Takeaways from Temu’s tell-all lawsuit against Shein

Chinese online marketplace Temu filed a lawsuit earlier this month accusing rival Shein of engaging in anti-competitive practices.

It accused Shein of forcing manufacturers into signing exclusivity agreements prohibiting them from also working with Temu, leading some to remove products from the latter’s website and to hold back on offering new products on Temu’s platform.

Shein is also alleged to have sent thousands of errant copyright notices to Temu, aimed at products that the latter has priced lower than the former.

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The ongoing rivalry between Shein and Temu – both Chinese-founded firms that have established themselves in overseas markets – was put on full display when the latter filed a lawsuit against the former this month.

From market share, to Shein’s moat, to just how far both companies have pulled ahead of the traditional fast-fashion firms, the court document is a tell-all.

Here are a few of our key takeaways:

1) Shein’s manufacturers hold the key to any potential ultra-fast fashion challenger.

Shein has built its moat around its network of independent, third-party apparel manufacturers in China – approximately 8,338 of them. We already knew that but the documents reveal something more: that Temu’s ambitions to challenge and overtake Shein very much depend on having access to this same network.

Temu uses many of these same manufacturers for its own operations – but its access to them is now under threat.

According to Temu, the same 8,338 manufacturers represent “70% to 80% of the total number of merchants capable of supplying ultra-fast fashion” and hold a unique and crucial skill set.

This includes the ability to create new designs quickly, the agility to shift production to new stock-keeping units (SKUs), and the “expertise and facilities necessary to fit into the efficient logistics and distribution practices necessary to deliver ultra-fast fashion,” Temu says.

At the same time, manufacturers dependent on Shein’s dominant market share have to either acquiesce to its demands for exclusivity or face costly penalties. Shein commands an estimated 70% of the ultra-fast fashion market in the US.

As long as the status quo remains, Temu – and any potential Shein challenger for that matter – will struggle to topple Shein’s position as the market leader.