The Chinese e-commerce sites Temu and Shein have been rapidly growing and disrupting the air freight industry by shipping massive amounts of cargo worldwide every day. This surge in demand has caused air freight rates to soar and has led to a shortage of available cargo space on planes. Both companies rely heavily on air freight to deliver products to customers quickly, with Temu and Shein shipping around 9,000 tons of cargo daily, equivalent to 88 Boeing 777 freighters.
To keep up with the increasing demand, logistics and airline companies have been adding more flights and adjusting routes. Korean Air reported a 20 percent year-over-year increase in revenue in the first quarter of 2024, citing robust cargo demand. Temu has also started new sea and air routes to the U.S., altering traditional trade patterns and raising freight rates from these alternative routes above those from mainland China.
Sending cargo by air is faster but much more expensive and environmentally costly compared to shipping by sea. Air freight emits around 500 grams of carbon dioxide per metric ton-kilometer traveled, compared to 10 to 40 grams for cargo ships. Despite the high costs of air freight, Temu and Shein offer free shipping for orders over a certain size, absorbing the expenses as they focus on accelerating growth in the U.S. But as both companies become established e-commerce platforms, they may look for ways to cut costs in the future.
Temu and Shein have been expanding their footprint within the U.S. and Mexico, with Shein establishing distribution centers in Indiana and California. However, the high costs of air freight are exacerbated by the return trip of empty planes from the U.S. to China, creating challenges for the industry. Both companies lack a maritime shipping and ground-based domestic logistics network compared to Amazon or Walmart and may need to find alternative solutions to reduce costs in the long term.
The rapid growth of Temu and Shein is expected to continue, with both companies likely to surpass revenues of $90 billion this year. The upcoming holiday season is anticipated to be record-breaking for both companies, raising concerns among shippers about the challenges they will face during peak season. As the companies continue to grow and disrupt the air freight industry, the need for innovative solutions to manage the increasing demand and costs will be critical for sustainable growth and success.
