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How Shein and Temu are overloading airfreight capacity and escalating shipping rates

Image Credits: UnsplashImage Credits: Unsplash
  • Shein and Temu's direct-to-consumer shipping model is overwhelming global airfreight capacity, driving up freight rates.
  • The surge in demand for air cargo space is causing significant logistical challenges and necessitating innovative solutions.
  • The logistics sector must adapt to the growing e-commerce market, adopting new technologies and optimizing supply chains to manage increased shipping volumes.

The e-commerce landscape has been dramatically transformed by the rise of Shein and Temu. These companies have leveraged their extensive supply chains and direct-to-consumer shipping models to dominate the market. According to recent reports, Shein dispatches around 5,000 tonnes of goods daily, while Temu ships approximately 4,000 tonnes. This staggering volume translates to the need for 108 Boeing 777 freighters every day to meet their shipping demands.

Direct-to-Consumer Shipping Model

One of the key strategies employed by Shein and Temu is their direct-to-consumer shipping model. This approach involves sending individually addressed packages directly from factories in China to consumers worldwide. This method not only reduces costs but also speeds up delivery times, making it highly attractive to consumers. However, it places immense pressure on airfreight capacity, as evidenced by the 600,000 packages these companies send to the US daily.

Impact on Freight Rates

The surge in demand for air cargo space has led to a significant increase in freight rates. Airfreight costs from major hubs like Guangzhou and Hong Kong have skyrocketed, erasing the traditional slack season and causing space shortages. Industry insiders warn that this trend is likely to continue, with prices remaining high and the usual seasonal fluctuations becoming less predictable.

Broader Implications for the Logistics Industry

The overwhelming demand from Shein and Temu is not just a numbers game; it has broader implications for the logistics industry. The need for adaptation and innovation is more pressing than ever. Many importers are adopting hybrid approaches, combining regular sea freight with airfreight replenishment for urgent stock or special promotions. This strategy helps manage costs and ensures timely delivery, but it also highlights the need for more flexible and resilient logistics solutions.

The Australian Market

Australia is one of the regions significantly impacted by the surge in airfreight demand. According to AusPost, online shopping accounted for 16.8% of retail sales in 2023, totaling $63.6 billion. Much of these online purchases are delivered via airfreight, further straining the already overloaded system. Shein and Temu have built substantial customer bases in Australia, with 800,000 and 1.26 million customers, respectively, contributing to the increased demand for air cargo space.

Future Outlook

The future of the airfreight industry will likely be shaped by the continued growth of e-commerce giants like Shein and Temu. As these companies expand their reach and shipping volumes, the logistics sector must evolve to keep pace. This evolution will involve adopting new technologies, optimizing supply chains, and developing innovative solutions to manage the increased load and maintain efficiency.

Shein and Temu's impact on the airfreight industry is profound and far-reaching. Their massive shipping volumes are driving up freight rates and causing significant logistical challenges. As the e-commerce landscape continues to evolve, the logistics sector must adapt to meet the growing demand and ensure the smooth flow of goods across the globe.

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