Two Chinese e-commerce giants, Temu and Shein, have disrupted the global air freight industry by shipping an equivalent of 88 Boeing 777 freighters of cargo worldwide every day. This surge in demand for fast shipping has driven up air freight rates and caused a cargo crunch, forcing logistics and airline companies to adapt quickly to meet the growing needs of these companies. The two Chinese companies have been willing to subsidize fast shipping as they continue to expand globally, but the impact on the air freight industry is significant.
The rapid growth of Temu and Shein has caught many by surprise, as their volumes are comparable to some of the largest freight forwarding companies in the world. These companies differentiate themselves by selling goods directly from Chinese manufacturers, cutting costs and offering lower prices to consumers. However, their reliance on air freight for quick deliveries has caused prices to skyrocket, with air cargo rates from southern China to the U.S. currently at unprecedented levels.
To keep up with the demand generated by Temu and Shein, logistics and airline companies are adding more flights and expanding their capacity. Korean Air reported a 20% year-over-year increase in revenue due to robust cargo demand, and announced plans to strengthen partnerships and allocate more capacity to meet the growing e-commerce demand from China. The impact of these companies on global trade routes and shipping patterns has been significant, with new sea and air routes being established to accommodate their volume of cargo.
Despite the high costs of air freight and the environmental impact of shipping goods by plane, Temu and Shein continue to rely on this mode of transportation to fuel their growth in the U.S. Both companies offer free shipping for orders over a certain size, absorbing the additional costs as a way to accelerate their expansion. However, as they establish themselves as e-commerce giants, they may look for ways to cut costs and explore alternative shipping methods, such as maritime shipping and ground-based logistics networks.
The growth of Temu and Shein has been fueled by a massive TV advertising campaign in the U.S., with both companies rapidly gaining popularity among American consumers. Their parent companies, PDD Holdings and Shein, are valued at billions of dollars and are expected to have a record-breaking holiday season this year. Shippers are already concerned about the potential challenges of peak season and how the surge in demand for air freight services will impact the industry in the coming months.
Overall, the rise of Temu and Shein as global e-commerce giants has disrupted traditional trade routes and shipping patterns, forcing the air freight industry to adapt to meet the growing demand for fast shipping. The impact of these companies on air freight rates, global trade routes, and environmental sustainability is significant, and their continued growth will shape the future of the industry in the years to come.
