No. of Recommendations: 9
The market share of Temu among discount shopping (low income households) has gone from nothing to 17% since 2022. In the same measure and same time frame, the market share of DG fell from 63% to 52%, and Dollar Tree fell from 25.5% to 19.5%, a drop of 15% between the two of them. It's a different kind of shopping for household goods or clothes or toys, but it's coming from the same pool of shopping money, so the striking symmetry of the market share changes seems unlikely to be purely a coincidence. This may be another reason the dollar store bosses have been pushing for a higher mix of consumables: few people buy groceries drop shipped by slow boat from China.
If this view does have some meaningful explanatory power, then the recent announcement of intent to eliminate (or even reduce) the $800 duty- and tax-free "de minimis" exemption of small imports is VERY good news for the bricks and mortar discount sellers: the dollar stores. The tariffs aren't great, but (a) only a fraction of the discount inventory is imported and subject to duties, and (b) the buying power is largely restored by the recent rise in the US dollar.That's an interesting hypothesis: Temu has stolen its 17% share from the dollar stores, and might get some of it back. And it's the profitable 19% of their business, not the unprofitable 81% which is consumables (2023 AR).
But I'm not entirely convinced that people that have taken to getting Chinese junk delivered to them by mail are going to go back to buying the much less exotic junk in person in a dingy DG store. Have people really been buying toilet bowl brushes and paper towels on Temu, or are they buying one of the 2 million SKUs (distinct inventory items) that they can find on Temu?
Currently, de minimis parcels are consolidated so that customs can clear hundreds or thousands of shipments at once, but they will now require individual clearances, significantly increasing the burden for postal services, brokers and customs agents, Cori said.
The provision was initially intended as a way to streamline trade, and its use has surged with the increase in online shopping, fueling the growth of fast-fashion retailers Shein and online dollar-store Temu, both of which sell products ranging from toys to smartphones.
The two firms together likely accounted for more than 30% of all packages shipped to the United States each day under the provision, according to a June 2023 U.S. congressional committee report on China that also found nearly half of all packages shipped under de minimis come from China. https://www.reuters.com/world/us/us-postal-service...I guess it would be important to know how much duty DG has been paying on imports (almost half of which from China). Does anyone know what the number has been, in the last few years? Given that this duty was not charged on packages less than $800, that would have tilted the playing field towards buying stuff online, and away from the dollar stores. But it seems to me like if it's a low number, like 10%, that might not be enough to really make much of a difference. The big attraction with online purchases is not just the low price, it's also the convenience and especially the variety of items that you have access to. I have a hard time imagining that customers that have become accustomed to buying things online are going to go back to buying things in stores unless the price difference is a lot more than 10%.
