Temu Faces Merchant Backlash Over Business Restructuring Moves

Temu Faces Merchant Backlash: Key Insight

• Business Restructuring Moves Trigger Seller Outcry: The latest protests at the offices of Temu's parent company PDD Holdings involve resistance to a change in Temu's business model. Temu is actively looking for sellers to handle warehousing and last-mile delivery in the EU and U.S. to shift costs to merchants and avoid issues in the case of regulatory updates prohibiting tax exemptions for many small packages, subsumed as of now under the de minimis regulation.

• List of Seller Complaints Is Long: For months, Temu sellers have been protesting the rising number of penalties imposed on them as a result of consumer complaints. Sellers feel the punishment is unfair and too strict, cutting into their profits and threatening the continuation of their businesses.

Temu is facing criticism from sellers who protest the company’s business model aimed at keeping down prices at all costs. FT reports that a new business shift has sparked the latest backlash, leading to vendor protests outside PDD Holdings’ Guangzhou office.

Shift in Business Practices
Led to Current Protests

The business move that sellers are protesting is that Temu is looking for merchants to take over logistics handling in the EU and U.S. This would change the company's model from ‘fully-managed’ to ‘semi-managed’, meaning that sellers would handle warehousing, shipping, and last-mile delivery themselves. With growing attention on the de minimis rule, which provides tax exemptions for small goods under a certain weight and price threshold, Temu is likely looking to build in safeguards against a possible regulatory update. Hiring vendors with local warehousing capacity would also reduce delivery times.

But the outcry among Temu merchants is not solely based on these recent company changes. 

The most pressing issue merchants have with Temu is that the eCommerce platform has been imposing increasing fines on sellers, which they say are unfair and unnecessarily harsh. Protesters outside the parent company's office building in Guangzhou claim that Temu imposes fines for every customer complaint, ranging from faulty packaging to discrepancies between website descriptions and actual products. More severe penalties include withholding payment for products already shipped.

Temu Orders Declining

In any case, sellers claim that Temu orders have been declining in recent months. As such, the current rally at the Guangzhou offices is just one event in a string of beads signifying protests spread out over the past few months. Add to this the dwindling number of orders that merchants are facing, the increasing penalties, and now the announcement that logistics responsibilities will be shifted to the merchants, means the very existence of the merchants' businesses is threatened. At the same time, they are being asked to lower their prices further.   

Temu said that merchants who agreed to take on the semi-managed model would benefit with top placements for their products on the site.