**Pinduoduo’s Temu Penalizes Merchants, Triggering Rights Safeguarding**
Pinduoduo’s performance has surged, but merchants on its cross-border platform Temu are forced to take the path of rights safeguarding. Hundreds of small merchants gathered once again in Guangzhou for rights protection. Some merchants revealed the astonishing details of Temu’s fine chaos, indicating that the fines deduction is to plug the huge financial hole left by overseas sales subsidies.
July 30th, “Pinduoduo’s platform Temu angers sellers” trended on Weibo.
Netizens uploaded videos on overseas X social platforms, indicating that on July 29th, hundreds of Temu merchants gathered at the Temu office in Panyu District, Guangzhou, chanting slogans for rights protection. Dozens of people even entered the office area upstairs but failed to meet Temu executives and were eventually advised to leave by the police.
Some rights protectors held banners saying, “Pinduoduo doesn’t pay for goods, salaries can’t be paid”, while others wore cultural shirts with slogans like “Pinduoduo, trap”.
An e-commerce merchant involved in rights protection stated that Pinduoduo has been deducting fines without reason for a long time, ranging from hundreds of thousands to tens of thousands of Yuan. This has not only caused crises in the operations of many companies and factories but has also led to some factories being unable to pay salaries. Some merchants pointed out that the root cause of the issue is the huge financial hole left behind by Temu’s massive subsidies to overseas consumers.
Last Monday (July 22nd), there were also hundreds of merchants staging a rights protection activity at the Ao Garden.
E-commerce seller Chen Zhong told Dajiyuan that there is still no solution. The video of their last visit to Ao Garden was banned across the internet. Now, small and medium-sized sellers are on the brink of collapse. Some insiders involved in rights protection and Temu e-commerce have accepted interviews with Dajiyuan, revealing the strict details of Temu’s punitive deductions.
Chen (pseudonym) from Zhejiang has been in e-commerce for over a decade and was one of the first batch of merchants on Pinduoduo’s Temu when it launched in 2022. He told Dajiyuan that he has sold about 200,000 pairs of shoes and has been fined over 300,000 Yuan in total on the platform, with monthly fines being a recurring issue. Almost none of the 50,000 merchants on the Temu platform are exempt from fines.
The reasons for Temu’s fines, as well as all explanations for “non-compliance” and “lack of conformity,” are dictated by the platform itself.
Chen said, “They directly deduct the fine without specific explanation when imposing fines. The fine notices show post-transaction issues such as size problems, shoes not fitting, and packaging issues. I am willing to take responsibility for quality issues, and even if there are size problems for sports shoes or leather shoes, I can accept them. However, I sell IP slippers and still got fined over 200,000 Yuan. It’s truly speechless.”
Chen mentioned that fines last year were five times higher. For instance, if a pair of shoes cost 30 Yuan, a 5x fine would be 150 Yuan.
Pinduoduo implements “refund-only” policies both domestically and internationally. This means that customers do not need to return the goods, only complain about product quality, and they receive a one-way refund. Temu’s overseas customers face the same policy.
“As soon as a customer requests a refund, I get fined. When you calculate it, you’re actually losing money and are left with a pile of money stuck in the Temu account,” Chen stated.
Under the guise of post-transaction reserve funds, Temu forcibly withholds profits from sellers’ accounts each month to pay for post-transaction compensation and other technical service fees, causing dissatisfaction among merchants.
Chen explained that if one sells 100,000 Yuan in a month, Temu would deduct 10-20,000 Yuan from the platform. As of now, his monthly reserved funds amount to around 30,000 Yuan. Accumulating deductions are made every month, leaving many e-commerce merchants with substantial reserved funds.
Mu Xue (pseudonym), who has been running a Temu clothing store for three years, stated that she has been fined over 400,000 Yuan so far, with fines significantly increasing in recent months. In May alone, she was fined over 200,000 Yuan. Currently, there is still 900,000 Yuan reserved in her account on the platform.
“I’m exhausted from being fined! The goods are stacked in the warehouse, and I have to continue selling, resulting in more fines,” she lamented.
Notifications from Temu indicate that she has been fined for size issues or items not meeting expectations. When buyers place orders and then choose the “refund-only” mode for returns, they receive the money back and get to keep the clothing for free.
“Considering each piece of clothing costs 50 Yuan, a 5x fine amounts to 250 Yuan. If one makes a profit of 10 Yuan per item, a loss of 300 Yuan means I would have to sell an additional 26 of the same items just to break even. Essentially, I’ve sold 26 items to Temu for free,” Mu Xue explained.
Mu Xue pointed out that attributing all customer returns as quality and service issues to her, along with imposing fines several times over, is unreasonable. She attempted to contact the Temu platform but was unsuccessful. Even through Temu’s business feedback channels, she failed to obtain a clear response. She and many other merchants feel that the fines are excessive and opaque.
Chen clarified, “We merely set the price for a product, and the pricing authority lies with Temu. They employ a price comparison system that continuously devalues products, forcing me to lower prices for newly developed items and align with the low pricing of counterfeit goods. There’s a scheme involved, and we were compelled to sign contracts from the very beginning.”
When an account is created on the Temu platform, an agreement called the “Producer’s Extended Responsibility Related Service Agreement” automatically appears, and sellers must click “Agree to Sign” to gain access to the backend. The interpretation of the terms lies with Pinduoduo. Subsequently, Temu introduced rule changes as an excuse for fines, claiming that sellers had already “agreed.”
Pinduoduo’s Temu launched the “refund-only” return policy, citing consumer protection and the crackdown on counterfeit products by shop owners. This return policy ensures a secure shopping experience for buyers, stimulating rapid expansion of overseas users and traffic. However, merchants have been constantly complaining that “refund-only” has given rise to a large number of “freebie seekers” in shopping. The internet is flooded with strategies on how to take advantage of Pinduoduo’s Temu’s zero-cost shopping activities.
Ms. Xie, residing in New York, regularly buys small items on Temu and told Dajiyuan that Temu’s return service is as effortless as Amazon’s, making it one of her preferred platforms. Upholding consumer rights is a fundamental concept in American commerce, a concept Temu has effectively replicated. However, the prevalence of freebie seekers on Temu points to underlying issues that Temu needs to address, and rather than intensifying fines on merchants, it should take responsibility.
An odd phenomenon on Temu is that the more items acquired by freebie seekers, the higher the fines imposed by the platform. Merchants are the only victims in this profit loss scenario.
In contrast to the losses merchants incur from fines, Pinduoduo’s Temu saw a 560% increase in performance in the first half of this year; earning profits of 30.6 billion Yuan (approximately 4.24 billion U.S. dollars) from January to March, a 202% year-on-year increase.
Many Pinduoduo and Temu merchants stated that a significant portion of Pinduoduo’s astonishing profits includes substantial merchant fines.
Chen mentioned that Pinduoduo enjoys high traffic, earns market value, and has a high stock price. Shareholders prioritize their stocks making profits, regardless of how much merchants lose. Pinduoduo reportedly averages a loss of 30 U.S. dollars per order on products, and it continues to invest large sums in overseas advertising. With such substantial losses annually, these expenses are deducted from the merchants.
On July 30th, Pinduoduo responded, stating, “The platform will not profit from the fines imposed on violative merchants; if fined, it is to compensate consumers.” However, merchants do not agree with Pinduoduo’s response.
Furthermore, netizens on social media claimed that merchants fined amounts exceeding tens of thousands Yuan or having their funds accounts frozen by Pinduoduo are due to infringement issues as they face U.S. temporary restraining orders (TROs).
Regarding this, Chen expressed that it’s fair if infringing merchants encounter TROs, but most merchants’ main issues revolve around Temu platform fines, not TROs. He holds little hope for resolving these issues through rights protection. “They have backgrounds, connections, and money; it’s unwise to offend or provoke them,” Chen said.
Zhang Ming (pseudonym) from Guangzhou accompanied his brother for rights protection. He told Dajiyuan that his brother sells clothing on Temu and has been fined over 100,000 Yuan, not due to a TRO.
Zhang believes it’s futile to sue Temu in China as the limited rights of merchants render them mere pawns easily manipulated.
He also shared astonishing information that Temu does not have a headquarters, unlike Alibaba’s presence in Hangzhou; the so-called Temu Guangzhou headquarters is merely a business office, employing individuals to scout for new procurement agents. Zhang knows some of these individuals, who are not part of Temu’s management. Accessing people in charge is impossible; it truly appears complaints have no way of reaching them.
Dajiyuan reporters attempted to contact the Pinduoduo Guangzhou service department for comments, but no one answered the phone. Upon calling the Guangdong Consumer Council, the response was, “We are unaware of this matter.”
Temu’s fine deductions have triggered a survival crisis among merchants, with pressures affecting the commodity supply chain and originating factories. Many merchants are now leaving Temu.
Chen mentioned that the best sales period for him was from March to May 2023. During this period, he hired over ten employees on temporary contracts, and used a 9.6-ton truck to ship goods from the warehouse, one shipment at a time. However, there were fines starting from May, which seemed problematic to him, so he reduced the volume of inputs and staff. Now, he’s the only one left.
Many of Chen’s peers and friends are similarly downsizing, liquidating stock, and engaging individuals to clear out remaining goods. The more they engage, the more they lose.
Chen emphasized that Temu’s AI big data system continuously compares and depresses prices. If he sells at 10 U.S. dollars, and someone else at 5 U.S. dollars – authentic or not – the system pushes for lower prices. Some good sellers even ended up not wanting one or two hundred items and simply sold them for a cent or a dime. If you don’t lower prices, your ranking decreases, and the products may even be delisted. Lowering prices means losing money, and there are too many people unable to sustain this. Only a few people resort to rights protection in Guangzhou.
“Of course, the sheep cannot be sheared enough, with some people still being enticed by Temu’s traffic and performance.,” Chen commented.
Zhang added that all listed e-commerce companies have been spurred to new highs by Pinduoduo, and are caught in the “low-price vortex,” using fines to bleed small and medium-sized merchants. This pricing war is exploiting resources to the extreme, ultimately resulting in the degradation of the entire social economy.