While banning TikTok is high on the Washington agenda, it’s not the only app with ties to China that’s drawing scrutiny.

The fast-growing discount shopping apps Temu and Shein, two e-commerce companies whose super cheap goods have propelled them to become some of the most popular online shopping destinations in the world, are also the targets of congressional scrutiny. 

But who’s to blame for the stunning rise of Shein and Temu?

How about Amazon.

That sounds counterintuitive, but Jeff Bezos’s once modest online bookstore paved the way for $5 dollar t-shirts and $8 vacuum cleaners. 

American consumers were trained by years of online shopping to look past the brand name and just at the product. Amazon’s algorithms changed shopping habits and taught consumers the real value of brand names — not that much, for at least a significant number of people. 

Search results list out similar looking products side by side. Online the only apparent difference is often price, as long as the quality is good enough. 

It was only a matter of time before Chinese merchants started trying to reach American consumers directly, leveraging the same powerful ad platforms created by Meta, Google and later ByteDance, that had also been used by American companies. 

Earlier attempts were made — remember Wish, the discount e-commerce site founded in 2010 that was once worth $22 billion but sold this year for $173 million? Or Alibaba’s 11 Main which it sold in 2015? But they all struggled with quality control, logistics and name recognition.

Chinese entrepreneurs learned from their mistakes and kept trying. 

Given the intense competition back in China for e-commerce amid weak consumer demand, the U.S. consumer market, the biggest in the world, was an obvious choice for expansion, especially given that another big market, India, has banned most Chinese apps. 

Online shopping… makes comparison shopping super easy and allows an opening for Chinese suppliers to buy ads to put their products right alongside more famous brands.

Chinese entrepreneurs learned from working on Amazon’s marketplace. Suppliers and merchants who had made goods for other companies started selling under their own names, cutting out the middleman and taking a bigger cut of each sale.

Eventually, someone with deep enough pockets and a savvy approach figured out how to break into the U.S. and bypass Amazon. 

The current situation in the U.S. marks a remarkable moment. Chinese apps accounted for four of the top-ten downloaded iOS apps in the past month — as of March 21. The top spot went to Temu, according to Data.ai, with CapCut, a video editing software developed by TikTok’s owner ByteDance, at six. Shein, which was founded in China and now has its headquarters in Singapore, came in seventh and TikTok landed at ninth place. 

It’s a testimony to the popularity of these Chinese products despite years of efforts by China hawks in the U.S. government to ban or block them. 

TikTok’s rise threatens Meta’s empire and the likes of Snap and Pinterest. But set aside for a moment the controversy around TikTok, where the House has passed a sell-or-ban bill supported by the Biden Administration that’s now making its way to an uncertain future in the Senate — and focus on Shein and Temu.

These two shopping apps represent the first time that Chinese companies are selling billions of dollars in goods directly to U.S. consumers without relying on the likes of Amazon or Walmart to host their products.

Temu, owned by PDD, the upstart ecommerce retailer whose hard-driving tactics made it a formidable challenger to Alibaba in only nine years, hit gross merchandise volume, a measure of total sales on its platform, of $6.5 billion in the last quarter, according to Goldman Sachs. Shein last year earned $2 billion net profit off of $45 billion in gross merchandise volume, the total value of goods sold on its site, according to the Financial Times.

What they’re doing is different from TikTok, which is mostly showing user generated videos by other Americans.

There are differences between Temu and Shein. Shein is mostly focused on selling its own brand of clothes, making it a competitor to fast-fashion brands H&M and Zara. Its clothing is even sold on Amazon. Temu has much broader ambitions, selling all sorts of goods that put it squarely against Amazon.

There are other differences in style. Shein is a pure offshore play. It doesn’t sell anything in China, while Temu’s parent, PDD, is a major domestic player. Both have leveraged China’s massive supply chain, with thousands of factories working with them who are scrambling to find orders as they face a weakening domestic market. PDD is already listed on Nasdaq and as such the U.S. has less leverage on it, while Shein is more exposed to both U.S. and Chinese regulations as it’s trying to go public overseas, and has already applied to list in the U.S., though it’s reportedly considering London, instead. 

The rise of Shein and Temu was built on the foundations laid by overseas firms. For decades, foreign companies have been outsourcing much of their manufacturing to cheap Chinese factories. Especially after China’s accession to the WTO made China’s factory floor alluring, foreign firms increasingly sent their orders to Chinese factories, brokered by the likes of middlemen like Li & Fung, the Hong Kong outsourcing specialist. 

As one American executive at a leading mall brand told me back in 2001, his company’s strength was selling, not making. Why not have China make its product while he and his team focused on the high margin business of selling. The executive added that Chinese didn’t know how to make a brand name so he wasn’t worried that one day they’d take over. 

For a long time, that was true. But eventually Chinese factory owners began to realize they were leaving a lot of money on the table. It was a tough jump to make from running a factory in Shenzhen to figuring out what Main Street or 5th Avenue wanted to wear. 

Early efforts included Hong Kong supply chain companies acquiring high end fashion brands. Those efforts got a lot of press but not much consumer traction. For example, Shandong Ruyi, once China’s largest textile manufacturer, tried to fashion itself into China’s LVMH by acquiring foreign brands such as the UK’s Aquascutum, Cerutti 1881 and later Lycra. By 2022, the firm had defaulted to creditors and was acquired by a consortium of Chinese and overseas investors.

Instead, the place where Chinese factories began to shine was on Amazon through firms such as electronics accessories maker Anker, which tapped Chinese manufacturing and engineering and relied on Amazon for distribution.

Or the famous $129.99 puffer jacket by Chinese company Orolay, which became a number one bestseller on Amazon in 2019 after going viral on social media and in many ways foreshadowed what was to become the standard playbook for Shein and Temu.

Their rise was made possible by the success of online shopping which led to disintermediation between shoppers and the goods they were buying. 

Online shopping reduces the physical importance of a store and the brands built on mall shopping. It also makes comparison shopping super easy and allows an opening for Chinese suppliers to buy ads to put their products right alongside more famous brands. 

A recent search for running shorts turns up hits from companies with names like Blaosn, BMJL, Leidowei, and Baleaf. Each of them reveal little about themselves on their Amazon storefront but some online sleuthing shows that BMJL and Blooming Jelly are trademarked to a little-known company called Shenzhen Bu Ming Jue Li Electronic Commerce Co., Ltd. 

The Chinese connection may not be apparent to the casual buyer, but that’s the point. The products all look pretty much the same — and often some of those Chinese entrepreneurs started out making products for the same western brands they’re competing with now.

Perhaps with enough marketing and some luck, Blooming Jelly could be the next Shein — thanks to Amazon.

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