The exponential growth of online commerce and low-cost platforms focused on fashion and accessories over the last decade, along with a flood of new players in a market that is already crowded, has prompted some market participants to rethink aggressive commercial policies and the adherence to sustainability standards.
According to reports in the Financial Times, the Chinese operator Temu, owned by PDD Holdings, has expanded its supplier network by bringing in manufacturers who had previously been rejected by its main competitor, Shein, after it emerged that they did not meet the certification standards required to join Shein’s supplier network, as revealed by auditor findings.
Industry sources say the Chinese fashion giant, currently the market leader in e-commerce, proceeded to suspend cooperation with several suppliers after discovering that many of their contracted manufacturers failed to meet the minimum standards set by the company. This was confirmed by the audits and training conducted regularly through its Responsible Sourcing program (RSP), which aims to ensure compliant conditions across the manufacturing supplier network.
Specifically, the noncompliance related to factory conditions, such as the minimum number of employees, with a threshold of at least 50 workers, and the factory footprint, which needed to cover a minimum of 800 square meters.
Temu, which does not consider factory size when approving new sellers, did not hesitate to integrate many of these suppliers into its manufacturing network. Louis Li, a bag factory owner in Guangdong, told the Financial Times that the company once supplied Shein, but could not do so directly because it did not meet Shein’s factory size requirements. After Shein severed ties with smaller factories, Li noted that many of them shifted to Temu, a shift he described as a broad industry pattern.