Hundreds of Chinese merchants who supply products to global discount shopping app Temu stormed the company offices in Guangzhou on Monday, waving protest signs and chanting slogans accusing the company of cheating its suppliers.
Temu is trying to squeeze every last nickel out of its business model to finance a massive expansion and its suppliers say one of its techniques is to soak them with exorbitant penalties if customers complain about the quality of their products.
Protesting suppliers said Temu and its parent company, PDD Holdings, have slapped them with increasingly high penalties for everything from missing their delivery deadlines to customers returning their products with complaints about poor quality.
The protesters said these fines have increased steeply over the past few months without the e-commerce titan offering any reasonable explanation. Bloomberg News suggested on Tuesday that the true reason that Temu needs cash, fast, is to finance its global ambitions:
The dispute coincides with an aggressive expansion that’s taken the Temu brand around the world. PDD and its Temu platform exploded on the scene in 2023 with an expensive Super-Bowl ad. It’s since begun to challenge fellow Chinese online shopping giant Shein, and even Amazon.com Inc. in certain segments. It launched in Thailand just this month.
That breakneck global expansion at one point helped US-listed PDD — which stands for Pinduoduo — become China’s most valuable e-commerce company, outstripping longtime leaders Alibaba Group Holding Ltd. and JD.com Inc.
The South China Morning Post (which, as it duly noted, is owned by Temu’s competitor Alibaba) quoted a Guangzhou merchant who saw himself as a “victim” of Temu’s harsh policies. He said almost all of his profits from moving $5.5 million worth of items through Temu last year were wiped out by huge “fines” due to customer complaints and refunds.
Some other merchants said they suffered a net loss after selling millions of dollars in products through Temu because the e-retailer’s fines can be up to five times the retail sale value of the items and it does not require customers to return items they are unhappy with. In other words, if a Temu customer is unsatisfied with a $500 smartphone, the manufacturer loses the smartphone and could be charged up to $2,500 in fines.
Temu suppliers have held two smaller and more peaceable protest rallies, but on Monday a few dozen of them forced their way into PDD’s offices and lingered until the police arrived. Videos have surfaced on social media showing the offices surrounded by angry merchants.
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Temu issued a statement on Tuesday that acknowledged some of its suppliers are “unhappy” with how the company handles “after-sales issues related to the quality and compliance of their products.”
“These merchants have declined to resolve the disputes through the normal arbitration and legal channels stated in the seller agreements. The situation is stable, and the company is actively working with the merchants to find a solution,” Temu said, without commenting directly on the Tuesday protest action.
Temu’s latest expansion launched on Monday, as the online shopping giant began selling cheap Chinese merchandise in Thailand.
The Bangkok Post warned that Temu’s arrival could “stoke a price war in the local e-commerce market and affect Lazada, Shopee and TikTok, as well as fuelling concerns over the potential shuttering of more local factories.”
Thai businessmen complained that Temu is “like a factory that sells directly to consumers,” a business model local manufacturers cannot possibly compete with, especially when Temu uses its enormous financial advantage to subsidize key products at cut-rate prices to entice new customers. Temu’s launch product offerings include paper napkins sold at roughly a third of the normal price in Thailand, for example.
“The Temu Thailand application offers free returns on products for a period of 90 days and a promotional discount of up to 90% on products, along with a set of discount coupons worth 70 baht,” the Bangkok Post noted.
Seventy baht works out to about $1.95, a respectable sum for Thai consumers. China’s favorable exchange rate with Thai currency is expected to be another tremendous advantage for Temu.
Temu has been accused of benefiting from slave labor by encouraging its suppliers to use cotton sourced to occupied East Turkistan, where China keeps huge numbers of the Uyghur Muslim inhabitants in forced labor camps.
The United States implemented a law called the Uyghur Forced Labor Prevention Act (UFLPA) in 2022 that presumes all products from Xinjiang are tainted by forced labor unless the supplier can prove otherwise. The House Select Committee on the Chinese Communist Party issued a report in June 2023 which found “an extremely high risk that Temu’s supply chains are contaminated with forced labor.”
Rep. Blaine Luetkemeyer (R-MO) additionally warned in February 2024 that Temu’s “sister company” PDD is “known for facilitating trademark counterfeiting and copyright piracy,” spying on its customers, and maintaining harsh working conditions that have reportedly killed at least two of its employees.
