Speaker 1: Already and this is this is the daily This is
Speaker 1: the Daily OS. Oh, now it makes sense. Good morning,
Speaker 1: and welcome to the Daily OS. It's Tuesday, the twenty
Speaker 1: second of April. I'm Sam Kazlowski.
Speaker 2: I'm Zara Sidler.
Speaker 1: If you've spent any time on TikTok lately, looking at you, Zara,
Speaker 1: you might have come across videos from people claiming to
Speaker 1: be Chinese warehouse operators selling products directly to consumers. These
Speaker 1: videos are part of a trend called TikTok warehouse and
Speaker 1: owners are promising to deliver products from well loved brands
Speaker 1: from Louis Vuitton to Lululemon for a fraction of the
Speaker 1: usual retail price. The videos have gained significant traction amongst
Speaker 1: US consumers, especially as they claim to bypass the recent
Speaker 1: one hundred and forty five percent tariffs placed on Chinese
Speaker 1: exports to the US. In today's podcast, we're going to
Speaker 1: explain what's happening with this trend, why it's controversial, and
Speaker 1: if it has fundamentally changed the relationship between retailers and consumers.
Speaker 2: Sam, there's a lot of context to this story, and
Speaker 2: I suddenly, for one, have seen it coming up a
Speaker 2: lot on my for you page, and I have been
Speaker 2: asking you to explain this to me for a little
Speaker 2: while because it seemingly came out of nowhere, But of
Speaker 2: course that's not the case. Can we start at the beginning, though,
Speaker 2: Say someone has never listened to a TDA podcast before.
Speaker 1: Well, firstly, welcome, welcome, thank god you're here.
Speaker 2: If they haven't listened to a TDA podcast before, and
Speaker 2: they're not sure what you're referring to when you talk
Speaker 2: about tariffs, let's start there. What are the tariffs you're
Speaker 2: talking about?
Speaker 1: Well, firstly, the word tariffs are starting to not sound
Speaker 1: like a word because I've said it so much. It's
Speaker 1: starting to just sound like a syllable. So it is, though,
Speaker 1: really important to get it. So, since the beginning of April,
Speaker 1: all exports from China to the US have been subjects
Speaker 1: to what is now on one hundred and forty five
Speaker 1: percent tariff. And this is all part of the Trump
Speaker 1: administration's trade policy designed to drive US consumers towards purchasing
Speaker 1: more domestically made products, because naturally, now products from China
Speaker 1: are immediately more expensive than they were at the beginning
Speaker 1: of the year. Now, the tariffs affect all retailers who
Speaker 1: produce goods in China, from luxury brands to the new
Speaker 1: players on the scene, these famously low cost fast fashion
Speaker 1: outlets like Timu and Sheen. We've already seen mainstream retailers
Speaker 1: forecasting double digit growth declines in the current quarter, especially
Speaker 1: if they're publicly listed, and so stocks in brands like Nike,
Speaker 1: lu Lemon, and under Ama have really crashed in the
Speaker 1: last couple of weeks.
Speaker 2: It's so fascinating. And so American consumers who I guess
Speaker 2: once paid one hundred dollars for a pair of exercise leggings,
Speaker 2: now looking at the price going up to two hundred
Speaker 2: and forty five dollars, should the retailer I guess, pass
Speaker 2: on the entire tariff to the consumer that full one
Speaker 2: hundred and forty five percent. But then how are these
Speaker 2: warehouse operators on TikTok claiming to get around these tasks?
Speaker 2: Because that's what they're saying.
Speaker 1: Right exactly. They're saying if they post a package directly
Speaker 1: to you in America and they're in China and it's
Speaker 1: just got one pair of leggings in it, they can
Speaker 1: slip through what's called the d Minimus loophole. Now, under
Speaker 1: current US trade law, if a shipment is valued under
Speaker 1: eight hundred bucks, it's exempt from taxes or tariffs when
Speaker 1: it enters the US. Fascinating, and now this loophole has
Speaker 1: been around since nineteen thirty eight, but it's become particularly
Speaker 1: relevant now with these high tariffs. And so if you
Speaker 1: think about those leggings, right, let's think about those one
Speaker 1: hundred dollars leggings. If you produce those leggings and you
Speaker 1: import more than eight, because then the value would be
Speaker 1: over eight hundred, you have to pay taxes and tariffs
Speaker 1: on that. So as soon as that container hits the port,
Speaker 1: you have to hand over a check to the US
Speaker 1: government with the taxes and tariffs, which is a lot
Speaker 1: more than you paid a month ago. But if you
Speaker 1: import just one pair because you've ordered it, and you're
Speaker 1: living in and Diego and you order exercise leggings online
Speaker 1: from a Chinese warehouse directly, you skip past that point
Speaker 1: because the.
Speaker 2: Ships they're just sending one pair of legs, exactly. It's
Speaker 2: not this mass.
Speaker 1: Order exactly right, So it's exempt under this loophole, which
Speaker 1: is designed to kind of not target small producers. But
Speaker 1: that loophole might not be there for very long.
Speaker 2: Now.
Speaker 1: Why is that, Well, there's been a push from both
Speaker 1: sides of US politics to close the loophole, particularly after
Speaker 1: the rise of those big fast fashion retailers. Current retailers say,
Speaker 1: these brands like Timu and Sheen aren't paying their fair
Speaker 1: share of domestic tax because they've got this different business model. Right.
Speaker 1: They're directly importing to individual US consumers rather than you know,
Speaker 1: lul Lemon importing hundreds of thousands of pair of leggings.
Speaker 2: So what Sheen and tim I mean. I've never understood
Speaker 2: the business model of Sheen and tim and suddenly everything
Speaker 2: makes sense. They are basically cutting out the middle man
Speaker 2: exactly direct from warehouse to consumer.
Speaker 1: In its own package, so they will basically only ship
Speaker 1: when somebody's ordered something.
Speaker 2: Rather than a lot of packaging.
Speaker 1: It's a lot of packaging. And there is a whole
Speaker 1: discussion to have about the environmental impact of this new
Speaker 1: wave shopping.
Speaker 2: That'll be another podcast.
Speaker 1: That'll definitely be another podcast. It's bipartisan the opposition. So
Speaker 1: former President Joe Biden, who was a Democrat, he took
Speaker 1: steps to close the loophole during his time in the
Speaker 1: White House, but that legislation stalled. Now President Trump at
Speaker 1: the beginning of his term, he signed an executive order
Speaker 1: to close the loophole, but it's going to remain open
Speaker 1: until May the second, So that's the deadline day where
Speaker 1: those small packages are going to be taxed as big
Speaker 1: ones would be.
Speaker 2: I'm really interested to see what will happen to Timu
Speaker 2: and Sheen and all of these very low cost fast
Speaker 2: the fastest fashion that really exists. What happens then, and
Speaker 2: so is what's happening that those warehouse operators are essentially
Speaker 2: saying by directly from us before that May second deadline,
Speaker 2: before that loophole.
Speaker 1: Closes, Yeah, exactly. And they're only doing that because they're
Speaker 1: using TikTok to appeal directly to individual consumers, and they're
Speaker 1: telling consumers things like brands and these new tariffs mean
Speaker 1: that you're going to have to pay a lot more
Speaker 1: for the brands that you love, but it doesn't actually
Speaker 1: cost us that much to make, so we're going to
Speaker 1: sell it directly to for you know, basically what it
Speaker 1: costs to make. And when customers are given the opportunity
Speaker 1: to order something tariff free, they're told to go on
Speaker 1: Chinese shopping apps like Dhgate or Ali Express, or even
Speaker 1: just message the warehouse owners directly on the messaging app.
Speaker 2: Wow.
Speaker 1: The examples can be pretty wild. So one account claims
Speaker 1: to manufacture handbags for Louis Vaton and they're selling what
Speaker 1: they say is the exact same bag they supply to
Speaker 1: the Fashion Giant for fifty dollars. Now, for context, that
Speaker 1: bag normally retails for about five thousand US dollars. In
Speaker 1: another video, a producer who claims to make leggings for Lululemon,
Speaker 1: which we've kind of decided is the example we're going to.
Speaker 2: Use through this precision because I'm wearing Lula Lemon looking
Speaker 2: straight at them meant to be the value of not
Speaker 2: being able to see me on a podcast.
Speaker 1: So they're saying that those leggings that you're currently wearing,
Speaker 1: which are about one hundred dollars US, they'll send them
Speaker 1: to you for five bucks. And so it really is
Speaker 1: changing the relationship between retailers consumers, especially with so much
Speaker 1: uncertainty in the economy.
Speaker 2: I think the thing that comes to mind though, when
Speaker 2: you're talking about this, and let's continue on with the
Speaker 2: Lulu Lemon example, is are these knockoffs or are these
Speaker 2: the real deal? But then I guess I mean not
Speaker 2: to get into my own head or anything, but like,
Speaker 2: who knows what is real? What is real?
Speaker 1: Well, this is actually.
Speaker 2: Welcome to our existential crisis by Salmon Zara.
Speaker 1: Well, this would actually be a really interesting discussion to
Speaker 1: have again as its own episode. Is what makes a
Speaker 1: product real? And is it the fact that it has
Speaker 1: a brand name on it or a label on it
Speaker 1: that makes it real? If you took that brand name
Speaker 1: or label away, but it's exactly the same product made
Speaker 1: of the exact same material, would you call that a jupe?
Speaker 1: Would you call that replica? Would you call that a fake?
Speaker 1: So there's lots of different kind of definitions that are
Speaker 1: floating around, And it is worth mentioning that for every
Speaker 1: video of a warehouse operator saying I'll send you this
Speaker 1: for a lot cheaper, there are hundreds of videos of
Speaker 1: US consumers, mostly young people, who are receiving the products
Speaker 1: and giving it really good reviews. So obviously people are
Speaker 1: having their expectations matched. But experts doing the rounds in
Speaker 1: US media have indeed pointed out that major brands would
Speaker 1: likely have non disclosure agreements that prohibit the manufacturers from
Speaker 1: publicly disclosing where their products are made, and that is
Speaker 1: casting a bit of doubt on some of the claims
Speaker 1: being made on TikTok.
Speaker 2: And so have we heard from any of the brands themselves.
Speaker 2: I mean, I imagine they wouldn't be thrilled by what's happening.
Speaker 1: They're definitely not thrilled, and some of them have gotten
Speaker 1: on the front foot, Sarah, you're right, and so lul
Speaker 1: Lemon has put out the statement warning customers that they
Speaker 1: do not work with the manufacturers identified in the online videos,
Speaker 1: and so they're telling people to be cautious of fraud.
Speaker 1: And one step they talk is they actually released a
Speaker 1: list of their production partners in China, which didn't include
Speaker 1: any of the viral creators who claim to work with
Speaker 1: the company.
Speaker 2: I mean, that's a good point though, the idea that
Speaker 2: there's not much you can really do if you receive
Speaker 2: something that isn't what you ordered. Yeah, but part of
Speaker 2: going through a retailer is that there are quality assurances here.
Speaker 2: You can return a product if it's faulty or if
Speaker 2: it's not what you ordered. But in this situation, what
Speaker 2: can you do if what you ordered is not what
Speaker 2: you wanted.
Speaker 1: It's the wild West, right, Like, you can't really do anything.
Speaker 1: You also can't really do anything if you pay for
Speaker 1: a product and never receive it at all. And that
Speaker 1: is an argument that retailers are putting to their customers
Speaker 1: is you know, if it seems too good to be true,
Speaker 1: it probably is, is essentially what they're saying. So you know,
Speaker 1: you're leaving yourself exposed to not only some of those
Speaker 1: kind of customer fraud issues that you mentioned, but also
Speaker 1: the quality of the product. Is it firesafe?
Speaker 2: Yeah?
Speaker 1: Does it have parts that can fall off and be
Speaker 1: a choking hazard for babies? All of that stuff that
Speaker 1: goes into designing a product probably wouldn't be there when
Speaker 1: it's got no middleman between a producer and a customer.
Speaker 2: I'm really curious to understand whether this TikTok trend has
Speaker 2: actually left the app and converted into real life purchases
Speaker 2: or if this is something that I'm just seeing a
Speaker 2: lot and you know, feeling like is everywhere. Do we
Speaker 2: have any I don't know data on how many people
Speaker 2: are actually ordering from directly from these Chinese warehouses via TikTok.
Speaker 1: It's a really good question and I searched far and
Speaker 1: wide to try and look for some of these providers
Speaker 1: actually stating how many orders they've done in the last
Speaker 1: couple of weeks. It's very hard to tell. One indicator
Speaker 1: I thought was helpful, though, is the app downloads of
Speaker 1: the apps that offer these services. So Dhgate, which is
Speaker 1: a Chinese online retailer that many of these warehouse operators
Speaker 1: direct customers to think like it's kind of an eBay equivalent.
Speaker 1: It rose to the second position on the US App
Speaker 1: Store charts recently, and that does suggest that more Americans
Speaker 1: are downloading it now than they did last month. Then
Speaker 1: I looked at the Australian charts and it's clear in
Speaker 1: Australia that there has been a pretty widespread adoption of
Speaker 1: the apps. I mean, today four of the top ten
Speaker 1: apps on the Apple charts are Chinese shopping apps, so
Speaker 1: we've got Ali Express, Talboo, d Edhgate, and Tinu.
Speaker 2: I think that's interesting given that we're not facing the
Speaker 2: same tariff arrangement as US to China and China to
Speaker 2: the US is I mean, I think people in Australia
Speaker 2: must have just seen the trend and understood they can
Speaker 2: get things for cheaper.
Speaker 1: Well, I think the veil has been lifted on some
Speaker 1: of these ideas that retailers probably weren't that too keen
Speaker 1: on us understanding and talking about.
Speaker 2: Well, yeah, like what is the bigger picture here?
Speaker 1: Well, I think this really does change the way that
Speaker 1: we relate to big retailers. And when young people understand
Speaker 1: what goes into a price in retail, they're now asking
Speaker 1: more questions around how that price is formulated, and you
Speaker 1: can see that sentiment come out in the comments under
Speaker 1: a lot of these videos. Is also trying to evalue
Speaker 1: whether a brand name on a product is worth that
Speaker 1: markup for them, and I think the answer will be
Speaker 1: yes for a lot of people, because brands have a
Speaker 1: lot of power and that's why we wear certain clothing.
Speaker 1: But for a lot of people, especially in a cost
Speaker 1: of living crisis, this is another really interesting way to
Speaker 1: engage with world commerce.
Speaker 2: I think we just need to reiterate once again that
Speaker 2: we have just spoken about quite a narrow part of
Speaker 2: this whole world. As we mentioned the environmental impacts of
Speaker 2: something like this becoming a global trend, as you will,
Speaker 2: but also the kind of supply chain effects and visibility
Speaker 2: over labor all of those things. Yeah, exactly. That's a
Speaker 2: whole different conversation and one that I think we should
Speaker 2: all be having, and certainly one we can explore down
Speaker 2: the track on this podcast the sound. Thank you so
Speaker 2: much for explaining what I had been seeing on my
Speaker 2: for you page every single day for the past week
Speaker 2: and a half, and thank you for joining us for
Speaker 2: another episode of the Daily Odds. We'll be back with
Speaker 2: the headlines later today, but until then we joined the
Speaker 2: first day of the working week.
Speaker 1: My name is Lily Maddon and I'm a proud Arunda
Speaker 1: Bujelung Kalkadin woman from Gadighl Country. The Daily oz acknowledges
Speaker 1: that this podcast is recorded on the lands of the
Speaker 1: Gadighl people and pays respect to all Aboriginal and torrest
Speaker 1: Rate island and nations. We pay our respects to the
Speaker 1: first peoples of these countries, both past and present.