Temu's popularity surge ignites Chinese sellers' discontent over its “aggressive...

Temu's popularity surge ignites Chinese sellers' discontent over its “aggressive” policies

Temu's popularity surge ignites Chinese sellers' discontent over its “aggressive” policies

Rebbeca Ren

posted on April 11, 2023 8:48 pm

The surge in seller resentment highlights Temu's disordered growth, paralleling the backlash its sister platform Pinduoduo is currently experiencing.

A video that appears to be from a logistics hub worker complaining about the flood of Temu packages she has to deal with has garnered 9.5 million views on TikTok.

"I'm gonna need you all to stop ordering Temu shxx. Because what the fxxx is all this? This is all work," said user @scotty..pimpin in a TikTok video she uploaded on March 18.

Screenshot of the TikTok video

Amidst the worker’s discontent regarding the increased workload resulting from escalated package volumes, it is evident that this new e-commerce player is undergoing a rapid expansion — not only in terms of app downloads but also in tangible transactions.

Launched last September by Chinese e-commerce giant PDD Holdings, Temu has garnered significant attention as the most downloaded shopping app in both the App Store and Play Store for several months. With a variety of low-priced items such as clothing, accessories, nail polish, and home essentials, as well as a social marketing approach that heavily emphasizes social media, Temu has won the hearts and minds of US consumers.

Temu's swift rise to success comes as no surprise to industry insiders, as it seems to be adopting a strategy similar to that of Shein, which has proven successful in achieving growth. Additionally, the app is receiving support from its parent company, which provides expertise in operations, industry contacts, and more.

As the cross-border e-commerce platform expands rapidly, one might expect Chinese sellers to be happy with increased sales. However, contrary to expectations, a surge of grievances has appeared on social media. Sellers are highlighting Temu's mismanagement, inconsistent and unfriendly policies for sellers, as well as mounting pressures.

Around the time that the TikTok video was uploaded, Temu faced a new challenge as its warehouses in China reached maximum capacity, leaving sellers unable to store or ship their products to the US. In a sudden move on March 15, Temu announced without prior notice that it would be closing the warehouse and temporarily suspending acceptance of incoming products to address the issue.

“The notification came without any prior notice, leaving us unprepared, and the closure persisted until early April or so, which meant we were unable to send products to the warehouse for at least two weeks. Consequently, many of our products were removed from the shelves due to insufficient stock, and our sales dropped significantly as well," a Temu seller, who requested anonymity, told PingWest.

The seller went on to say that Temu’s actions were even more absurd, as the platform penalized him for allegedly not providing sufficient inventory, despite the fact that he had submitted the products as soon as the warehouse was back in operation.

Numerous sellers claim to have had similar experiences and have taken to social media to voice their grievances, asserting that they should not be held accountable for penalties resulting from Temu's mismanagement and inadequate planning for storage capacity.

Another grievance among sellers is Temu's aggressive pricing strategy, which significantly erodes their profits. Unlike Amazon, Temu controls the pricing of products on its platform. The pricing process works roughly as follows: sellers send their products to the Temu warehouse, the platform decides which products to put on the shelves, and it asks sellers to offer extremely low prices.

"If we can't offer the lowest price, our products won't be approved for listing," a Henan-based seller shared with PingWest, "and it's inequitable as Temu demands even lower prices than those in 1688."

While 1688 is an Alibaba-owned wholesale marketplace for bulk purchases, Temu operates as a retail platform targeting individual consumers. The seller expressed, "This overwhelming pricing strategy has almost drained our profits."

Temu reportedly requests sellers to reduce prices even further for popular products, and returns items expecting sellers to cover logistics costs for those that lose popularity. This places a substantial burden on sellers, given their already slim profit margins.

To ensure the lowest prices, the platform also brought in a bidding mechanism: when multiple suppliers offer similar products, the platform selects the lowest-priced option. 

While consumers may appear to benefit from the floor prices, an unintended consequence is that higher quality, slightly more expensive products are being phased out, leaving only the cheapest, subpar products, the seller explained.

Meanwhile, some sellers have also raised concerns about the platform's high return rate. Andrea, who operates businesses on both Temu and Amazon, told PingWest that her Amazon store experiences a 7% return rate, whereas her Temu store faces a staggering 30% rate. When asked about the specific types of products she sells on these e-commerce platforms, she declined to disclose, saying only that they are household basics.

As per Tool4Seller, Amazon's average return rate fluctuates between 5% and 15% depending on the category. The average return rate on Temu remains undefined at present.

The surge in seller resentment highlights Temu's somewhat disordered growth, paralleling the backlash its sister platform, Pinduoduo, is experiencing among Chinese sellers.

Like Temu, Pinduoduo is also known for offering a variety of low-priced products to budget-conscious Chinese consumers, and naturally, it employs the same tactics to drive down prices that have long upset sellers.

A storm of outrage was ignited among sellers on March 23, when Pinduoduo launched its own store, the "Duoduo Welfare Club (多多福利社)". The sellers took to social media to urge their peers to place orders on the new store and select the "refund but keep the product" option. Under Pinduoduo's policy, consumers can typically receive an immediate refund without having to return the product. Sellers are unhappy with this policy as they feel the platform always trusts consumers more than them.

The flurry of retaliatory actions forced Pinduoduo to temporarily shut down its own stores. On social media, the sellers cheered the "success" of their actions and mockingly labeled Pinduoduo as "Somali Pirates”. The sellers' sentiments stemmed from their belief that the platform consistently favors consumers unconditionally, makes unfair arbitrations, and forces sellers to bear all losses, akin to being robbed by pirates.

Even in the face of growing discontent among small and medium-sized sellers, Pinduoduo's revenue growth remains compelling as its competitive pricing and aggressive marketing strategies continue to attract consumers. 

PDD Holdings posted that total revenue in the third quarter of 2022 hit 35.5 billion yuan, a year-on-year increase of 65%. In the fourth quarter, the total revenue was 39.82 billion yuan, a year-on-year increase of 46%.

As a new business line under PDD Holdings, Temu has yet to contribute significant revenue to the parent company. However, its importance has already been established, and the company is investing heavily in it. This includes aggressive hiring in both China and the US.

In a recent reorganization that was described as the company’s largest in history, PDD Holding’s CEO, Chen Lei, announced that he would be shifting his focus to the cross-border e-commerce business, further highlighting the company’s commitment to the success of Temu.

For the foreseeable future, Temu is expected to maintain its rapid growth trajectory, no matter how unhappy those sellers may be. This sentiment is echoed in comments on the TikTok video; one comment reads, "Girl, stop recording and get to work. I've been waiting for my Temu packet for a while now." “Girl, just do your job, I've got another order coming in,”...

In a surprising turn of events, the TikTok user who had previously griped about the increased workload has stopped wailing, and instead added a Temu referral link to her bio, hoping to get more people to sign up.