E-commerce: 'We expect a sign from Finance Minister Lindner'

How do you perceive the current situation?

We naturally see the competitive advantages that some Asian players enjoy in Europe. These advantages have a noticeable commercial impact. If competitors can rely on significant cost advantages that are not just based on innovative business models, but also on a lack of legal enforcement, then that is a thorn in our side. We are not just talking about the business practices of these companies. It's more about how the regulatory framework is structured and enforced here in Europe.

What damage do you think competition from Temu and Shein could inflict on European retailers?

Many companies are coming under severe pressure. We see this from a general market perspective: The longer the advantages exist, the more these companies, which are not based in the European Union and mainly come from the Far East, are able to gain a strong position on the market thanks to these advantages. Especially if the state continues to offer advantages to these companies or fails to close regulatory gaps. These cost advantages are not in the per mille range, but in the high double-digit percentage range. These advantages arise through subsidies, in China for example, through the utilization of duty-free allowances and through presumably lower or no VAT payments. The longer it takes for players to be able to operate on this basis, the more problematic this will be in Europe in general, as well as for individual brands, individual companies, and us.

Do you think these Chinese companies should be excluded from the market?

We do not want to resort to protectionism, and we do not want to put non-EU companies in a worse position. If anything, we want to avoid that companies based here are being disadvantaged. The two large companies in these direct-to-consumer models that we see here in Europe, Temu and Shein, are not purely private-sector companies as we know them. They are companies that are instruments of Chinese trade policy. They are important players in the implementation of a Chinese plan for export-oriented e-commerce. We are talking about a massive economic issue that is just as important as solar cells, electric cars and many other areas.

How should this be handled?

We are firmly in favor of abolishing the 150 euro duty-free limit. Not only to generate public revenue. But also to send out a signal that these external business practices will no longer work in the long term or that we should at least expect them to become more expensive. We very much welcomed the customs reform proposal presented by the European Commission last year. Unfortunately, however, some Member States, especially Germany, are still very hesitant or even idle.

Who exactly is idle?

We expect Finance Minister Lindner to commit to the abolition, preferably before 2028, and thus also send a signal in the European discourse. Many players are still hesitant and wait for a signal from Germany. We hear this from Brussels and the EU representatives of the other states.

In theory, the abolition sounds effective. However, critics believe it would create bureaucratic chaos.

It will be a challenge for customs officials and the customs system. However, it is also an economic challenge that is bigger than customs. We would like to see this kind of prioritization from the Ministry of Finance. We believe that abolishing the duty-free limit is currently the biggest legislative tool. It won't solve everything at once and these business models will certainly continue to exist, but it will offset some of these competitive advantages. That would be quite a change for direct-to-consumer business models. The way we see it: The door is completely open right now. If we abolish this exemption limit, we will close it a bit.

Shouldn't European providers also ask themselves if the way Temu or Shein offer their products is better for customers?

The Chinese type of e-commerce cannot be fully replicated in Europe in the form it exists in China. This is also due to the proximity to the manufacturing locations, which professionalize production in smaller cycles and in smaller quantities. It is a general trend that many companies are already working on shortening the cycles, even for large brands to produce in a more targeted manner. The reason why companies are successful in many areas is simply the product prices. These include the aforementioned advantages. Many of their marketing practices, such as countdowns or lucky wheels discounts, are simply not legal.

So, is there nothing where you would say that the Europeans failed to act? On the political side and also among businesses?

I think every company has to decide for itself to what extent it competes with these players and to what extent these companies are actually gaining market share in relevant categories. For us, this is only visible to a minimal extent, if at all. We are strategically well-positioned. But the problem is growing. It has already taken a very long time before anyone in politics has realized how these business models function and deduced how European regulations may need to be adapted – and we are still in the process.

Daniel Enke is Director of Public Affairs Corporate Citizenship at Zalando in Berlin. He previously worked for 365 Sherpas and the German Retail Association, among others.