Talking Points: Are Temu and Shein's fashion deals too good to be true?

MINNEAPOLIS — One survey says consumers will spend on average $985 dollars on holiday items this year. But with inflation and interest rates high,  low prices are a huge draw, and no one has lower prices than two relatively new retail giants Temu and Shein.

Tonight in Talking Points, Esme Murphy learns more about the companies and finds out if the low prices are for real. And what about quality?

Originating from China, both Shein and Temu face questions about their business practices including allegations of forced labor. 

Murphy spoke with Tracy Perlman, an executive producer at WCCO, about her experience as a Shein customer. Perlman was attracted by the convivence of the online shopping app, but says returning a product was her biggest problem.

"I'll buy four or five items, and need to return two of them. And it's just not worth it for me to go to the post office. So I leave them in the bag," said Perlman, "I end up donating them or giving them to friends."

Perlman isn't alone in her frustrations over returning products. Shein currently has an "F" rating from The Better Business Bureau. Meanwhile, its rival Temu has a passing grade with a "C-."

Bao Vang, the Vice President of Communications for the BBB of Minnesota and North Dakota, cites a lack of response by the companies in explaining the grade they received. She also noted the types of complaints they see from customers.

"We're seeing are delayed products and services, bad customer service," said Vang, "meaning there just are the businesses willing to work with the consumer when they see a delay in their product, or not a product at all, or a product that is not as advertised when it shows up to the door."

These online rivals are competing for your eyes with aggressive promotions on your social media platforms like Instagram, Facebook and Twitter. 

Maha Abouelenein, Managing Director of Digital and Savvy, says they want to claim their stake in the U.S. market.

"I think both of these companies have been very aggressive in trying to take a bite out of the U.S. market apple," said Abouelenein. "(They) really capitalize on consumer behavior, which focuses on shopping online, and they're trying to go in by being affordable or cheaper. And they're really trying to make a dent in the market, and they're they're coming out aggressively in their marketing and in their campaigns."

Murphy spoke with George John, a leading marketing professor with the Carlson School of Management at the University of Minnesota, about how these two giants have succeeded in getting their names out, and whether their business models succeed. 

"You cannot turn on your phone without seeing another ad for downloading the app," said John. "Think of them as the successors to Zara and H&M who invented this notion of fast fashion. Which means that they turn over their styles, and what they have to offer several times a year, these people turn over their styles and what they have to offer a couple of times a month. So they've ratcheted that velocity up. And what they're trying to do is to have incredibly low prices, which they accomplish by beating up on the small suppliers."

We reached out to Temu and Shein about the allegations. Murphy spoke with a representative of Temu:

How can Temu make items that are so cheap?

Temu can achieve competitively priced products by connecting consumers directly with cost-efficient producers. By eliminating multiple middlemen and shipping directly from factories to consumers, customers benefit from wholesale prices from the source.  Transportation and warehousing are among the biggest costs in retail, costs that consumers end up paying for. With a direct-from-factory model, Temu reduces the number of times products must be shipped and stored and the substantial cost savings are passed onto consumers in the form of lower prices.  Additionally, when tens of thousands of consumers combine their purchases, they create bulk shipments. This volume makes what would be high shipping costs for individual items much more economical. Consequently, the gross profit from these products covers the shipping costs, allowing the merchants on our platform to maintain a fair margin.

Does Temu stand behind the quality of its products?

As an online marketplace, Temu connects consumers with third-party sellers that list and sell their products through our platform. Temu works closely with our merchants to offer quality merchandise to our millions of consumers. If any issues with quality arise, customers can promptly contact our customer service team, which will investigate each concern swiftly and comprehensively.

Customers can shop with full peace of mind on Temu with our purchase protection program, which ensures buyers are refunded if their orders don't match the item descriptions or photos, the products arrived damaged, or couldn't be delivered, arrived lateor were lost in transit. Temu has one of the industry's most generous return polices with a 90-day window for customers to seek refunds for items. Customers can seek help by contacting our 24/7 customer service through our website or app. For more information on the Purchase Protection Program.

How do you return something to Temu?

If an item is eligible for return and refund, you may return it within the return window of 90 days after the day of purchase.

You can make a return by following these steps:

I. Go to your Temu account on Temu.com or on the app to request a refund. If you do not have a Temu account, please click on "Save your Order" in your Temu order email to make a return.

II. Find the relevant order in "Your Orders" and click on the "Return/Refund" button.

III. Select the item(s) you would like to return and the reason for the return. Depending on the reason you selected, you may be required to provide further information related to the order. After you provide the required information, click the "Next Step" button to proceed.

IV. If there is no need to return your item, then your final step is simply to select your refund method. You may choose to receive your refund as a Temu credit balance or be credited back via your original payment method. Make your selection and click "Submit".

V. If you need to return your item(s), you will have the option to choose your return and refund methods. After you submit the request, we will provide you with a return label so that you can return the item(s). Return shipping is free on your first return for every order within 90 days from the date of purchase.

VI. After placing all the return items in one package, please print and tape the return label we provided onto the outside of the package. Send your package back from the nearest USPS/UPS location and you're done!

VII. You can check the refund status of your item(s) on your order details page or through Temu's SMS/Email/Push notifications.

For more details on returns, please visit our customer service and support center at https://www.temu.com/return-and-refund-policy.html.

How quickly do you get something if you buy it on Temu?

Typically 7-15 business days, but customers have reported receiving orders in fewer than 5 days. Temu is constantly improving on delivery times. You can also see the expected delivery window on the Temu website and app.

How quickly is the money returned to your credit card if you return something?

Depending on your financial institution, refunds can take 5-14 business days (up to 30 days) to be credited to your original payment account. You can also choose to accept Temu credits instead of a refund to the original payment method. Refunds to Temu credits are faster than your original payment method.

Temu and Shein are rivals, but consumers may lump them together – what would you say to consumers who might be confused about that?

First and foremost, Temu is not a fast fashion company like Shein. Right from the start, Temu began as a comprehensive e-commerce platform that encompasses a vast range of product categories. While we do offer a selection of clothing, our primary strength lies in daily necessities. We stock millions of items, ensuring we cater to nearly every facet of a consumer's life. 

In total, Temu carries 30 major product categories, spanning over 250 sub-categories. This includes everything from apparel to pet supplies and home improvement tools. 

We understand that it's easy to compare Temu with Shein due to its similar prices in the clothing category; however, our business models and target consumers are very different. Temu's model is a pure marketplace platform with all third-party independent sellers. Temu does not initiate production or own any brands.

Fast fashion companies release thousands of fashion designs daily under their own brands. They contract with factories to produce garments that are sold under their own brand names. This contract manufacturing is key for "fast fashion" business models and does not describe Temu at all.

Are the allegations of copyright infringement and abusive labor practices (including child labor) that have been alleged against Shein also true for Temu?

Though Temu is a young company with just a year under our belt, we've always prioritized following the rules and regulations. Our commitment to full compliance has been unwavering since inception and underpins all of our business activities. 

In terms of our approach to copyright infringement, Temu is a marketplace where third-party sellers offer their products directly to consumers. Each product listing on our platform is created and managed by these independent merchants.

Within Temu, we've set up a specialized system dedicated to the protection of intellectual property rights and an associated reporting structure. These systems act as swift, responsive mechanisms to address any intellectual property infringement claims made by rights holders or consumers. We take immediate and robust actions to rectify any such issues.

When we receive reports of infringement, we promptly investigate each case and take appropriate actions, from removing product listings and images to terminating vendor accounts. Depending on their level of infringement, merchants can be permanently banned from our platform. When they are terminated or banned, their merchandise listings will be removed as well.

On the issue of labor, before setting up their stores and listing products on Temu, every seller has to sign an agreement. This Third Party Code of Conduct stands as a pledge to maintain lawful and compliant business operations, and adhere strictly to the legal standards and regulations of their specific markets. 

The Code mandates that anyone doing business with Temu must strictly comply with all regulatory standards and compliance requirements. The use of forced, penal, or child labor is strictly prohibited. 

Employment by all our merchants and suppliers must be strictly voluntary. They shall respect the freedom of association and workers' rights to collectively bargain. Temu's merchants, suppliers, and other third parties must pay their employees and contractors on time and must comply with all applicable local wage and hours laws.

Our current standards and practices are no different from those of major U.S. e-commerce platforms, such as Amazon, eBay, and Etsy. 

Temu says it is based in Boston, but isn't it true that Temu is owned by the Chinese-based company TDD Holdings which is based in the Cayman Islands?

Temu launched in the US as an online marketplace and is headquartered in Boston, MA. Temu is part of the Nasdaq-listed e-commerce group, PDD Holdings Inc.

American consumers have been warned of allegations that TikTok may be using our information and even spying on behalf of the Chinese government – should Temu consumers be worried about that?

At Temu, we prioritize the protection of privacy and are transparent about our data practices. As part of Nasdaq-listed PDD Holdings Inc., an e-commerce group with a market capitalization of $140 billion, we are subject to extensive regulatory and supervisory oversight. 

We collect information with a clear and singular purpose: to provide and continually enhance our products and services for our users. When disclosing data collection practices, we adhere to the principle of maximum disclosure. If there's a possibility that data will be collected in any given scenario, we disclose it. This is in line with the requirements for developers set by application marketplaces like Apple's App Store. 

However, when it comes to the actual collection and use of data, we follow the principle of minimality, meaning we only collect and use data necessary for specific, justified scenarios. Data of Temu U.S. users will be stored by default in the infrastructure of Microsoft Azure or a similar cloud service provider in the U.S.

Temu vendors appear to be from all over the world, should American consumers be worried about the security of their personal information?

Consumers can shop with peace of midn on Temu, which is a TrustedSite Certified Secure Site that follows the Payment Card Industry Data Security Standard (PCI DSS) when handling card data by encrypting data in storage and transmission. Temu does not sell customer data and does not share payment information with our merchants or partners. 

In addition, Temu works with major payment networks with their own security and authentication protocols for added protection, including Visa Secure, MasterCard ID Check, American Express SafeKey, Discover ProtectBuy, and JCB J/Secure.

That said, we are aware of scam websites that have been impersonating Temu to defraud customers who thought they were shopping on Temu. Temu sued 20 scam sites in the US District Court for the Northern District of Illinois on Oct. 30 for running phishing and online fraud schemes while posing as Temu. We will take swift legal action to defend our rights and shield our customers from such malicious and unlawful activities. 

We also advise customers to only download apps from Apple's App Store and Google Play Store, and not to click on suspicious links on social media. 

Also just found out that BBB rates Temu a C-. Is there a response to that?

Temu has been actively engaged with BBB to respond to concerns raised by consumers. On Temu's C- rating by the BBB,please note that the length of time a business is in operation holds significant weightage in the calculation of the rating. Temu began operations in September 2022, or just over a year ago. For context, Shein, an online retailer that is often compared with Temu and has a much longer operating history, is rated F by the BBB. 

We'd also like to point out that Temu's BBB customer review rating of 2.57/5 should also be considered in relation to its industry peers and not in isolation to give your viewers the necessary context. 

Temu's customer review rating is higher than Amazon (1.16), eBay (1.08) and Walmart (1.08), three companies with a much longer track record of operations. In terms of the number of customer complaints, Temu's 1,159 cases compares with Amazon's 16,895 complaints, eBay with 5,214 and 4,021 for Walmart in the past 12 months. 

In other words, Amazon has more than 14 times the number of complaints compared to Temu, while eBay has more than 4 times and Walmart more than 3 times more complaints versus Temu. Temu has a 100% response rate and resolved all complaints. 

In addition, Temu has a 3.3 star rating on Trustpilot, which is also higher than the ratings for eBay, Etsy, and Amazon.

A representative of Shein also responded to Murphy's questions:

How can Shein make clothes that are so cheap? Does Shein stand behind the quality of its products?

Unlike the traditional supply-driven model, SHEIN's on-demand model addresses customer preferences more accurately and efficiently. Our digitalized supply chain enables us to address the mismatch between customer demand and merchandise supply. It entails testing new products by launching them in small initial batches of 100 to 200 items and evaluating customer feedback in real time. We then restock products that are in demand, ensuring our customers get what they want, when they want it and at the price they deserve.

How do you return something to Shein? How quickly is the money returned to your credit card if you return something?

Details about SHEIN's returns policy and process can be found here. 

TEMU and Shein are rivals, but consumers may lump them together – what would you say to consumers who might be confused about that? 

SHEIN's on-demand business model and our relationships with small and medium sized suppliers allow us to respond to customer preferences with precision and speed in a way that sets us apart from other companies. This agility enables us to continue providing accessible, affordable and individualized fashion and lifestyle choices at prices that our customers love.  SHEIN is laser focused on being customer-first and delivering the best shopping experience for our customers.

Are the allegations of frequent copyright infringement and abusive labor practices (including child labor) true?

• SHEIN takes all claims of infringement seriously. It is not our intent to infringe anyone's valid intellectual property and it is not our business model to do so. SHEIN suppliers and Marketplace sellers are required to comply with company policy and certify their products do not infringe third-party IP. We continue to invest in and improve our product review process.
• We take visibility across our entire supply chain seriously, and we are committed to respecting human rights and adhering to local laws in each and every market we operate in. Our third-party suppliers must adhere to a strict code of conduct that is aligned to the International Labour Organizations core conventions. In April, we announced that SHEIN will invest $70mil over the next five years to empower our ecosystem of third-party manufacturing suppliers, and the workers within. Through this recently announced additional $55mil investment, which builds upon SHEIN's previous $15mil investment in the Supplier Community Empowerment Program (SCEP) announced in December 2022, we will provide upskilling initiatives for workers, facilities enhancements, investments in new technologies, and services for the communities within the supplier ecosystem.

Shein is obviously a privately held company that originated in China, American consumers have been warned of allegations that TikTok may be using our information and even spying on behalf of the Chinese government – should Shein consumers be worried about that?

Data security and privacy are top priorities at SHEIN. Our U.S.-based Information Security and Privacy Compliance teams work to protect customer, employee and personal data in line with leading industry practices and applicable regulations. 

NOTE: The video above is a preview of Talking Points presented on "The 4."