Discount shopping giant Temu’s supply chain faces scrutiny as mainland sellers protest

According to multiple merchants on Temu, the terms between the platform and its suppliers have put them at a disadvantage

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Many of Temu’s merchants complain about the platform’s “opaque” system of slapping fines on sellers, while offering few channels for relief. Photo: Shutterstock

Published: 10:04pm, 31 Jul 2024Updated: 9:07am, 1 Aug 2024

The recent protest against international discount-shopping service Temu, which has grown the past two years as a popular portal for mainland Chinese exporters to reach overseas consumers, appears to have exposed inherent tensions between the PDD Holdings-owned platform and its suppliers.

Hundreds of mainland suppliers on Monday stormed Temu’s office in Guangzhou, capital of southern Guangdong province, alleging unreasonable policies by the platform. According to multiple merchants on Temu, the terms between the platform and its suppliers have put them at a disadvantage.

Many of these merchants complained about Temu’s “opaque” system of slapping fines on sellers, while offering few channels for relief. At Temu’s discretion, the amount of fines can cost a merchant up to five times the price of a product that is subject of a complaint.

Temu’s efforts to please consumers were borrowed from its Chinese sister platform Pinduoduo, known for cut-to-the-bone deals and easy-to-refund options. That policy has helped Temu grow overseas. Its gross merchandise value surged to about US$20 billion in the first half of this year, surpassing overall sales of US$18 billion in 2023, according to a report by Chinese media outlet 36Kr.

A screen grab from a video of mainland Chinese suppliers protesting against Temu on Monday in Guangzhou, capital of southern Guangdong province. Photo: YiMagazine

“From the company’s perspective, the most important task now is to rapidly expand the market and gain more customers, especially when substantial marketing inputs need to be justified,” said Ivy Yang, founder of Wavelet Strategy, who also writes the Substack newsletter Calling the Shots. “If prices continue to be pressed down, merchants will have to cut costs to maintain profits, leading to lower product quality, and this is a vicious cycle.”

Alibaba Group Holding, the owner of the Post, also owns AliExpress and Lazada, director competitors of Temu.