South African consumers frequently shopping from popular online Chinese stores Shein and Temu should be aware that the cheap prices they pay for products might carry a high cost in other areas.
While the stores have taken South Africa by storm, cybersecurity experts, lawmakers, and fair labour advocates have warned that their methods of doing business might not be what many deem to be ethical — or even legal.
The concerns relate to the conditions under which these retailers’ suppliers have their employees working, how the companies handle and protect users’ personal data, and the reputation that the stores have when it comes to deliveries and returns.
In South Africa, the clothing and textile sector is also worried about how the companies’ low prices are impacting their businesses and jobs.
Below are more details on the three main concerns raised about the business practices of Shein and Temu consumers should be aware of before hitting that checkout button.
Low pay and forced labour
Several reputed media publications have reported about the long work hours and low pay Shein’s clothing makers earn.
An undercover investigation by Channel 4 and The i newspaper in the UK revealed that workers in one factory earned 4,000 yuan (R10,223) per month but had to make at least 500 pieces of clothing per day.
In another factory, workers did not get paid a base salary but earned 0.27 yuan (R0.69) per item of clothing.
The investigation also found that workers’ pay was docked for the first month and that they were subject to heavy fines amounting to two-thirds of daily wages.
US House lawmakers have also warned there was a very high likelihood that some of Temu’s products were made using forced labour in the Xinjiang Uyghur Autonomous Region of China.
A US House Select Committee stated in an interim report that Temu was doing next to nothing to keep its supply chains free from slave labour.
“At the same time, Temu and Shein are building empires around the de minimis loophole in our import rules — dodging import taxes and evading scrutiny on the millions of goods they sell to Americans, said chairman Mike Gallagher.
“Temu conducts no audits and reports [and has] no compliance system to affirmatively examine and ensure compliance with the Uyghur Forced Labour Protection Act.
“The only measure Temu reported that it takes to ensure that it is not shipping goods to Americans that are produced with forced labour in violation of U.S. law was that its suppliers agree to boilerplate terms and conditions that prohibit the use of forced labour.”
Shein has denied that its products are made using forced labour and explained it had a number of measures in place to avoid this.
“We are committed to respecting human rights and adhering to local laws and regulations in each market we operate in,” a Shein spokesperson said.
“Our suppliers must adhere to a strict code of conduct that is aligned to the International Labour Organisation’s core conventions. We have zero tolerance for forced labour.”
However, US lawmakers have called upon the company to get independent verification that its suppliers were abiding by this code of conduct.
Temu’s dodgy user data handling
While Shein is making profits off selling dirt-cheap clothing, many people might not be surprised to learn that Temu’s e-commerce business is running at a loss.
Temu’s major revenue driver is in the ads space it sells on its website and apps, similar to Amazon.
Although Amazon also gathers a lot of personal data about its users, Temu’s parent company has engaged in overzealous and potentially illegal monitoring of users’ online activity.
The company is owned by Chinese firm PDD Holdings, which has another online shopping app called Pinduoduo.
In 2023, Pinduoduo was removed from the Google Play Store after versions of the app on other platforms were found to contain malware.
Although nefarious actors can do this other legitimate apps, reports said that the company allegedly had a team of around 100 developers looking for ways to exploit vulnerabilities in Android phones and that they were behind the versions with malicious software.
The malware allegedly allowed Pinduoduo to gain access to data from other apps, prevented users from uninstalling the app, and bypassed Google Play’s update-verification process.
Although Temu has denied these allegations, Pinduoduo reportedly shut down the team shortly after Google removed the app from its Play Store. Most of those working on the exploits were transferred to Temu.
Temu is also facing a class action lawsuit in Australia for allegedly tracking users’ browser activity extensively by injecting JavaScript code for spyware in websites that users visit from the Temu website.
Data acquired by the company included names, physical addresses, email addresses, phone numbers, biometric data, social security numbers, and credit card and financial information.
The lawsuit also accused Temu of having lax cybersecurity systems to save money, potentially exposing its customers’ data.
Local jobs threatened
While not necessarily an issue of legality, it is important to consider the impact that Shein and Temu have on South African jobs and tax revenues.
Although you might be getting a garment from China for a fraction of the price of a similar piece made in South Africa, the latter helps sustain a local household.
Aside from the business they create for local courier companies and unofficial resellers, Shein and Temu in no way contribute to growth in the local economy. Neither have any official local offices or factories.
One prominent e-commerce executive also told Daily Investor that Shein and Temu are dodging import duties, enabling them to significantly undercut local sellers’ prices.
The Department of Trade, Industry and Competition is investigating Shein for potentially skirting import taxes, following formal complaints by the National Clothing Retail Federation of South Africa and the Southern African Clothing and Textile Workers Union.
The National Clothing Retail Federation’s Michael Lawrence also told 702 that Shein and Temu were not paying duties on their imports and avoided paying VAT where it should be applied.
“Our concern with offshore online services is that they are not paying the correct duties and VAT. So, our national revenue is implicated, and our local producers are disadvantaged,” Lawrence said.
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