SHENZHEN, China—E-commerce sellers Shein and Temu are offering a lifeline for small suppliers in China’s manufacturing hubs—but it isn’t always a straightforward win.

In recent years, thousands of Chinese factories and vendors have joined the supply chain for Shein and Temu, whose popularity has exploded in the U.S. with their offers of inexpensive made-in-China goods, from T-shirts and handbags to electronics and kitchen items.