In recent days, the merchants of Temu, a foreign platform under Pinduoduo, have been actively defending their rights in Guangzhou, attracting widespread attention. The strict fines and deductions imposed by Temu have caused many merchants to consider withdrawing, with some expressing admiration for the business environment of Amazon in comparison. Some merchants are now opting to leave the Temu platform and focus their efforts on operating on Amazon.
On July 30th, hundreds of Temu merchants gathered in Guangzhou at Pinduoduo’s overseas office to highlight the issue of rights defense, and the news of merchants being fined heavily and having no channel for complaints has become widely known.
Since May, Temu merchants have staged multiple protests for their rights, but the issues they have raised regarding fines and other matters have not been resolved, leading to disillusionment among the merchants.
From conversations with several Temu merchants, it has been revealed that many of them are either leaving or preparing to give up on Temu, whether it’s for clearance or wrapping up operations. Some merchants have compared Amazon and Temu, expressing envy towards the business environment of Amazon, with intentions to shift their focus there.
In June of this year, Amazon announced the launch of a new “Low Price” section: providing low-priced products directly shipped from Chinese warehouses to overseas consumers. This new low-price store has begun extensive communication with merchants, completing contracts, and is expected to start receiving goods this fall. This new strategy is beneficial for attracting and retaining more Chinese sellers.
In a time of economic downturn in China, both large and small businesses hope to sell their products in Europe and America to earn more money. Taking advantage of this, Pinduoduo introduced the Temu fully-managed model, where as long as small and medium-sized merchants provide products, everything else is handled by the platform. This has attracted a large number of small and medium-sized merchants to join.
The pricing power is completely in Temu’s hands, with merchants having to comply with their price reduction demands, which is a major point of contention for merchants.
Temu uses ultra-low prices to attract consumers, with only the supplier offering the lowest bid winning the order. Through a real-time price monitoring system across the platform, Temu pressures store owners and suppliers to lower prices by seeking out lower-priced, similar products.
An e-commerce entrepreneur from Jiangsu, Zhang Kai (pseudonym), told Dajiyuan that Temu’s bidding system forces sellers to reduce prices. If one does not maintain the lowest price, they cannot hold onto their place for long, meaning that another product may replace theirs at any time. In contrast, Amazon operates differently, where a seller’s product link belongs to the seller, and as long as they achieve a certain ranking, they can continuously receive a large amount of natural traffic from the platform, without worrying about lower-priced products suddenly displacing their own.
Zhang Kai explained, “I listed a genuine A product, a product exclusively developed on the platform, priced at 10 yuan (about 1.4 US dollars); after the first wave of sales, Temu searched across the network for the same product, leading to counterfeit products being introduced; they have no development costs, selling for three to five yuan. Temu doesn’t care whether it’s a genuine product or a counterfeit, forcing you to lower the price. As a result, some genuine manufacturers cannot continue, leading to more products of inferior quality.”
Zhang Kai stated that he sells shoes on multiple online platforms, such as Tmall and JD.com, all authorized genuine products. None of them are as poor as Temu. A pair of shoes costing 20 yuan (about 2.79 US dollars) at cost might earn just three to four yuan (about 0.42 to 0.56 US dollars) in profit, after deducting logistics, labor, warehousing, office, and other expenses, not making a cent of profit and even needing to put money in. Additionally, Temu reserves a large amount of money, making it difficult for merchants to withdraw. This makes it unsustainable.
Temu’s pricing system reduces merchant profits and increases risks for genuine product merchants.
Having spent three years at Temu, Zhang Kai is extremely dissatisfied with its opaque fine system. He found that regardless of what he sold on Temu, fines were always imposed. Everyone wants to sell products, and Temu doesn’t worry about having no one to act as ‘cannon fodder’.
Zhang Kai also sells on Amazon. He said, “When you make a mistake, you must face the consequences. If Amazon deducts funds, at least you know where you went wrong, can appeal, correct it, and avoid repeating the same mistake. But with Temu’s fines, merchants don’t know what the problem is, where they went wrong, and how to correct it.”
With over a decade of experience in e-commerce, Zhang Kai initially thought supplying goods to Temu would be straightforward, but the various fines and deductions made him almost receive no returns. He commented, “This is the first time I’ve encountered such a terrible platform; it has lost its conscience. I won’t continue with Temu; I will spend more time focusing on my Amazon store.”
Unlike Pinduoduo’s dominance in low prices, Amazon leaves the pricing power in the hands of merchants.
Jing Fei Dai, the Asia-Pacific Chief Executive of Amazon Global Store, emphasized to the media at the end of last year that Amazon hopes sellers will bring innovative products to the platform, rather than competing on price; they want them to build global brands.
This year, Amazon introduced the “low-price shop,” inspired by the fully-managed model, but retained sellers’ autonomy in pricing, participation in activities, and selection of products, while advertising promotion rights belong to Amazon.
A Guangzhou merchant, Wang Ming (pseudonym), expressed to Dajiyuan that he envies Amazon. Amazon prioritizes product quality and service, with more robust systems in place for product support, operational capabilities, and brand protection.
However, in November 2023, Amazon formally announced that it would no longer accept registrations from individual businesses. This impacted a large number of small and micro-individual businesses looking to register.
Wang Ming stated that Temu is different, as long as you have an operating license, regardless of the company’s size, even if it’s just two people, you can register to open a store. So the overall product quality of Temu cannot be compared to Amazon, and the service experience is also different.