Shein has launched a pop-up store in South Africa, but goods aren’t available for purchase there. The busiest mall in the nation, the Mall of Africa in Johannesburg, hosted the first pop-up store for the Chinese e-commerce behemoth, which is based in Singapore.
Till Sunday, August 11, the store will be open from 09:00 to 21:00. However, according to the group, the pop-up store is merely an exhibition area that features the newest items in fashion and leisure.
It follows that merchandise cannot be bought during the pop-up. Consumers can order things online at the store at a discount after trying them on.
The approach that Yuppiechef took when it opened its first brick-and-mortar locations in 2018 was a combination of online and physical retail.
Tax conflict
Local merchants are finding it difficult to compete with Shein and rival online retailer Temu’s reduced prices, which have generated upheaval in the South African retail industry.
Retailers of semi-durable items, such as textiles, apparel, footwear, and leather goods, reported greatly declining confidence in the most recent Retail Survey for 2024Q2, conducted by the Bureau for Economic Research (BER). This confidence dropped from 68% in the previous quarter to just 38%.
The 2024 Rugby World Cup, among other factors, contributed to a time of high base period in sales, which was followed by dismal sales in the first quarter of 2024.
The Bureau of Economic Research (BER) stated that Temu and Shein, two online rivals, are also hurting domestic clothing retailers’ sales. Many retailers have also attacked online sellers for allegedly breaking tax laws in order to drive down prices and undercut their South African competitors.
They are accused of abusing the de minimis rule to get clothing parcels under R500 through customs with a 20% import duty and 0% value-added tax (VAT). Local retailers argue that Temu and Shein split up larger orders into smaller quantities and packages to ensure they are under R500.
After taking advantage of the lower 20% tax, they must then combine the orders before sending them to customers. Local retailers claimed that Shein and Temu have to pay the 45% plus VAT for imported clothing.
Local shopkeepers accuse Shein and Temu of tax evasion amid r500 order splitting strategy
Temu and Shein, according to local shopkeepers, split up larger orders into smaller quantities and packaging in order to keep them under R500.
They have to combine the orders before sending them to customers, even after taking advantage of the reduced 20% tax.
Shein and Temu are required to pay the 45% plus VAT on imported clothing, according to local shopkeepers. Michael Lawrence of the National Clothing Retail Federation stated: “These companies are avoiding paying VAT where it is applicable and are not paying duties on their imports.”
According to Lawrence, the South African Revenue Service (SARS) is not receiving accurate reports from the local couriers and service providers used by these eCommerce behemoths on their duties and taxes.
He stated that as of right now, there haven’t been any invoices that show the correct revenue collection from authorities about VAT and tariffs. Temu, Shein, and other internet shops would remain the focus of the tax man, according to SARS Commissioner Edward Kieswetter.
The service promised to charge clothing items under R500 the same customs and taxes as larger orders. According to Kieswetter, the state is aggressively attempting to resolve the issue after losing out on almost R3 billion in unpaid taxes.
Temu and Shein, though, insist they did nothing wrong.
Temu stated that import tariffs and taxes are not included in the products listed on its website and that it conforms with local tax laws.
Shein said that rather than evading local taxes, its flexible supply chain and technology-driven on-demand business strategy allow it to maintain low prices.
(Tashia Bernardus)