Key facts
- China's e-commerce exports fell 10.9% in April year-on-year.
- This marks the fifth consecutive monthly decline in exports.
- Rising jet fuel costs, exacerbated by the Middle East conflict, are increasing shipping expenses.
- Sellers are passing on higher shipping costs to consumers, leading to price increases and a slight decline in sales.
- Weakening consumer demand in the West is attributed to inflation and the economic impact of geopolitical instability.
- Platforms are exploring strategies like increasing local warehouse capacity to mitigate high air freight costs.
China's e-commerce export engine is faltering as surging jet fuel costs and weak demand threaten profits for big online platforms like Temu, Shein, and AliExpress. Soaring logistics costs stemming from the Middle East conflict are adding to the strain, with shippers like DHL Express imposing hefty fuel surcharges.
Data indicates a notable slowdown, with China's e-commerce exports falling 10.9% in April compared to the previous year, marking the fifth consecutive month of decline. Sellers are already adjusting prices; one Shenzhen-based seller on Temu reported increasing her prices by $2 per garment due to a $1 rise in shipping costs, a move necessary to protect profit margins, though it has led to a slight decrease in sales.
Analysts and industry insiders suggest that the era of hyper-growth for these low-cost platforms may be over. The rising cost of air freight, which can constitute a significant portion of the product's value for low-priced items, is a major factor. Companies are exploring alternative strategies, such as increasing their local warehouse capacity in Western markets to dispatch goods more efficiently and reduce reliance on direct air freight from China. Shein, for instance, has been expanding its warehouse network in Europe.
Beyond logistics, weakening demand from lower-income consumers in the West is also contributing to the slowdown. Inflationary pressures and the broader economic impact of geopolitical instability are dampening household budgets. The European Union's planned €3 fee on low-value e-commerce parcels starting July 1 further adds to the cost pressures. While exports remain higher than two years ago, returning to the rapid growth rates of recent years is expected to be challenging as market share becomes more consolidated and consumer spending power diminishes.