The news: Temu’s foothold in the US is shrinking as the company pulls back sharply on advertising.

• Weekly sales slumped more than 25% YoY between May 11 and June 8, according to Bloomberg Second Measure.
• As of Q2, the US now accounts for just 10% of Temu’s global monthly active user (MAU) base, per an HSBC analyst note cited by Reuters.

Temu switches gears: After spending billions in its attempt to conquer the US, Temu is now quietly backing away in favor of markets like Europe, where it is—for the time being—easier for Chinese ecommerce marketplaces to operate.

• The retailer is increasing ad spending in Europe while it massively dials down its US campaigns. The number of daily advertisements Temu is creating in the US is down to the dozens, or even single digits, analytics company AppGrowing Global told Bloomberg—a sharp contrast compared with its behavior prior to April 10, when it was creating as many as tens of thousands of ads per day.
• Sales in the EU and UK were up 63% and 38% YoY in May, respectively, per Consumer Edge data shared with CNBC—although that could soon change as lawmakers in both markets look to impose restrictions on low-value parcels.

Shein recovers: While Temu beats a hasty US retreat, Shein is staying firmly put. While the retailer has also turned its attention to growing its European business, it continues to advertise in the US—although the absence of one of its largest competitors has led it to temper its spending. That enabled US weekly sales to return to growth in June, per Bloomberg Second Measure.

The company has also benefited from the temporary easing of China tariffs and de minimis duties, allowing it to walk back some price increases—which it made sure to promote on its website and in emails to customers.

Our take: Given the importance of the US market to Temu and its merchants, it’s possible that its current pause on US ad spending and shift to Europe is a temporary effort to regroup as it searches for a business model more resistant to tariffs and the end of de minimis. At the same time, the longer the pause goes on, the more ground it will cede to Shein and other competitors—and the harder it will be to regain market share.