show about 124 million average monthly active users in the EU in the six months to June 2026, down from about 130 million in the previous half-year.6

Europe's parcel duty did more than skeptics expected

On July 1, 2026, the EU ended its duty-free treatment of parcels worth less than €150. In its place is a flat €3 charge for each tariff category in a shipment, not for each parcel.20 An order with three different kinds of product therefore pays €9.15 The charge is temporary and runs until July 2028, when standard, category-based tariffs are due to replace it.19 A separate EU handling fee and mandatory product identifiers are due by November 2026.20

Before July, many observers doubted the duty would matter. One analysis predicted that Temu and Shein would keep growing in Europe through the third quarter, mainly because both had moved stock into EU warehouses where the per-item charge does not apply.14 Supply-chain reporting said the two platforms had largely sidestepped the duty through warehouse hubs in Germany, the Netherlands and Poland.18

The data since then points the other way. Consumer Edge transaction data shows Shein's share of apparel spending in five large EU markets falling from about 7% in spring to below 5% in September. Temu's share of online general-merchandise spending fell from about 7% to 4.5% over the same period, while both companies held steady in the UK, which has no such duty yet.2 In Germany, the e-commerce trade association BEVH reported that third-quarter sales at Shein, Temu and AliExpress combined fell 35.5% to €566 million, and their share of German online retail dropped from 5.3% to 3.1%.8 French ministers said traffic in July fell 42% at Shein and 36% at Temu, and that sales on these platforms were down about 25% by value in September. Brussels estimates that the flow of small parcels has fallen about 64% since July.3

Our reading is that the warehouse argument was correct about how the duty could be avoided but wrong about the timing. Moving inventory into Europe is a real escape route. It also costs money and takes time, and not every product can be stocked locally. Shein's second-quarter fulfilment costs rose 18.1% and reached 50.4% of revenue, up from 43.1% a year earlier. The company said its move to hold stock closer to European customers would add costs in the near term.46 Avoiding the duty, in other words, still shows up in the accounts as a cost.

One caveat applies. Shein blamed much of its margin pressure on higher oil and freight costs linked to tension in the Middle East. Its chairman said the company chose to absorb those costs rather than raise prices.44 Bloomberg's reporting also noted that time spent on Temu and Amazon fell this summer, which suggests part of the weakness reflects a wider slowdown in e-commerce.5 Even so, the gap between Europe and the UK in the transaction data makes it hard to treat the duty as a side issue.2

France adds a further layer. It has introduced levies on ultra-fast fashion and plans a total advertising ban from January 2027.9 This is already the strictest version of Europe's approach.

Amazon sellers: cheaper in Europe, more expensive in the US

Amazon's response shows how much pressure the discount platforms put on everyone else. In December 2025 it announced what was described as one of its largest seller-fee cuts in Europe, explicitly aimed at Shein and Temu. Referral fees on clothing priced up to €15 or £15 fell to 5%, and fees on clothing between €15 and €20 fell from 15% to 10%. From February, home-goods fees on items up to €20 dropped from 15% to 8%. Fulfilment fees in Amazon's five main European stores fell by an average of €0.32 per parcel.24

US sellers were treated differently. FBA fulfilment fees rose in January 2026, by an average of $0.25 per unit for small items priced between $10 and $50.26 One fee analysis estimates that Amazon's charges take about half the price of a $9.99 item, compared with under 20% for a $100 item.30 Cheap goods are therefore the hardest for Amazon sellers to sell profitably, and that is exactly the price range where Temu competes. Sellers also report that low-cost listings have pushed down the price Amazon's Buy Box rewards, close to the minimum many traditionally sourced sellers can accept.26

The split makes sense. Amazon cut fees where the duty-free threat from Temu and Shein was strongest, and kept raising them in the US, where the end of de minimis had already weakened that threat. Amazon also had little to fear from the EU duty itself: it said 97% of its EU shipments were already sent from warehouses inside the bloc.15

Walmart's marketplace and Temu's US turn

Walmart's marketplace has passed 200,000 active sellers. Nearly 60% of sellers who joined in 2025 came from China, bringing Chinese sellers to 34% of the active total.36 Third-party sales rose 17% in one recent quarter, and the number of sellers buying Walmart advertising grew 50%.36 Marketplace Pulse estimates Walmart's US marketplace volume at about $15 billion, and notes that its advertising revenue is growing six times faster than its sales.35

In effect, the Chinese manufacturers who once relied on Temu's direct-from-China model are spreading across US marketplaces. Walmart gains a wider range of products. US sellers face more competition on price-sensitive goods.

Temu is changing too. After the US de minimis exemption ended, it moved toward local warehouses and a semi-managed model in which sellers take on more of the pricing and logistics. Prices rose in categories exposed to duties.33 It is now recruiting US sellers, including food sellers, and says its local program covers more than 700 categories.40 Its US page for local sellers advertised 0% commission as of July 2026, although sellers still pay for shipping, returns and promotions.27 The company that once threatened marketplace sellers is now competing to sign them up.

Why it matters

Taken together, the reporting points to one conclusion. Temu and Shein's main advantage was not supply-chain magic. It was a regulatory gap, and that gap is now closing in both the US and the EU. Shein's chairman has said the company will move toward higher-priced brands to raise its average selling price.50 Temu is building a domestic marketplace. In both cases the companies are moving toward the incumbents' business model.

For sellers on Amazon and Walmart, the price ceiling set by ultra-cheap imports is rising, though unevenly. Amazon's European fee cuts suggest it will lower fees when a rival forces it to, and keep raising them when it does not. For regulators, Europe's results so far show that pricing small parcels can change how people shop within one quarter. The next tests come with the November handling fee and the 2026 holiday season. Shein is counting on that season to bring back orders.44