Chinese E-Commerce Giant Shein, Once Banned in Indonesia, Now Faces a Precarious Future

The Chinese e-commerce giant Shein, once banned from Indonesia for its business model deemed harmful to local small and medium enterprises (SMEs), is now facing a precarious financial situation. The company, which together with Temu was blocked from the Indonesian market for selling goods directly from factories to consumers at extremely low prices, has reported a significant quarterly loss. Shein recorded a loss of US$99 million (approximately Rp1.7 trillion) due to slowing sales, a stark contrast to the net profit of US$395 million it posted in the previous year. The downturn follows the United States government’s decision to revoke the ‘de minimis’ trade exemption, a rule that previously allowed packages valued under US$800 to enter the country duty-free. The removal of this exemption means Shein’s products shipped from China to the US are now subject to tariffs ranging from 10% to 87.5%, severely impacting its low-price advantage. In response, the company stated it is considering various options, including implementing price increases specifically for the US market to offset the rising costs. Beyond the US, Shein is also encountering regulatory headwinds in the European Union, where a new €3 customs duty has been imposed on low-value e-commerce imports. The European Commission introduced this measure to curb unfair competition from Chinese products. The financial strain comes as Shein, which is headquartered in Singapore, prepares for its initial public offering (IPO) on the Hong Kong stock exchange, having already received approval from the China Securities Regulatory Commission.