What Temu's Growth Means for E-Commerce Supply Chains

Temu, founded and headquartered in Boston, Massachusetts, entered the e-commerce market in 2022 with a commitment to providing low-priced goods.

The platform revolutionised the sector, achieving remarkable growth and encouraging more people to shop online.

In 2024, 4.6 billion low-value parcels entered the EU and more than 91% of parcels which were valued at less than €150 (US$175) came from China, where the vast majority of Temu sellers are based. 

Now, the EU is looking to enforce stricter regulations to avoid a further influx of un-taxable goods. 

What is Temu?

Temu brings millions of sellers, manufacturers and brands together. With a direct to consumer (D2C) approach, it lists everything, from clothes to chopping boards – without the need for huge warehouses or distribution centres. 

While Temu is usually able to beat competitors when it comes to price, products themselves are often lower-quality and subject to long delivery times. 

What's more, with the majority of goods coming from Chinese suppliers, many of which are small or unverified, critics have questioned the overarching ethics of the operation.

Temu found itself in breach of the Digital Services Act in July, with the European Commission citing there was a "high risk for consumers in the EU to encounter illegal products on the platform". 

Now, Temu is under further scrutiny for seemingly paying a relatively small amount in taxes. 

Temu tax payments questioned

Temu doubled its pre-tax profits in 2024, ending the year just below US$120m, but only paid US$18m in corporation tax.

Paul Monaghan, CEO of the Fair Tax Foundation, comments: “Serious questions need to be asked as to why Temu has such a negligible economic and tax footprint in the UK and across Europe despite its enormous sales."

The EU is working to put an end to the €150 (US$175) de minimis exemption, which allows low-value packages to enter the region duty-free, thereby levelling the playing field for domestic sellers.

Paul continues: “The UK and other European governments need to move much more quickly to not only protect their tax base, but allow existing retailers to compete on a level playing field with these Chinese e-commerce giants that have overseas tax avoidance hard-wired into their structures."

A spokesperson for Temu states: “Temu categorically rejects any suggestion that our structure or operations are designed to avoid taxes or minimise our economic footprint in Europe.

"Despite being a young and fast-growing company still in the investment phase, we have already paid billions of euros in taxes across European jurisdictions, and that figure will continue to rise as our operations mature.

“The tax figure cited refers only to the tax paid by a single legal entity and does not include customs duties, VAT, and other taxes."

As well as abolishing the de minimis exemption, the EU is also proposing a €2 (US$2.3) per parcel tax.

Amid several investigations into Temu's operations, a more watchful eye is falling on e-commerce as a whole. 

Global e-commerce supply chains are set to shift, with marketplaces having to decide whether they invest in regional teams and distribution centres.