Already and this is this is the daily This is the Daily OS. Oh, now it makes sense. Good morning, and welcome to the Daily OS. It's Tuesday, the twenty second of April. I'm Sam Kazlowski.
I'm Zara Sidler.
If you've spent any time on TikTok lately, looking at you, Zara, you might have come across videos from people claiming to be Chinese warehouse operators selling products directly to consumers. These videos are part of a trend called TikTok warehouse and owners are promising to deliver products from well loved brands from Louis Vuitton to Lululemon for a fraction of the
usual retail price. The videos have gained significant traction amongst US consumers, especially as they claim to bypass the recent one hundred and forty five percent tariffs placed on Chinese exports to the US. In today's podcast, we're going to explain what's happening with this trend, why it's controversial, and if it has fundamentally changed the relationship between retailers and consumers.
Sam, there's a lot of context to this story, and I suddenly, for one, have seen it coming up a lot on my for you page, and I have been asking you to explain this to me for a little while because it seemingly came out of nowhere, But of course that's not the case. Can we start at the beginning, though, Say someone has never listened to a TDA podcast before.
Well, firstly, welcome, welcome, thank god you're here.
If they haven't listened to a TDA podcast before, and they're not sure what you're referring to when you talk about tariffs, let's start there. What are the tariffs you're talking about?
Well, firstly, the word tariffs are starting to not sound like a word because I've said it so much. It's starting to just sound like a syllable. So it is, though, really important to get it. So, since the beginning of April, all exports from China to the US have been subjects to what is now on one hundred and forty five
percent tariff. And this is all part of the Trump administration's trade policy designed to drive US consumers towards purchasing more domestically made products, because naturally, now products from China are immediately more expensive than they were at the beginning of the year. Now, the tariffs affect all retailers who produce goods in China, from luxury brands to the new players on the scene, these famously low cost fast fashion
outlets like Timu and Sheen. We've already seen mainstream retailers forecasting double digit growth declines in the current quarter, especially if they're publicly listed, and so stocks in brands like Nike, lu Lemon, and under Ama have really crashed in the last couple of weeks.
It's so fascinating. And so American consumers who I guess once paid one hundred dollars for a pair of exercise leggings, now looking at the price going up to two hundred and forty five dollars, should the retailer I guess, pass on the entire tariff to the consumer that full one hundred and forty five percent. But then how are these warehouse operators on TikTok claiming to get around these tasks? Because that's what they're saying.
Right exactly. They're saying if they post a package directly to you in America and they're in China and it's just got one pair of leggings in it, they can slip through what's called the d Minimus loophole. Now, under current US trade law, if a shipment is valued under eight hundred bucks, it's exempt from taxes or tariffs when it enters the US. Fascinating, and now this loophole has been around since nineteen thirty eight, but it's become particularly
relevant now with these high tariffs. And so if you think about those leggings, right, let's think about those one hundred dollars leggings. If you produce those leggings and you import more than eight, because then the value would be over eight hundred, you have to pay taxes and tariffs on that. So as soon as that container hits the port, you have to hand over a check to the US government with the taxes and tariffs, which is a lot
more than you paid a month ago. But if you import just one pair because you've ordered it, and you're living in and Diego and you order exercise leggings online from a Chinese warehouse directly, you skip past that point because the.
Ships they're just sending one pair of legs, exactly. It's not this mass.
Order exactly right, So it's exempt under this loophole, which is designed to kind of not target small producers. But that loophole might not be there for very long.
Now.
Why is that, Well, there's been a push from both sides of US politics to close the loophole, particularly after the rise of those big fast fashion retailers. Current retailers say, these brands like Timu and Sheen aren't paying their fair share of domestic tax because they've got this different business model. Right. They're directly importing to individual US consumers rather than you know, lul Lemon importing hundreds of thousands of pair of leggings.
So what Sheen and tim I mean. I've never understood the business model of Sheen and tim and suddenly everything makes sense. They are basically cutting out the middle man exactly direct from warehouse to consumer.
In its own package, so they will basically only ship when somebody's ordered something.
Rather than a lot of packaging.
It's a lot of packaging. And there is a whole discussion to have about the environmental impact of this new wave shopping.
That'll be another podcast.
That'll definitely be another podcast. It's bipartisan the opposition. So former President Joe Biden, who was a Democrat, he took steps to close the loophole during his time in the White House, but that legislation stalled. Now President Trump at the beginning of his term, he signed an executive order to close the loophole, but it's going to remain open until May the second, So that's the deadline day where those small packages are going to be taxed as big ones would be.
I'm really interested to see what will happen to Timu and Sheen and all of these very low cost fast the fastest fashion that really exists. What happens then, and so is what's happening that those warehouse operators are essentially saying by directly from us before that May second deadline, before that loophole.
Closes, Yeah, exactly. And they're only doing that because they're using TikTok to appeal directly to individual consumers, and they're telling consumers things like brands and these new tariffs mean that you're going to have to pay a lot more for the brands that you love, but it doesn't actually cost us that much to make, so we're going to sell it directly to for you know, basically what it
costs to make. And when customers are given the opportunity to order something tariff free, they're told to go on Chinese shopping apps like Dhgate or Ali Express, or even just message the warehouse owners directly on the messaging app.
Wow.
The examples can be pretty wild. So one account claims to manufacture handbags for Louis Vaton and they're selling what they say is the exact same bag they supply to the Fashion Giant for fifty dollars. Now, for context, that bag normally retails for about five thousand US dollars. In another video, a producer who claims to make leggings for Lululemon, which we've kind of decided is the example we're going to.
Use through this precision because I'm wearing Lula Lemon looking straight at them meant to be the value of not being able to see me on a podcast.
So they're saying that those leggings that you're currently wearing, which are about one hundred dollars US, they'll send them to you for five bucks. And so it really is changing the relationship between retailers consumers, especially with so much uncertainty in the economy.
I think the thing that comes to mind though, when you're talking about this, and let's continue on with the Lulu Lemon example, is are these knockoffs or are these the real deal? But then I guess I mean not to get into my own head or anything, but like, who knows what is real? What is real?
Well, this is actually.
Welcome to our existential crisis by Salmon Zara.
Well, this would actually be a really interesting discussion to have again as its own episode. Is what makes a product real? And is it the fact that it has a brand name on it or a label on it that makes it real? If you took that brand name or label away, but it's exactly the same product made of the exact same material, would you call that a jupe? Would you call that replica? Would you call that a fake?
So there's lots of different kind of definitions that are floating around, And it is worth mentioning that for every video of a warehouse operator saying I'll send you this for a lot cheaper, there are hundreds of videos of US consumers, mostly young people, who are receiving the products and giving it really good reviews. So obviously people are
having their expectations matched. But experts doing the rounds in US media have indeed pointed out that major brands would likely have non disclosure agreements that prohibit the manufacturers from publicly disclosing where their products are made, and that is casting a bit of doubt on some of the claims being made on TikTok.
And so have we heard from any of the brands themselves. I mean, I imagine they wouldn't be thrilled by what's happening.
They're definitely not thrilled, and some of them have gotten on the front foot, Sarah, you're right, and so lul Lemon has put out the statement warning customers that they do not work with the manufacturers identified in the online videos, and so they're telling people to be cautious of fraud. And one step they talk is they actually released a list of their production partners in China, which didn't include any of the viral creators who claim to work with the company.
I mean, that's a good point though, the idea that there's not much you can really do if you receive something that isn't what you ordered. Yeah, but part of going through a retailer is that there are quality assurances here. You can return a product if it's faulty or if it's not what you ordered. But in this situation, what can you do if what you ordered is not what you wanted.
It's the wild West, right, Like, you can't really do anything. You also can't really do anything if you pay for a product and never receive it at all. And that is an argument that retailers are putting to their customers is you know, if it seems too good to be true, it probably is, is essentially what they're saying. So you know, you're leaving yourself exposed to not only some of those kind of customer fraud issues that you mentioned, but also the quality of the product. Is it firesafe?
Yeah?
Does it have parts that can fall off and be a choking hazard for babies? All of that stuff that goes into designing a product probably wouldn't be there when it's got no middleman between a producer and a customer.
I'm really curious to understand whether this TikTok trend has actually left the app and converted into real life purchases or if this is something that I'm just seeing a lot and you know, feeling like is everywhere. Do we have any I don't know data on how many people are actually ordering from directly from these Chinese warehouses via TikTok.
It's a really good question and I searched far and wide to try and look for some of these providers actually stating how many orders they've done in the last couple of weeks. It's very hard to tell. One indicator I thought was helpful, though, is the app downloads of the apps that offer these services. So Dhgate, which is a Chinese online retailer that many of these warehouse operators direct customers to think like it's kind of an eBay equivalent.
It rose to the second position on the US App Store charts recently, and that does suggest that more Americans are downloading it now than they did last month. Then I looked at the Australian charts and it's clear in Australia that there has been a pretty widespread adoption of the apps. I mean, today four of the top ten apps on the Apple charts are Chinese shopping apps, so we've got Ali Express, Talboo, d Edhgate, and Tinu.
I think that's interesting given that we're not facing the same tariff arrangement as US to China and China to the US is I mean, I think people in Australia must have just seen the trend and understood they can get things for cheaper.
Well, I think the veil has been lifted on some of these ideas that retailers probably weren't that too keen on us understanding and talking about.
Well, yeah, like what is the bigger picture here?
Well, I think this really does change the way that we relate to big retailers. And when young people understand what goes into a price in retail, they're now asking more questions around how that price is formulated, and you can see that sentiment come out in the comments under
a lot of these videos. Is also trying to evalue whether a brand name on a product is worth that markup for them, and I think the answer will be yes for a lot of people, because brands have a lot of power and that's why we wear certain clothing. But for a lot of people, especially in a cost of living crisis, this is another really interesting way to engage with world commerce.
I think we just need to reiterate once again that we have just spoken about quite a narrow part of this whole world. As we mentioned the environmental impacts of something like this becoming a global trend, as you will, but also the kind of supply chain effects and visibility over labor all of those things. Yeah, exactly. That's a whole different conversation and one that I think we should all be having, and certainly one we can explore down
the track on this podcast the sound. Thank you so much for explaining what I had been seeing on my for you page every single day for the past week and a half, and thank you for joining us for another episode of the Daily Odds. We'll be back with the headlines later today, but until then we joined the first day of the working week.
My name is Lily Maddon and I'm a proud Arunda Bujelung Kalkadin woman from Gadighl Country. The Daily oz acknowledges that this podcast is recorded on the lands of the Gadighl people and pays respect to all Aboriginal and torrest Rate island and nations. We pay our respects to the first peoples of these countries, both past and present.