Mercado Libre, Magalu, and Shopee may see a greater impact with Temu’s entry than specialized retailers, according to analysts.
The news that Pinduoduo, a Chinese digital services platform, is entering the Brazilian e-commerce market through Temu has been making headlines in the news in recent days.
The company has submitted a request for certification in the Remessa Conforme program to the Brazilian Federal Revenue, which allows the import of goods below US$ 50 without paying import taxes, according to information from Valor Econômico, with an incidence of 17% ICMS (Tax on Circulation of Goods and Services).
Temu’s entry into the Brazilian market has been expected since last year, as well as the effects on national retailers and well-established foreign ones here.
In an August report, XP highlighted Temu’s profile. Unlike Shein, which is recognized as a fashion platform, Temu has a much broader assortment of categories, with over 30 major product categories such as pets, clothing, toys, home, and electronics, making it more comparable to Shopee’s value proposition.
However, the company has a business model similar to Shein’s, helping Chinese manufacturers better understand consumers’ needs, leading to greater accuracy and efficiency.
Temu’s app can be downloaded in Brazil, but purchases are not yet available, according to BTG Pactual. The app has already received over 3 million reviews in Brazil, with an average of 200,000 monthly downloads.
Globally, the company projects $60 billion in sales this year, including its own sales and those from the marketplace, more than triple the value in 2023, according to Chinese media.
Regarding the latest news, Santander pointed out that Temu’s entry into Brazil this year was highly anticipated and, if the exemption from import taxes for purchases below US$ 50 remains, it could translate into a negative effect on the retail sector in general, as the risk of increased competition for cross-border players would materialize.
However, it believes that long-time operators in the online market, such as Mercado Libre (MELI34), Magazine Luiza (MGLU3), and Shopee, may see a greater impact with Temu’s entry than specialized retailers.
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The bank’s analysis team also assesses that Temu’s decision to enter the market through the Remessa Conforme program should help monitor the company’s growth rate in the country, or at least provide an idea of the potential impact, which is a different scenario from the “impressive growth of Shein” in 2021-2023, the period before its enrollment in the program.
BTG points out that the measure comes at a time when Brazilian retailers and industries are pushing for the return of import taxes. Congressman Átila Lira presented his report on bill no. 914/24, which deals with the Mover program.
The main change was the inclusion of “e-commerce taxation.” The text repeals a 1980 decree-law that granted import tax exemption for international postal shipments P2P up to US$ 50.
International retail news intensified recently due to the government’s decision to eliminate the import tax on items below US$ 50 (which only pay 17% ICMS). But the growing pressure from local companies and associations has led the government to suggest possible tax increases on several occasions.
Last June, the Ministry of Finance issued a decree with new rules for online international purchases. The government will no longer charge import taxes on online purchases up to US$ 50 if companies adhere to Remessa Conforme and pay the state tax (17% ICMS).
Prior to this, all B2C imports were taxed regardless of value. The US$ 50 exemption was limited to international P2P shipments.
According to the decree, online purchases up to US$ 50 made from companies that do not comply with the new rules will still be taxed. International shipments are subject to a 60% import tax. The measure came into effect on August 1, 2023.
