Temu Sellers Revolt Over Fines and Withheld Pay

Temu, an online shopping platform owned by Chinese e-commerce titan PDD, is facing mounting challenges as it pursues global expansion. Recently, the platform sparked a protest by hundreds of its independent Chinese merchants in Guangzhou, who are disgruntled over what they describe as unfair fines and withheld payments. These merchants, who contribute to Temu’s diverse offering of inexpensive products, rallied at a local office this week, demanding the release of their funds.

The protest, which began on Monday and had mostly subsided by Wednesday, underscores the difficulties Temu is encountering as it attempts to grow its footprint worldwide, including its recent foray into the Thai market. According to footage captured by a protester, the demonstrators, though peaceful, expressed their frustrations vocally and some staged a sit-in inside the office.

These suppliers, speaking anonymously to CNN, voiced concerns about excessive fines imposed by Temu for issues such as late deliveries or inaccurate product descriptions, with penalties reportedly ranging from one to five times the wholesale cost of the affected products. One merchant, a household goods seller, claimed that Temu froze about two million yuan ($276,000) from her sales, which she needed for business expenses, citing unspecified rule violations.

The situation reached a point of desperation for some, with one seller expressing regret over joining the platform due to the severe impact on her family and business.

Temu’s spokesperson, however, downplayed the scale of the protest, suggesting that only about a dozen merchants, primarily from the clothing sector and also active on competitor Shein, were involved. The spokesperson stated that these merchants were dissatisfied with how Temu handled product quality and compliance issues, and had chosen not to pursue standard dispute resolution processes.

Despite these disputes, Temu has experienced rapid growth since its U.S. launch in September 2022. The app has become incredibly popular, with over 600 million downloads and significant expansions into regions like Latin America, the Middle East, and Southeast Asia. Temu’s aggressive marketing strategies, including free shipping and returns, have been crucial in attracting consumers, much like those employed by Amazon and Wayfair.

However, according to Ivy Yang of Wavelet Strategy, Temu’s rapid expansion has led to an imbalance, with consumers demanding better and cheaper products and sellers striving for higher margins, all while Temu seeks to boost its revenue to sustain its massive marketing investments. This has led to significant seller discontent, driven by opaque communication and hefty fines, making profitability nearly impossible for some.

In response, a Temu spokesperson reiterated the company’s commitment to maintaining a high-quality marketplace and ensuring fair enforcement and resolution of disputes. However, some sellers like Peng and Mi, who briefly sold products like fishing wire and essential oils, find it difficult to remain profitable under the current system, further fueling tensions within the platform’s community.