Temu and Shein surge across Europe as US growth slows amid tariff pressure
As Chinese e-commerce giants Temu and Shein grapple with rising trade headwinds in the U.S., both companies are swiftly shifting focus — and gaining ground — in Europe, according to new data from Consumer Edge.
Temu’s year-over-year sales growth in the European Union surged more than 60% in early May, with France leading the charge at nearly 100% growth. Shein, meanwhile, is maintaining strong momentum across the region, especially in the U.K., where its growth hovers around 50%. Consumer Edge Research analyzed consumer spending data from 6 million credit and debit card transactions in the E.U., specifically account holders in Germany, France, Spain, Italy and Austria.
“Just as growth in the U.S. started to really come down, it has started to accelerate in the U.K. and continental Europe,” said Michael Gunther, vp of insights at Consumer Edge. “Part of this seems to be a result of a concerted effort to diversify geographically.”
In the wake of the U.S. eliminating the de minimis loophole — which previously allowed parcels under $800 to enter the country tariff-free — Temu and Shein have slashed ad budgets in the U.S., while ramping up digital advertising in European markets. Shein’s and Temu’s ad spending increased the most in France and the U.K. compared to other European countries, according to Sensor Tower data cited by Reuters. Temu’s ad spend rose 40% in France and 20% in the U.K. month-over-month in April, while Shein increased its spend by 35% in the same countries. That advertising boost has likely fueled the companies’ growth in Europe.
In absolute terms, U.S. consumers still make up the lion’s share of Temu’s and Shein’s revenue, but the recent pullback has been dramatic. Gunther said U.S. spending on Temu dropped roughly 30% in May, while Shein saw a nearly 20% decline. “These companies hit their high-water mark in early April,” he said. “Temu was seeing growth rates of over 50%. The fact that it even turned negative is a big deal.”
Shifting shopping behavior
The slowdown is being felt on multiple fronts.
Temu’s U.S. web traffic plummeted 51% from May 1 to May 16 compared to the same period last year, according to data from digital intelligence platform Similarweb shared with Modern Retail. Shein is also seeing a nearly 44% drop. Meanwhile, traditional U.S. retailers are reaping the rewards. Walmart.com saw a nearly 15% traffic bump, and Target.com was up more than 10% over the same period, signaling that domestic players may be regaining e-commerce ground previously lost to China-founded upstarts.
App usage in the U.S. is also down — Temu averaged 41 million monthly users in May, down from 58 million in March, according to data that market intelligence firm Sensor Tower shared with Modern Retail. Shein also saw its monthly active users fall to 25.7 million in May, down from 29.2 million in March. U.S. consumers who have stopped shopping on the platforms are diverting spending to more traditional retailers, with department stores like Macy’s and Kohl’s, and value-focused brands like Old Navy, seeing notable gains, according to separate data from Consumer Edge.
Meanwhile, momentum in Europe is building. Temu’s growth accelerated sharply in France, Spain and Germany, with consumers in France almost doubling their year-over-year spend.
Gunther said the rise is tied not only to increased ad spending but also to more favorable trade policy. The E.U. is considering a €2 ($2.27) flat fee on small e-commerce parcels valued under €150 ($170.02), particularly those shipped directly to consumers from outside the region.
“That’s so much lower than what these companies are facing in the U.S.,” Gunther said. By comparison, U.S. tariffs on low-cost Chinese imports rose as high as 145% in April before easing to 30%.
Basket sizes are comparable across geographies, with average orders in the E.U. slightly smaller than in the U.S.—$32 versus $36 for Temu and $55 versus $57 for Shein. Still, the gap isn’t enough to outweigh the appeal of the E.U.’s relatively lighter regulatory touch.
Shein’s and Temu’s European pivot comes at a critical moment for both companies. Revenue growth at Temu’s Chinese parent, PDD Holdings, slowed, and its profits plummeted in the first quarter, the company reported Tuesday. (PDD doesn’t break out revenue for Temu.) Meanwhile, Shein is pursuing a potential listing in Hong Kong after its plans for a London IPO stalled, according to Reuters.
Temu has shifted away from the direct-from-China model that turbocharged its success in the U.S. Now, Temu is focused on shipping orders from U.S. warehouses. “No matter how policies shift, we’ll continue to strengthen our operations in the markets we serve, helping more local merchants grow on our platform and enabling more orders to be fulfilled from local warehouses,” PDD Chairman Chen Lei said on a call with analysts.
While the platforms’ growth in Europe is accelerating, future hurdles remain. The proposed E.U. package fee, while modest now, signals a broader regulatory tightening. “If they were to raise that more to protect local industry, maybe that would put a dent in growth,” Gunther said.