The rapid rise of fast-fashion e-commerce retailers such as Shein and Temu is upending the global air cargo industry, as they increasingly vie for limited air-cargo space to woo consumers with rapid delivery times, industry sources say.
Shein, PDD Group’s Temu and ByteDance’s TikTok Shop, which recently launched online shopping in the U.S., ship the majority of their products directly from factories in China to shoppers by air in individually addressed packages.
Shein and Temu together send almost 600,000 packages to the United States every day, according to a June 2023 report by the U.S. Congress, and their growing popularity is boosting air-freight costs from Asian hubs like Guangzhou and Hong Kong, making off-peak seasons almost disappear and causing capacity shortages, the sources said.
“The biggest trend impacting air freight right now is not the Red Sea, it’s Chinese e-commerce companies like Shein or Temu,” said Basile Ricard, director of Greater China operations at freight forwarder Bollore Logistics.
According to data aggregated by Cargo Facts Consulting, Temu ships around 4,000 tonnes a day, Shein 5,000 tonnes, Alibaba.com 1,000 tonnes and TikTok 800 tonnes. That equates to around 108 Boeing 777 freighters a day, the consultancy said.
Driven by robust demand for their low-priced apparel — like $10 Cdn tops and $5 biker shorts — Shein alone accounts for one-fifth of the global fast-fashion market, measured by sales, and has fuelled growth of China’s e-commerce industry, according to Coresight Research.
CBC News has reached out to Shein and Temu for comment.
The fast-fashion online retailer Shein is growing rapidly and experts say it could eventually rival Amazon. But as its profit margins grow — so do the environmental concerns.
Fast fashion now accounts for half of China’s total cross-border e-commerce shipments and takes up about one-third of global long-distance cargo aircraft, according to cross-border transportation media firm Baixiao.com.
Shein and Temu’s growth is squeezing out space for other industries on air freighters, just as global firms are scrambling to find alternative logistics options due to disruptions in the Red Sea.
The crisis emerged when Yemen’s Houthi militia group began attacking shipping vessels in the Red Sea, forcing companies to reroute around the Suez Canal, one of the world’s most important shipping lanes.
“When the Suez Canal [crisis] hit, there was no capacity to be bought, because e-commerce has bought it all,” said an executive at an air cargo carrier who requested anonymity due to industry sensitivities.
Shein and Temu together send almost 600,000 packages to the U.S. every day, according to a June 2023 report by the U.S. Congress. (Yuichi Yamazaki/AFP/Getty Images)
Pronounced demand for air freight from fast fashion started increasing dramatically in the second half of last year, several sources said.
A German logistics source said large tech firms like Apple only transport about 900 tonnes maximum a day and the growing cargo demand from fast fashion could push out traditional long-term customers, as they vie for limited air capacity.
Some air-freight carriers have responded to the increased e-commerce demand by providing additional charter capacity, “which is already heavily booked for the long term,” said a spokesperson for German logistics firm Schenker.
Apple declined to comment. TikTok Shop did not return messages seeking comment.
“Shein is continually optimizing its efforts to ensure the best customer experience and fulfilment efficiency,” a Shein spokesperson said, declining to elaborate.
The hunt for capacity
The sudden spike in demand from fast fashion that began last year has lifted air-cargo rates from China and is raising concerns about longer-term capacity shortage.
“Based on what we have seen, this model of [airborne] e-commerce is not sustainable, neither from a profit or environmental standpoint,” said Guillermo Ochovo, director at Cargo Facts Consulting.
He said both Shein and Temu are now looking more at sea freight due to the high cost of air freight and considering opening warehouses outside of China to shorten transport times to other regions.
A user opens the Temu app to a Victoria Day promotion on May 19, 2023. (Aloysius Wong/CBC)
In its 2023 commercial market outlook, Boeing estimated China’s air cargo fleet would more than triple to 750 aircraft between 2022 and 2042. Boeing declined to comment.
E-commerce firms are approaching airlines directly to secure more capacity, according to the executive at a major air cargo carrier and Unique Logistics.
Shein has started sending goods to U.S. warehouses to speed up shipping times. Temu told Reuters in a statement that it is looking for sellers based in the U.S. and Europe “to reduce shipping distances and delivery times” to shoppers.
Airlines and freight forwarders are also contemplating how much capacity to set aside for Temu and Shein’s business as shipments and prices fluctuate.
The impact of China’s new e-commerce giants is “game-changing,” said Marc Schlossberg, executive vice-president of Air Freight at Unique. “They … are emerging as the most important drivers in the industry.”
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
