WEBVTT - Why are Chinese warehouse videos going viral?

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<v Speaker 1>Already and this is this is the daily This is

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<v Speaker 1>the Daily OS. Oh, now it makes sense. Good morning,

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<v Speaker 1>and welcome to the Daily OS. It's Tuesday, the twenty

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<v Speaker 1>second of April. I'm Sam Kazlowski.

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<v Speaker 2>I'm Zara Sidler.

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<v Speaker 1>If you've spent any time on TikTok lately, looking at you, Zara,

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<v Speaker 1>you might have come across videos from people claiming to

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<v Speaker 1>be Chinese warehouse operators selling products directly to consumers. These

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<v Speaker 1>videos are part of a trend called TikTok warehouse and

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<v Speaker 1>owners are promising to deliver products from well loved brands

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<v Speaker 1>from Louis Vuitton to Lululemon for a fraction of the

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<v Speaker 1>usual retail price. The videos have gained significant traction amongst

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<v Speaker 1>US consumers, especially as they claim to bypass the recent

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<v Speaker 1>one hundred and forty five percent tariffs placed on Chinese

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<v Speaker 1>exports to the US. In today's podcast, we're going to

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<v Speaker 1>explain what's happening with this trend, why it's controversial, and

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<v Speaker 1>if it has fundamentally changed the relationship between retailers and consumers.

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<v Speaker 2>Sam, there's a lot of context to this story, and

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<v Speaker 2>I suddenly, for one, have seen it coming up a

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<v Speaker 2>lot on my for you page, and I have been

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<v Speaker 2>asking you to explain this to me for a little

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<v Speaker 2>while because it seemingly came out of nowhere, But of

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<v Speaker 2>course that's not the case. Can we start at the beginning, though,

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<v Speaker 2>Say someone has never listened to a TDA podcast before.

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<v Speaker 1>Well, firstly, welcome, welcome, thank god you're here.

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<v Speaker 2>If they haven't listened to a TDA podcast before, and

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<v Speaker 2>they're not sure what you're referring to when you talk

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<v Speaker 2>about tariffs, let's start there. What are the tariffs you're

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<v Speaker 2>talking about?

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<v Speaker 1>Well, firstly, the word tariffs are starting to not sound

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<v Speaker 1>like a word because I've said it so much. It's

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<v Speaker 1>starting to just sound like a syllable. So it is, though,

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<v Speaker 1>really important to get it. So, since the beginning of April,

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<v Speaker 1>all exports from China to the US have been subjects

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<v Speaker 1>to what is now on one hundred and forty five

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<v Speaker 1>percent tariff. And this is all part of the Trump

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<v Speaker 1>administration's trade policy designed to drive US consumers towards purchasing

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<v Speaker 1>more domestically made products, because naturally, now products from China

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<v Speaker 1>are immediately more expensive than they were at the beginning

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<v Speaker 1>of the year. Now, the tariffs affect all retailers who

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<v Speaker 1>produce goods in China, from luxury brands to the new

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<v Speaker 1>players on the scene, these famously low cost fast fashion

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<v Speaker 1>outlets like Timu and Sheen. We've already seen mainstream retailers

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<v Speaker 1>forecasting double digit growth declines in the current quarter, especially

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<v Speaker 1>if they're publicly listed, and so stocks in brands like Nike,

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<v Speaker 1>lu Lemon, and under Ama have really crashed in the

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<v Speaker 1>last couple of weeks.

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<v Speaker 2>It's so fascinating. And so American consumers who I guess

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<v Speaker 2>once paid one hundred dollars for a pair of exercise leggings,

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<v Speaker 2>now looking at the price going up to two hundred

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<v Speaker 2>and forty five dollars, should the retailer I guess, pass

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<v Speaker 2>on the entire tariff to the consumer that full one

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<v Speaker 2>hundred and forty five percent. But then how are these

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<v Speaker 2>warehouse operators on TikTok claiming to get around these tasks?

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<v Speaker 2>Because that's what they're saying.

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<v Speaker 1>Right exactly. They're saying if they post a package directly

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<v Speaker 1>to you in America and they're in China and it's

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<v Speaker 1>just got one pair of leggings in it, they can

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<v Speaker 1>slip through what's called the d Minimus loophole. Now, under

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<v Speaker 1>current US trade law, if a shipment is valued under

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<v Speaker 1>eight hundred bucks, it's exempt from taxes or tariffs when

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<v Speaker 1>it enters the US. Fascinating, and now this loophole has

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<v Speaker 1>been around since nineteen thirty eight, but it's become particularly

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<v Speaker 1>relevant now with these high tariffs. And so if you

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<v Speaker 1>think about those leggings, right, let's think about those one

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<v Speaker 1>hundred dollars leggings. If you produce those leggings and you

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<v Speaker 1>import more than eight, because then the value would be

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<v Speaker 1>over eight hundred, you have to pay taxes and tariffs

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<v Speaker 1>on that. So as soon as that container hits the port,

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<v Speaker 1>you have to hand over a check to the US

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<v Speaker 1>government with the taxes and tariffs, which is a lot

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<v Speaker 1>more than you paid a month ago. But if you

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<v Speaker 1>import just one pair because you've ordered it, and you're

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<v Speaker 1>living in and Diego and you order exercise leggings online

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<v Speaker 1>from a Chinese warehouse directly, you skip past that point

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<v Speaker 1>because the.

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<v Speaker 2>Ships they're just sending one pair of legs, exactly. It's

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<v Speaker 2>not this mass.

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<v Speaker 1>Order exactly right, So it's exempt under this loophole, which

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<v Speaker 1>is designed to kind of not target small producers. But

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<v Speaker 1>that loophole might not be there for very long.

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<v Speaker 2>Now.

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<v Speaker 1>Why is that, Well, there's been a push from both

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<v Speaker 1>sides of US politics to close the loophole, particularly after

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<v Speaker 1>the rise of those big fast fashion retailers. Current retailers say,

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<v Speaker 1>these brands like Timu and Sheen aren't paying their fair

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<v Speaker 1>share of domestic tax because they've got this different business model. Right.

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<v Speaker 1>They're directly importing to individual US consumers rather than you know,

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<v Speaker 1>lul Lemon importing hundreds of thousands of pair of leggings.

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<v Speaker 2>So what Sheen and tim I mean. I've never understood

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<v Speaker 2>the business model of Sheen and tim and suddenly everything

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<v Speaker 2>makes sense. They are basically cutting out the middle man

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<v Speaker 2>exactly direct from warehouse to consumer.

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<v Speaker 1>In its own package, so they will basically only ship

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<v Speaker 1>when somebody's ordered something.

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<v Speaker 2>Rather than a lot of packaging.

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<v Speaker 1>It's a lot of packaging. And there is a whole

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<v Speaker 1>discussion to have about the environmental impact of this new

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<v Speaker 1>wave shopping.

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<v Speaker 2>That'll be another podcast.

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<v Speaker 1>That'll definitely be another podcast. It's bipartisan the opposition. So

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<v Speaker 1>former President Joe Biden, who was a Democrat, he took

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<v Speaker 1>steps to close the loophole during his time in the

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<v Speaker 1>White House, but that legislation stalled. Now President Trump at

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<v Speaker 1>the beginning of his term, he signed an executive order

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<v Speaker 1>to close the loophole, but it's going to remain open

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<v Speaker 1>until May the second, So that's the deadline day where

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<v Speaker 1>those small packages are going to be taxed as big

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<v Speaker 1>ones would be.

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<v Speaker 2>I'm really interested to see what will happen to Timu

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<v Speaker 2>and Sheen and all of these very low cost fast

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<v Speaker 2>the fastest fashion that really exists. What happens then, and

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<v Speaker 2>so is what's happening that those warehouse operators are essentially

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<v Speaker 2>saying by directly from us before that May second deadline,

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<v Speaker 2>before that loophole.

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<v Speaker 1>Closes, Yeah, exactly. And they're only doing that because they're

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<v Speaker 1>using TikTok to appeal directly to individual consumers, and they're

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<v Speaker 1>telling consumers things like brands and these new tariffs mean

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<v Speaker 1>that you're going to have to pay a lot more

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<v Speaker 1>for the brands that you love, but it doesn't actually

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<v Speaker 1>cost us that much to make, so we're going to

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<v Speaker 1>sell it directly to for you know, basically what it

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<v Speaker 1>costs to make. And when customers are given the opportunity

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<v Speaker 1>to order something tariff free, they're told to go on

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<v Speaker 1>Chinese shopping apps like Dhgate or Ali Express, or even

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<v Speaker 1>just message the warehouse owners directly on the messaging app.

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<v Speaker 2>Wow.

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<v Speaker 1>The examples can be pretty wild. So one account claims

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<v Speaker 1>to manufacture handbags for Louis Vaton and they're selling what

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<v Speaker 1>they say is the exact same bag they supply to

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<v Speaker 1>the Fashion Giant for fifty dollars. Now, for context, that

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<v Speaker 1>bag normally retails for about five thousand US dollars. In

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<v Speaker 1>another video, a producer who claims to make leggings for Lululemon,

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<v Speaker 1>which we've kind of decided is the example we're going to.

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<v Speaker 2>Use through this precision because I'm wearing Lula Lemon looking

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<v Speaker 2>straight at them meant to be the value of not

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<v Speaker 2>being able to see me on a podcast.

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<v Speaker 1>So they're saying that those leggings that you're currently wearing,

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<v Speaker 1>which are about one hundred dollars US, they'll send them

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<v Speaker 1>to you for five bucks. And so it really is

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<v Speaker 1>changing the relationship between retailers consumers, especially with so much

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<v Speaker 1>uncertainty in the economy.

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<v Speaker 2>I think the thing that comes to mind though, when

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<v Speaker 2>you're talking about this, and let's continue on with the

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<v Speaker 2>Lulu Lemon example, is are these knockoffs or are these

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<v Speaker 2>the real deal? But then I guess I mean not

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<v Speaker 2>to get into my own head or anything, but like,

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<v Speaker 2>who knows what is real? What is real?

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<v Speaker 1>Well, this is actually.

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<v Speaker 2>Welcome to our existential crisis by Salmon Zara.

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<v Speaker 1>Well, this would actually be a really interesting discussion to

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<v Speaker 1>have again as its own episode. Is what makes a

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<v Speaker 1>product real? And is it the fact that it has

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<v Speaker 1>a brand name on it or a label on it

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<v Speaker 1>that makes it real? If you took that brand name

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<v Speaker 1>or label away, but it's exactly the same product made

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<v Speaker 1>of the exact same material, would you call that a jupe?

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<v Speaker 1>Would you call that replica? Would you call that a fake?

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<v Speaker 1>So there's lots of different kind of definitions that are

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<v Speaker 1>floating around, And it is worth mentioning that for every

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<v Speaker 1>video of a warehouse operator saying I'll send you this

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<v Speaker 1>for a lot cheaper, there are hundreds of videos of

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<v Speaker 1>US consumers, mostly young people, who are receiving the products

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<v Speaker 1>and giving it really good reviews. So obviously people are

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<v Speaker 1>having their expectations matched. But experts doing the rounds in

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<v Speaker 1>US media have indeed pointed out that major brands would

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<v Speaker 1>likely have non disclosure agreements that prohibit the manufacturers from

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<v Speaker 1>publicly disclosing where their products are made, and that is

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<v Speaker 1>casting a bit of doubt on some of the claims

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<v Speaker 1>being made on TikTok.

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<v Speaker 2>And so have we heard from any of the brands themselves.

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<v Speaker 2>I mean, I imagine they wouldn't be thrilled by what's happening.

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<v Speaker 1>They're definitely not thrilled, and some of them have gotten

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<v Speaker 1>on the front foot, Sarah, you're right, and so lul

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<v Speaker 1>Lemon has put out the statement warning customers that they

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<v Speaker 1>do not work with the manufacturers identified in the online videos,

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<v Speaker 1>and so they're telling people to be cautious of fraud.

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<v Speaker 1>And one step they talk is they actually released a

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<v Speaker 1>list of their production partners in China, which didn't include

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<v Speaker 1>any of the viral creators who claim to work with

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<v Speaker 1>the company.

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<v Speaker 2>I mean, that's a good point though, the idea that

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<v Speaker 2>there's not much you can really do if you receive

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<v Speaker 2>something that isn't what you ordered. Yeah, but part of

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<v Speaker 2>going through a retailer is that there are quality assurances here.

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<v Speaker 2>You can return a product if it's faulty or if

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<v Speaker 2>it's not what you ordered. But in this situation, what

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<v Speaker 2>can you do if what you ordered is not what

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<v Speaker 2>you wanted.

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<v Speaker 1>It's the wild West, right, Like, you can't really do anything.

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<v Speaker 1>You also can't really do anything if you pay for

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<v Speaker 1>a product and never receive it at all. And that

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<v Speaker 1>is an argument that retailers are putting to their customers

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<v Speaker 1>is you know, if it seems too good to be true,

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<v Speaker 1>it probably is, is essentially what they're saying. So you know,

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<v Speaker 1>you're leaving yourself exposed to not only some of those

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<v Speaker 1>kind of customer fraud issues that you mentioned, but also

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<v Speaker 1>the quality of the product. Is it firesafe?

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<v Speaker 2>Yeah?

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<v Speaker 1>Does it have parts that can fall off and be

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<v Speaker 1>a choking hazard for babies? All of that stuff that

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<v Speaker 1>goes into designing a product probably wouldn't be there when

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<v Speaker 1>it's got no middleman between a producer and a customer.

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<v Speaker 2>I'm really curious to understand whether this TikTok trend has

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<v Speaker 2>actually left the app and converted into real life purchases

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<v Speaker 2>or if this is something that I'm just seeing a

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<v Speaker 2>lot and you know, feeling like is everywhere. Do we

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<v Speaker 2>have any I don't know data on how many people

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<v Speaker 2>are actually ordering from directly from these Chinese warehouses via TikTok.

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<v Speaker 1>It's a really good question and I searched far and

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<v Speaker 1>wide to try and look for some of these providers

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<v Speaker 1>actually stating how many orders they've done in the last

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<v Speaker 1>couple of weeks. It's very hard to tell. One indicator

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<v Speaker 1>I thought was helpful, though, is the app downloads of

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<v Speaker 1>the apps that offer these services. So Dhgate, which is

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<v Speaker 1>a Chinese online retailer that many of these warehouse operators

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<v Speaker 1>direct customers to think like it's kind of an eBay equivalent.

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<v Speaker 1>It rose to the second position on the US App

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<v Speaker 1>Store charts recently, and that does suggest that more Americans

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<v Speaker 1>are downloading it now than they did last month. Then

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<v Speaker 1>I looked at the Australian charts and it's clear in

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<v Speaker 1>Australia that there has been a pretty widespread adoption of

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<v Speaker 1>the apps. I mean, today four of the top ten

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<v Speaker 1>apps on the Apple charts are Chinese shopping apps, so

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<v Speaker 1>we've got Ali Express, Talboo, d Edhgate, and Tinu.

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<v Speaker 2>I think that's interesting given that we're not facing the

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<v Speaker 2>same tariff arrangement as US to China and China to

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<v Speaker 2>the US is I mean, I think people in Australia

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<v Speaker 2>must have just seen the trend and understood they can

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<v Speaker 2>get things for cheaper.

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<v Speaker 1>Well, I think the veil has been lifted on some

0:11:32.040 --> 0:11:35.520
<v Speaker 1>of these ideas that retailers probably weren't that too keen

0:11:35.600 --> 0:11:37.840
<v Speaker 1>on us understanding and talking about.

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<v Speaker 2>Well, yeah, like what is the bigger picture here?

0:11:39.760 --> 0:11:42.040
<v Speaker 1>Well, I think this really does change the way that

0:11:42.080 --> 0:11:46.160
<v Speaker 1>we relate to big retailers. And when young people understand

0:11:46.760 --> 0:11:50.040
<v Speaker 1>what goes into a price in retail, they're now asking

0:11:50.040 --> 0:11:54.720
<v Speaker 1>more questions around how that price is formulated, and you

0:11:54.760 --> 0:11:57.080
<v Speaker 1>can see that sentiment come out in the comments under

0:11:57.120 --> 0:12:00.000
<v Speaker 1>a lot of these videos. Is also trying to evalue

0:12:00.320 --> 0:12:04.079
<v Speaker 1>whether a brand name on a product is worth that

0:12:04.160 --> 0:12:06.000
<v Speaker 1>markup for them, and I think the answer will be

0:12:06.120 --> 0:12:08.440
<v Speaker 1>yes for a lot of people, because brands have a

0:12:08.440 --> 0:12:10.920
<v Speaker 1>lot of power and that's why we wear certain clothing.

0:12:11.400 --> 0:12:13.320
<v Speaker 1>But for a lot of people, especially in a cost

0:12:13.320 --> 0:12:16.040
<v Speaker 1>of living crisis, this is another really interesting way to

0:12:16.120 --> 0:12:17.560
<v Speaker 1>engage with world commerce.

0:12:17.960 --> 0:12:20.520
<v Speaker 2>I think we just need to reiterate once again that

0:12:20.640 --> 0:12:24.320
<v Speaker 2>we have just spoken about quite a narrow part of

0:12:24.360 --> 0:12:28.800
<v Speaker 2>this whole world. As we mentioned the environmental impacts of

0:12:28.800 --> 0:12:32.160
<v Speaker 2>something like this becoming a global trend, as you will,

0:12:32.400 --> 0:12:36.400
<v Speaker 2>but also the kind of supply chain effects and visibility

0:12:36.400 --> 0:12:39.560
<v Speaker 2>over labor all of those things. Yeah, exactly. That's a

0:12:39.640 --> 0:12:42.760
<v Speaker 2>whole different conversation and one that I think we should

0:12:42.800 --> 0:12:45.400
<v Speaker 2>all be having, and certainly one we can explore down

0:12:45.440 --> 0:12:48.040
<v Speaker 2>the track on this podcast the sound. Thank you so

0:12:48.120 --> 0:12:50.880
<v Speaker 2>much for explaining what I had been seeing on my

0:12:50.960 --> 0:12:53.160
<v Speaker 2>for you page every single day for the past week

0:12:53.160 --> 0:12:55.160
<v Speaker 2>and a half, and thank you for joining us for

0:12:55.200 --> 0:12:57.800
<v Speaker 2>another episode of the Daily Odds. We'll be back with

0:12:57.800 --> 0:13:00.319
<v Speaker 2>the headlines later today, but until then we joined the

0:13:00.320 --> 0:13:01.360
<v Speaker 2>first day of the working week.

0:13:05.720 --> 0:13:08.080
<v Speaker 1>My name is Lily Maddon and I'm a proud Arunda

0:13:08.280 --> 0:13:13.079
<v Speaker 1>Bujelung Kalkadin woman from Gadighl Country. The Daily oz acknowledges

0:13:13.160 --> 0:13:15.319
<v Speaker 1>that this podcast is recorded on the lands of the

0:13:15.360 --> 0:13:18.960
<v Speaker 1>Gadighl people and pays respect to all Aboriginal and torrest

0:13:19.000 --> 0:13:21.840
<v Speaker 1>Rate island and nations. We pay our respects to the

0:13:21.840 --> 0:13:24.640
<v Speaker 1>first peoples of these countries, both past and present.