Chinese merchants operating on Temu, the international platform of Chinese e-commerce giant Pinduoduo, who have been protesting what they describe as unsustainable policies on the platform, are transitioning their business to Amazon, disheartened by Temu’s handling of their grievances.
On Temu, merchants describe anti-business penalties, including substantial “fines” that can reach up to five times the transaction value when purchases are returned, and the withholding of payments whenever customers lodge complaints or request refunds on goods already shipped. Temu allows customers to retain items even after a refund, due to the prohibitive costs of international return shipping, and merchants report receiving no compensation in such instances.
Several Temu merchants, preferring anonymity, have told The Epoch Times that the platform’s poor treatment of merchants has forced them to leave the platform. Many are in the process of clearing out their inventory and wrapping up operations, citing a significant lack of trust. These merchants often compare Temu unfavorably to Amazon, indicating a strong preference for the business practices of the latter.
Jiangsu e-commerce merchant Zhang, who has been with Temu for three years, spoke of the pervasive issue of fines on the platform, “Everyone wants to sell, but Temu continues to exploit sellers without fear of running out [of sellers].”
He said that fines levied against the merchants are often “unexplained” and offer no room for appeal, fostering a climate of uncertainty among merchants who never know when they might be penalized.
Sharing his frustrations with The Epoch Times, Zhang said that Temu’s aggressive bidding system forces sellers into a relentless downward price spiral. Unlike Amazon, where sellers maintain control over their product links and can generate substantial organic traffic from the platform as long as they maintain a certain ranking, Temu’s system can replace a product link with a cheaper alternative at any moment.
“I launched an exclusive product at 10 yuan (about $1.40). After initial sales, Temu scoured the network for the same product, leading to the introduction of counterfeit versions priced between 3 to 5 yuan,” Zhang said.
“Temu shows no concern for the authenticity of products, pushing genuine manufacturers to either drastically lower prices or cease production as inferior quality goods flood the market,” he said.
Besides Temu, Zhang sells shoes on Chinese e-commerce platforms including Tmall and JD.com, where most goods are genuine branded products. The profit margins on these platforms contrast starkly with those on Temu; a pair of shoes costing 20 yuan (about $2.80) to produce might only net 3 to 4 yuan (between 42 cents and 56 cents) after Temu’s expenses, often resulting in a net loss when considering logistics, labor, storage, and office costs, he said.
Additionally, Temu’s use of a reserve fund to withhold a substantial portion of merchant earnings further strains the relationship.
Echoing this sentiment, Wang, another Temu merchant from Guangzhou, also prefers Amazon’s business model. “Amazon’s support systems for products, operational capabilities, and brand protection are well-developed, which significantly enhances the selling environment,” he said.
Wang said that Temu’s registration process is notably less stringent than Amazon’s, permitting any entity with a business license or sole proprietorship to register, regardless of its size. However, he also observes that this more inclusive approach does not necessarily equate to higher quality, as the product and service experience in Temu generally falls short of the standards maintained by Amazon.
As China faces an economic downturn, both small and large businesses are looking toward markets in America and Europe to bolster their revenues. Seizing on this opportunity, Pinduoduo introduced its fully-managed Temu platform, which initially proved to be especially attractive to small-scale merchants as they were only responsible for supplying products, while Temu handled everything else, from logistics to customer service.
However, this convenience came with a significant drawback: Temu retains full control over pricing.
Merchants are compelled to comply with constant demands for price reductions, a practice that has drawn considerable criticism. The platform’s strategy involves enticing consumers with exceptionally low prices, where the supplier with the lowest bid secures the order. Furthermore, Temu employs a real-time pricing monitoring system to exert pressure on merchants to lower their prices if similar products are available cheaper elsewhere. This, coupled with a harsh and opaque penalty system, leaves no room for seller appeals.
“On Amazon, if you are penalized, at least you understand what the mistake was, you can appeal, and learn how to avoid future errors. Temu, however, leaves its merchants in the dark about the reasons for penalties, preventing any chance to rectify issues,” Zhang said, adding that he is now shifting focus to his Amazon store.
Xin Ning contributed to this report.