Does TEMU Signal Imminent Systemic Failure?

Selling stuff below cost to delay collapse

TEMU is Destroying the Retail Landscape

I am in the process of outfitting a 4 x 4 off road rig with everything from recovery kit to cooking gear. The mission critical items I purchased from BCF Camping or from reputable offroad outfitters. I installed two recovery points with ARB this week at a cost of nearly $1000 only because TEMU does not sell this quality of hardware and I cannot have points that might fail when in the middle of nowhere.

I would estimate that I have spent a little over $1000 on TEMU for merch that would cost easily $4000 from BCF. For instance, this exact coffee machine costing $37.99 at BCF cost $8.28 on TEMU.

I also bought a baseball bat on TEMU for 12 bucks that would cost close to $100 in a shop (I also purchased a family pack of pepper spray from an online site in Aussie).

Even wholesalers buying in bulk would not be able to offer these prices to their retail clients.

What’s the connection between the baseball bat, pepper spray cannisters and camping you ask. I participated in a bush driving course on the weekend and mentioned to the instructor that I had been warned about the town of Newman. He said you need to be careful in every single town up north because those Aborigine fellas are on the war path. Leave nothing in your car and always be sure to park in a secure place when resupplying (see Midnight Oil Song Incites Terrorism).

I get it that these fellas have been fucked over Big Time but I adhere to the strategy of Fuck Around and Find Out. Choose an easier target fellas.

The instructor also warned me off of bothering the crocs. Apparently some fella was crossing a river and there was a big boy in the way so he tried to gently nudge it. The croc tore the bull bar off the rig and pounded the shit out of the bonnet with his tail. Bad idea. Real bad idea.

While we are off topic, does it make sense to try to capture one of the many deadly snakes that slither about in the outback, put it in a cage and keep it as an alternative to Fentanyl, when the time comes? I could name the snake Cleopatra :)

How about we also put Tony Fauci in the cage with the snake? Gimme a few hearts if you support that initiative.

Anyhow, where was I… oh yes…Systemic Failure and cheap stuff…

The quality of all items that I have purchased off of TEMU has been very good. The site allows purchasers to review products and there is an option to return items. I have made dozens of purchases and returned none.

The thing is … they are shipping these items from China by air and they arrive in Australia in less than two weeks (with a $5 credit if the shipment is late). There is no way in hell the factories pumping these products out can make money when production costs + air freight are factored in.

How is this illogical situation possible?

Once upon a time I invested in a business that manufactured air purifiers in China. We sold mainly into the China market but we also exported units. I was reviewing the P&L and noticed a fat payment from the government and asked the accountant what that was. He says oh that - we get cash from the government for every air purifier that we export.

Fuck Yeah says I then I asked him to cut me a check for my share of that profit and I went on a two week bender at the local Gent’s Club splurging on lap dances, Bolivian Blow and cases of Champagne. A belated thank you to the CCP for your sponsorship of this epic debauchery.

Now you know how it is possible for factories in China to sell products at what has to be a substantial loss and not go bankrupt. The Chinese government is subsidizing their exports as part of a job creation strategy and a way to juice GDP.

Retail is a zero sum game and TEMU (along with a few other sites in China) is like a school of sharks circling retailers around the world ripping off hunks of meat.

China is also subsidizing the living daylights out of EV manufacturers. The shark is eating Tesla’s lunch as there is no way to compete with this.

BYD Co.’s reliance on financing from working capital has masked surging debt levels at the Chinese electric vehicle giant, according to calculations from Hong Kong-based GMT Research.

While it’s common for fast-growing firms to use debt to fuel expansion, BYD appears “addicted” to supply chain financing, GMT, an accounting consultancy that previously raised the alarm about China Evergrande Group, said.

When adjusted to reflect receivables that have been removed from the balance sheet because they’ve been sold or borrowed against, and treating excess payables — any amount over 90 days — as a liability, BYD’s true net debt was more like 323 billion yuan ($44.1 billion) as of June 30, GMT said in a Jan. 10 research report. The company’s market value in Hong Kong is about $105 billion.

BYD itself put its net debt at 27.7 billion yuan as of mid-2024. Representatives for BYD declined to comment.

“However it’s structured, it’s clearly a form of financing, or hidden debt,” GMT analyst Nigel Stevenson said. “It’s using sleight of hand to present these liabilities as part of working capital.”

The hidden debt makes it harder for investors to get a handle on BYD’s actual financial situation as competition in China’s EV market intensifies. A bruising price war, spearheaded in part by the carmaker, has crushed weaker rivals and delivered a boom in business for the bigger players. It’s also left suppliers increasingly reliant on a smaller pool of manufacturers that have the power to command ever tougher terms.

For BYD, and other Chinese EV makers like Nio Inc. and Xpeng Inc., extended payment periods can stretch to hundreds of days. BYD took an average 275 days to pay suppliers in 2023, Bloomberg-compiled data show.

While long payment terms are becoming standard in China, they’re far more than the 45- to 60-day payment cycle for automakers in other parts of the world. Tesla Inc.’s Global Vice President Grace Tao has said the US EV maker typically pays suppliers within 90 days.

We have discussed overcapacity and price wars in China previously and TEMU is the Chinese government’s desperate response to this catastrophic situation.

Trump was told (by the Ministry of Truth) to threaten to reduce the tax exempt status on low value imported parcels but that turned out to be bullshit like just about every other policy change they threaten (because it’s all pro wrestling). There is zero discussion of taxing TEMU imports here in Australia, even though it has to be causing retailers to bleed out (BCF lost $4000 in potential sales to me alone over the past month).

Given there is global cooperation to fend off collapse for as long as possible, my take on TEMU is that it is a welcome development from governments because it helps combat raging inflation. Everyone loves that $8 coffee maker so it acts as a pressure valve to keep the mob from reaching for the pitchforks and taking to the streets.

Enjoy the low prices while they last because this is wreaking havoc across the global retail landscape and it will cost jobs and threaten the existence of not only bricks and mortar shops but also online retailers including Amazon. No company can compete with factories that are being subsidized by the government of China.

In conclusion, I urge you to direct your purchasing power to TEMU so as to help collapse the global economy because Fuck Everyone and Everything.

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