Pinduoduo, the leading e-commerce platform in China, hopes to revolutionize the way people shop through Temu and create a faster, simpler, and cheaper version of Amazon. However, recent protests have erupted against Temu due to hefty fines imposed on suppliers, raising concerns about various controversies in China’s cross-border e-commerce sector. Commentators believe that the ongoing disputes surrounding Chinese cross-border e-commerce companies abroad stem from the Communist Party of China.
On July 29, over two hundred small merchants from Temu, a cross-border e-commerce platform under Pinduoduo, gathered outside Temu’s office building in Guangzhou to protest the platform’s high fines and policies of withholding funds, with some merchants even entering Temu’s office on the 25th floor to express their dissatisfaction.
Since March this year, Temu has released a large number of lists of fines, primarily citing “after-sales issues.” Merchants have expressed discontent as Temu mandatorily withholds profits from their e-commerce accounts each month to cover after-sales compensation and other technical service fees, leading to merchant dissatisfaction.
According to a rights-protecting supplier, Pinduoduo has been unreasonably fining merchants for a long time, ranging from tens of thousands to millions of yuan, and has even frozen over a billion yuan of merchants’ reserve funds, causing operational crises for numerous companies and factories.
Chen Zhong (pseudonym) from Zhejiang, one of the first shoe merchants to join Temu in 2022, shared with Epoch Times that he has been fined over 300,000 RMB by the platform so far.
Chen stated, “They fine you without specific explanations. The fine notices mention after-sales issues like incorrect sizes, shoes unfitting, or poor packaging. I am willing to take responsibility for quality issues. For sports shoes or leather shoes, size discrepancies are acceptable, but I sell IP slippers and still got fined up to 200,000.”
The Wall Street Journal reported that a spokesperson from Temu confirmed that merchants are dissatisfied with how Temu handles after-sales issues. Temu’s policy ensures high-quality customer service and requires penalties to maintain a high-quality e-commerce platform.
The majority of Temu merchants have achieved success under these regulations, benefiting from increased sales and positive customer feedback.
These fines are related to the overseas “refund-only” policy implemented by Temu. The policy allows refunds for some low-value items without the need for the buyer to return the product, which may be intended to compel manufacturers to improve product quality. Pinduoduo first introduced this service in 2021, followed shortly by JD.com and Taobao.
However, this rule has faced ongoing controversy during implementation. Some small individual merchants claim that malicious groups exploit Temu’s “refund-only” feature for “zero-cost online shopping.”
Chen Zhong lamented, “I get fined whenever a customer wants a refund. When I calculate, I barely make any money now, and there is a ton of money stuck in my Temu account.”
In contrast to the losses incurred by fined merchants, Pinduoduo’s Temu saw a 560% revenue surge in the first half of this year.
Insiders note that since Pinduoduo’s emergence, the phenomenon of e-commerce in mainland China has become more intense.
Established in 2015, Pinduoduo adopted a strategy of low prices and a “hardcore struggle mode” to compete with other platforms and is sometimes referred to as the “king of rolling” in Chinese online networks, running “sprints at a marathon pace.”
Pinduoduo describes itself as a “dynamic, fast-paced company” committed to providing employees with an active and efficient work environment.
Pinduoduo is known for its lean workforce and efficiency, with over 60,000 employees in 2019, compared to Alibaba’s 108,000 and JD.com’s 220,000 employees.
In 2023, Pinduoduo’s profits and efficiency surpassed Tencent and Alibaba. However, to achieve this, Pinduoduo employees work long hours.
Epoch Times reached out to Pinduoduo for comments on the above issues but had not received a response by the time of publication.
Another point of contention with Pinduoduo is its ultra-low-priced model under full consignment operation. While other cross-border e-commerce platforms allow sellers to set prices for their products, on Temu, the platform dictates the pricing.
Temu has a strict pricing review mechanism where if a seller’s price on Temu for a product is higher than a similar product on the domestic wholesale e-commerce platform 1688, the platform requires the seller to reprice their item.
After products are listed, Temu conducts real-time monitoring, issuing “price reduction reminders” to sellers if a similar product at a lower price is detected.
Financial expert Huang Shicong from Taiwan told Epoch Times that Pinduoduo’s rise reflects China’s current trend of consumer downgrading. While platforms like Taobao and JD.com cater mainly to the middle and upper class, Pinduoduo targets second and third-tier cities, appealing to price-sensitive consumer groups with low-cost marketing strategies. As Pinduoduo’s performance improves, the declines in JD.com and Alibaba’s performance signify a clear decline in overall demand in China.
Furthermore, CNN reported that American security experts discovered that Pinduoduo’s shopping application exploited around 50 Android system vulnerabilities, allowing Pinduoduo to access users’ locations, contacts, calendars, notifications, and photo albums without user consent. The application can also alter system settings, access users’ social network accounts, and chat logs.
While it is unlikely for the overseas version of Temu to operate similarly to the Pinduoduo software, these security concerns undoubtedly cast doubt on the safety of Pinduoduo’s overseas Temu platform.
In June this year, the state of Arkansas in the United States filed a lawsuit against the Temu app, accusing the Chinese-backed platform of violating the state’s privacy laws, engaging in deceptive trade practices, and exploiting low-price goods to access customers’ personal information almost limitlessly.
The lawsuit alleged that Temu uses low-cost goods manufactured in China to entice users into unknowingly providing “almost unlimited access to their personal identifying information.” “Once installed, Temu can recompose itself and change attributes, including overriding the user’s believed privacy settings.”
Political commentator Li Linyi believes that with the Communist Party’s crackdown on companies like Alibaba and the continuous economic decline in China, these e-commerce platforms’ survival is severely threatened. To expand their presence, cross-border e-commerce companies are accelerating overseas business development, which has led to ongoing controversies abroad, ultimately stemming from the influence of the Communist Party of China.
Li cited that in the broader context, China’s e-commerce expansion overseas under the increasingly tense rivalry between the West and China naturally draws caution and even triggers various investigations in Europe and the United States; however, China does not rigorously regulate and penalize domestic illegal activities in many areas like privacy violations. In fact, the Chinese government has always sought ways to illegally obtain people’s information.
“Therefore, in mainland China, Chinese people’s personal information is openly sold online, with only a handful of those being processed. Hence, Arkansas’ lawsuit against the Temu application also has its reasons. Additionally, there is, in fact, forced labor in Xinjiang, despite the Chinese Communist Party’s denial. When the e-commerce supply chain becomes opaque, it naturally raises suspicions,” he said.
In recent years, amidst China’s economic downturn, the Chinese authorities have heavily promoted e-commerce expansion into overseas markets and provided subsidies.
Pinduoduo hopes to leverage this opportunity through Temu to revolutionize the world’s shopping experience, creating a faster, more concise, and cheaper version to compete with leading e-commerce giants like Amazon. However, compared to Amazon, this emerging platform still has gaps to fill.
One key difference lies in shipping speed. Some top Chinese suppliers on Amazon have warehouses in the US and other critical markets, offering same-day or next-day delivery services. In contrast, Temu’s warehouses are solely located in mainland China, and all items must be shipped via air freight, typically taking 9 to 12 days to reach foreign shoppers.
“Amazon is critical,” said Mr. Hu from Brand Factory to the Financial Times. “Most successful sellers heavily rely on Amazon, which deepens their trust in the platform. In comparison, the emerging platform has not gained an equivalent level of trust.”
In a report in May, American bank analysts stated that Amazon and Walmart could best “withstand” the impact of Chinese competitors.
The London Stock Exchange stated that Amazon’s recent report projects revenue growth of approximately 11%, reaching $148.6 billion.
In response to Temu’s low-price challenge, Amazon has also begun mimicking Temu’s model by recruiting Chinese suppliers and planning to launch discount stores mainly selling non-branded items priced below $20.
Huang Shicong stated that Amazon has established numerous distribution and centralized warehouses in the US, enabling rapid deliveries. As an American brand, US consumers are more willing to purchase from Amazon. If the platform sells counterfeit products, the complaints process is more convenient.
“However, Pinduoduo does not have such a setup. Pinduoduo focuses on low prices. If the demand for product quality is not as high, there is still a market for it, and indeed, it puts pressure on Amazon. Therefore, e-commerce issues are not only restricted to China; this contraction effect is felt even by overseas e-commerce companies.”
Analysts point out that Temu’s greatest challenge may lie in its compliance, such as tariff evasion and sustainability concerns, which have attracted scrutiny from countries like the US and Europe.
A report from the US Congress last summer highlighted that China’s fast-fashion e-commerce relies on forced labor and exploits loopholes in the American postal system. In 2023, the European Commission revealed the “EU tariff reform proposal,” aiming to eliminate the current tariff exemption policy for goods under 150 euros. France introduced the “2129 bill” last year to combat low-cost fast fashion, proposing eco-tax on such products.
European consumer groups have filed a lawsuit against the European Commission alleging that Temu failed to protect consumers and engaged in manipulative practices.
Regarding suppliers protesting against Temu, Huang Shicong stated that everyone aims to profit, and when such internal strife reaches a peak, it leads to a situation where everyone faces substantial losses. Unless the Chinese economy improves, and businesses expand, allowing for a larger share of the pie to be divided, such conflicts will only intensify. If the pie keeps shrinking, pressures from internal conflicts will grow, resulting in lower-quality products for consumers and leaving suppliers unable to provide better products to Pinduoduo, an ongoing trend.
As a mix of market competition, e-commerce strategies, compliance challenges, and security concerns continue to evolve in the e-commerce landscape, Pinduoduo and its Temu platform face a complex web of controversies and competition as they strive to make a mark in the global market.