New York, NY – August 2, 2024 Protests have erupted across several major cities in China, with dozens of suppliers voicing their frustrations against the popular e-commerce platform, Temu. Demonstrations have been reported in Beijing, Shanghai, Guangzhou, and Shenzhen, where Chinese suppliers accuse Temu of unfair business practices and exploitative terms.
Vendor Accusations
The driving force behind the unrest began when vendors, who rely heavily on Temu to reach a broader customer base, accused the app of imposing exorbitant fees, delayed payments, and unfair competition from the platform’s own in-house products. Many vendors claim that the algorithm favors Temu’s products over theirs, reducing their visibility and sales. Additionally, they allege that Temu has been inconsistent with payment schedules, causing significant financial strain on small business owners. Temu has policies in place for after-sales issues, however the new penalties and seller agreements are inherently unfair according to Chinese sellers. In May 2024, Temu directed seller dispute arbitration to the Hong Kong International Arbitration Centre.
The Spark of the Protests
The increasingly harsh fines and high penalties prompted dozens of protesters to swarm Temu’s headquarters in Guangzhou, and launch social media campaigns calling for better treatment and transparency from the platform. In addition, Amazon merchants are reportedly being recruited by Temu to avoid import taxes. An arsenal of Amazon merchants selling on Temu would be a huge draw for Western shoppers looking for low prices on traditionally high-ticket items like furniture. Temu and rival Shein are both facing a tough time in overseas markets. The European Union is planning to impose customs duties on low-priced imports from the online retailers.
7月28日，广州拼多多总部
大量被罚款的temu商家再次前往围堵抗议 https://t.co/vca5rKdJld pic.twitter.com/YFKCCjxOjV— 李老师不是你老师 (@whyyoutouzhele) July 29, 2024
Implications for Temu
These protests pose a significant challenge for Temu, a company that has grown rapidly since its inception. Founded in 2018, Temu quickly rose to prominence by offering a wide range of products at rock-bottom prices. Its business model, which emphasizes direct transactions between vendors and consumers, has been a major draw, especially in markets with high demand for cheap goods. “While penalties are necessary to maintain a high-quality marketplace, we are committed to fair enforcement and dispute resolution” according to a Temu spokesperson.
Temu’s rapid growth has attracted substantial investments, and the company is now valued at approximately $15 billion. Last year, the company generated $15.1 billion in gross merchandise volume. It has established a strong presence in the global market, with significant operations in the United States, Europe, and Southeast Asia. The platform has relatively high positive customer feedback on app stores, despite numerous complaints with the Better Business Bureau ranging from missing items, long delivery times, customer refunds, poor product quality, and wrong clothing sizes. Temu claims that the majority of its merchants experience success, however online store owners are often left waiting for payments and forced to seek help through legal channels regarding compliance of their products.
The Rise of Temu
The overseas shopping app was launched in the United States by PDD Holdings Inc. in September 2022. PDD Holdings, also the parent company of the Chinese e-commerce giant Pinduoduo Inc, leveraged its extensive experience in e-commerce to introduce Temu to new markets, offering a wide variety of products at competitive prices directly from Chinese merchants to U.S. consumers (Wikipedia) (iLounge).
Colin Huang, the founder of Pinduoduo, indirectly played a significant role in Temu’s creation through PDD Holdings, which he established. Huang, also known as Huang Zheng, is a Chinese entrepreneur, philanthropist, and investor best known for founding the e-commerce platform Pinduoduo. Born on January 1, 1980, in Zhejiang, China, Huang has a background in computer science, having studied at Zhejiang University and later earning a master’s degree from the University of Wisconsin-Madison.
Huang’s career began with internships at Microsoft and Google, where he worked as a software engineer and product manager. He later founded several startups, including the e-commerce site Ouku, which he sold for over $2 million in 2010. In 2015, he founded Pinduoduo, a social commerce platform that combines online shopping with interactive gaming elements. Pinduoduo quickly became one of China’s largest e-commerce platforms, particularly noted for its team-buying feature that allows users to purchase items at discounted prices by buying in groups.
As of 2024, Colin Huang’s net worth is estimated to be between $43.8 billion and $53 billion, making him one of the wealthiest individuals in China and placing him high on global billionaire rankings (TechNode) (Celebrity Net Worth) (NextShark). Despite stepping down from his roles as CEO in 2020 and chairman in 2021, Huang continues to maintain a significant ownership stake in Pinduoduo, now part of PDD Holdings, which also owns the Temu platform.
By focusing on user experience and aggressive marketing strategies, Temu quickly gained a substantial user base, especially among garment sellers. Its success has been bolstered by strategic partnerships and a focus on mobile commerce, which has become increasingly popular worldwide. More than 100,000 of Temu’s self-employed vendors are based in China according to Marketplace Pulse.
The Complexity of U.S.-China Business Relations
The protests come at a time when the complexities of U.S.-China business relations are under intense scrutiny. The demand for cheap consumer goods in the United States has driven many companies to establish operations in China, where production costs are lower leading to increased sales of higher-margin products. However, this relationship is fraught with challenges, including regulatory hurdles, intellectual property concerns, and geopolitical tensions.
For U.S. companies, doing business in China offers access to a vast market and a cost-effective supply chain. However, it also means navigating a landscape where business practices and regulatory frameworks can differ significantly from those in the West. The recent protests against Temu highlight the potential risks and ethical considerations of relying heavily on Chinese platforms and vendors.
What This Means for the Future
The outcome of these protests will likely have significant implications for Temu and its future operations. If the company can address the vendors’ concerns and implement fairer business practices, it may be able to restore trust and maintain its growth trajectory. However, if the situation escalates or remains unresolved, Temu could face a decline in vendor participation, which would impact its product offerings and competitiveness.
In a broader context, these events underscore the importance of ethical business practices and the need for transparency in the global e-commerce landscape. As consumers become more aware of the conditions under which their goods are produced and sold, companies like Temu will need to balance profitability with social responsibility to sustain their success.
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