Philippe Palazzi, CEO of French retail group Casino Guichard Perrachon, has called on the European Union to ban the sales of fast-growing online retail giants Shein and Temu for two years. Palazzi, during an interview with BFM Business TV, said that a large number of the products sold on the two platforms which are both based in China, are not in line with EU consumer protection and safety standards. In a warning that if regulatory intervention is not timely, European retailers may experience so much competitive pressure that it could jeopardize the survival of small and medium-sized enterprises.
Palazzi explained that the growth of Shein and Temu has led to the influx of a huge number of cheap products into the European markets. These include clothing, home décor, toys, and furniture. The latter are usually at prices that traditional retailers are not able to compete with. The CEO announced that the extremely low price is a result of the avoidance of the regulatory portion of the cost and the requirements of compliance that the European companies have to meet while those from outside the EU do not, such as safety certification, environmental standards, and labor regulations.
Safety and regulatory compliance concerns
Palazzi suggested that the lack of regulation in this respect causes a safety risk to users of the products. “The products are not up to European standards and may pose health and safety risks to consumers,” he noted, suggesting a temporary halt of the two companies’ work in the EU while new regulations are introduced.
Authorities in France have also expressed their worries about the quality and safety of products on Shein’s platform, which led France to take this issue to the European Commission officially. The investigations have been focused mostly on the safety of chemicals in textiles and children’s products. For some of these products, it has been pointed out that they contain substances that are prohibited by EU law.
Temu, which went global in 2022, has also had a hard time in Europe due to allegations related to the quality of its products and transparency in different European markets, according to reports. The two companies, Shein and Temu, heavily rely on shipping products directly from worldwide suppliers to consumers. This way, they can avoid customs that check on bulk imports.
Impact on local retailers
Palazzi said that the inflow of extremely cheap goods is hurting the businesses of those retailers who abide by European rules and pay higher production and distribution costs. According to him, this price competition can lead to the faster disappearance of independent shops and traditional retail chains, the latter which are already heavily affected by economic uncertainties and changes in consumer habits.
“The danger is that many small businesses which are committed to European regulations and provide local jobs will vanish,” he warned.
The CEO’s statement is indicative of the increasing worries among European industry leaders about the power of fast-fashion and discount e-commerce companies that use algorithm-driven marketing and real-time production to quickly change global shopping trends.
Policy debate and future regulations
The European Union is in the process of setting up new rules for imports and digital marketplaces, which will aim at increasing the accountability of global sellers. Once fully implemented in 2028, the new rules will require companies such as Shein and Temu to meet stricter product safety, sustainability, and transparency requirements.
EU institutions should do away with the problem for two years, according to Palazzi, while the rules are being worked out. He said that if the regulations were waited for at 2028, the European retail sector would be severely harmed beyond repair. European lawmakers are already considering further steps that fall under the Digital Services Act (DSA) and proposed product sustainability regulations which might have an impact on the business models of high-volume online sellers.
Shein, which has moved its headquarters to Singapore, recently made a physical presence expansion in Europe by inaugurating its first brick-and-mortar store in Paris, France, a gesture that indicates its intentions to further penetrate the market in spite of the regulatory constraints.
A growing political flashpoint
The argument about Shein and Temu is the mirror of greater geopolitical and economic disputes that concern trade with China, competition fairness, and consumer protection. Palazzi’s demand is in line with the concerns of European industry associations which call for more rigorous monitoring of fast-fashion importations.
It is not known whether the EU might consider a temporary ban. The matter, however, will be the center of upcoming policy discussions on digital trade and retail sustainability.
As the demands of consumers change and regulatory frameworks take time to catch up with technological disruptions, the competition between global e-commerce platforms and local retail economies is likely to get fiercer.
