China’s Temu is under fire for their ways of handling after sales issues.
In southern China, hundreds of merchants protested in a rally at PDD Holdings Inc’s offices this week. The merchants protested against an increasingly harsh fine policy from Temu by swarming its parent company’s offices in Guangzhou as per local Chinese media reports.
The merchants disapproved of Temu‘s ways of handling after sales issues which were related to the quality and compliance of their products. The frustrated suppliers said that the affordable online marketplace that sells dresses and sneakers for $10 has now started levying unfair penalties on the Chinese merchants.
The suppliers of smaller outfits that sell Chinese goods to Western shoppers through the fast growing online brand Temu yelled slogans outside a Guangzhou company. Some protestors made their way into the offices but were dispersed before they met the senior executives.
The protest was the result of the growing frustration among the third party sellers and merchants who felt a squeeze by PDD for revenue as it embarked on a costly global expansion. Their objections focus on PDD’s practice of withholding payments from merchants who are assessed to have failed to meet customer expectations, according to the sources. This included everything from mismatched product listings to missed delivery deadlines.
The penalties and fines rose in number in the past months mostly without a clear reason or explanation. The payments were either withheld for the products that were already sold or levied a fine which was higher than the retail prices by Temu or PDD. The shares of the company fell by 3.5% in New York City which was recorded as the highest single day fall since the month of June.
The dispute merges with an increased frustration which takes Temu around the world. PDD’s platform took over the online market after an explosion in 2023 with an expensive Super-Bowl ad. Since then the online platform competes with other bigger Chinese online shopping brands like Shein, and even Amazon.com Inc. Although it was recently launched in Thailand, it picked up fame.
PDD stands for Pinduoduo which is a US listed company that benefited from the rapid worldwide expansion and has now become one of the most valuable e-commerce companies. PDD has outstripped longtime leaders Alibaba Group Holding Ltd. and JD.com Inc.
A spokesperson from Temu confirmed that it has brought in disputes with roughly over a dozen sellers over the “after-sales issues”. He also mentioned that a few merchants gathered outside the site of the Temu logistics affiliate.
“These merchants have declined to resolve the disputes through the normal arbitration and legal channels stated in the seller agreements,” the company said in a statement. “The situation is stable, and the company is actively working with the merchants to find a solution.”
Temu is driving abroad in part because Chinese consumption is slowing after years of Covid-related malaise. Although many other competitors including Shein, Alibaba and the TikTok shop of ByteDance Ltd. have the same thought. The threat to squeeze margins and shoot up costs.
Beijing is the driving force behind Shein and Temu’s rapid rise in the US. It has openly expressed its support on the sale of Chinese goods abroad or what is known as cross-border e-commerce. Although a circulating report suggests growing dissatisfaction among Temu’s merchants in Chinese provinces this year. The merchants or the third party sellers supply the cheap and fast-moving goods in bulk that the abroad consumers are hoovering up.
The moves to assuage merchants of PDD are unclear. Temu is concerned that suppliers and sellers would shift to other platforms, disrupting the flow of goods required to support the young platform’s growth.
This year, European consumer groups filed a complaint with the European Commission, accusing Temu of failing to protect consumers and engaging in coercive activities.