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「Core Tips」
"Make it easy to do business in the world" or "Make it impossible to do business in the world"?

Author | Chen Fashan

Editor | Liu Yang

Merchants on the TEMU platform have recently experienced a series of challenges - first the overseas "zero-yuan purchase" wave has not been resolved, followed by a series of high fines. Merchants driven crazy by the dense fines gathered at TEMU's Aoyuan headquarters in Panyu District, Guangzhou, trying to "force the palace" to apply for a refund of part of the fines to reduce their losses.

Judging from the video circulating at the scene, many merchants signed on A4 paper to confirm the amount of fines they had suffered. Some were fined more than 200,000 yuan, and some were even close to one million yuan.According to Caixin, a statistical catalogue provided by merchants showed that "the total amount of after-sales fines and frozen after-sales reserves of more than 100 merchants reached 142 million yuan."

Since entering the North American market in the fall of 2022, TEMU has quickly made a breakthrough in the US market with its RMB 150 million sponsorship of the "American Spring Festival Gala" Super Bowl event and a series of high-subsidy strategies, and has topped the Apple Store's download list, becoming a dark horse in the field of cross-border e-commerce.

The merchants who joined in the early stage enjoyed the traffic dividend, which attracted more cross-border "novices" to join. However, after entering 2024, the situation changed, and TEMU began to issue high fines to merchants.According to TEMU's after-sales service rules, the fine can be up to five times the order amount.

As a cross-border e-commerce platform under Pinduoduo, TEMU has similar operating strategies to Pinduoduo. Some merchants are dissatisfied with Pinduoduo's refund-only policy, but they are powerless because it is difficult for merchants to find effective channels for complaints. As a result, dissatisfaction began to spread and accumulate among the merchant community, and with the spread and connection of social media, it eventually triggered this large-scale protest.

E-commerce platforms bring great convenience to both buyers and sellers, and their original intention is to make business easier. However, for merchants, the reality does not seem to be so rosy. Is this the price of the "rapid growth" of cross-border e-commerce?

1. Collective "forcing the palace"

On social media, some merchants expressed their dissatisfaction with the high fines imposed on TEMU, describing the company as "a company with no logo, no signboard, and the most mysterious". Some merchants claimed that even if they found TEMU's office, the staff inside denied their identities and insisted that it was a logistics company, causing the merchants to suspect that they had found the wrong place.

Offline, rights protection activities had already begun in May. By early July, only a few businesses had directly participated in negotiations with TEMU. As related videos quickly spread on WeChat groups and short video platforms, the number of participants continued to increase.

A group chat record obtained by Leopard Change shows that on July 22, a large number of merchants gathered downstairs of Guangzhou Panyu Aoyuan International Center. Most people wore masks to cover their faces and did not take any radical actions. Many police officers were maintaining order. At the same time, someone on the scene used a loudspeaker to guide merchants to communicate with TEMU's operations team, but the process seemed a bit chaotic because the specific contact person or office location was unclear.

In another photo, some businesses have begun to register personal information and fine amounts on A4 paper, ranging from 170,000 yuan to more than 900,000 yuan.

The "rights protection" information at the scene quickly spread through social media. Someone shared the location of Aoyuan Building in a WeChat group and left a message saying, "If you are fined a lot of money by TEMU, quickly send someone to Panyu Aoyuan to register. There are hundreds of people there defending their rights."

Judging from the videos posted on social media, a large number of merchants still showed up in the following days, and their emotions were even more agitated than at the beginning. At the same time, some people climbed the stairs into the TEMU office area and demanded to solve the problem face to face. Before their demands were met, they simply sat on the floor in the aisle.Some people at the scene kept repeating that they were "victims" and demanded that the legal representative and person in charge of TEMU come forward to deal with the problems of the merchants.

The video shows that at first there were still staff working in the TEMU office area, but in the video shot a few days later, the office area was empty. On July 29, as the situation escalated, TEMU employees were notified to leave work, and the merchants who "invaded" the office area were persuaded to leave by the police on the grounds of occupying other people's office space.

In this "rights protection" event, in addition to the merchants, there were also many people who "joined in the fun". Some bloggers who focus on the e-commerce field personally went to the scene to shoot, or used online materials to make videos, hoping to gain traffic income from them. However, many bloggers later confirmed that many of the videos they posted had been removed from the shelves.

2. Mysterious fines

From the merchants' point of view, the fine itself is not unacceptable. The key is that the fine must be based on clear and reasonable reasons.

The cost of "reverse logistics" after sales in cross-border e-commerce is relatively high, especially for low-value goods. Merchants often lose more than they gain by handling returns and exchanges. The original intention of only refunding and adding high fines was to regulate the behavior of merchants, prompting them to provide better products and services and reduce post-sales disputes. However, in practice, this mechanism gradually deviated from its original intention, and the fine ratio continued to rise, eventually causing strong dissatisfaction among merchants.

Taking a merchant from Zhejiang as an example, data shows that in January-March this year, the amount of fines imposed on his store only accounted for 2%-3% of sales, but starting from April, the proportion of fines soared to 12%. In May and June, the figure further increased to 25% and 21%.

TEMU's after-sales service rules list in detail various situations that may lead to fines, including but not limited to product safety compliance issues, ingredient and size errors, defective products, false advertising, etc. The amount of the fine is determined based on the order amount and store rating. It is worth noting thatFor merchants with a quality score below 60, if consumers return products due to quality issues, in addition to "not settling the payment for the order", they will also face a fine of five times the order amount.

Although other cross-border e-commerce platforms also have similar punishment mechanisms, the frequency of fines is lower and the reasons given are more sufficient. Some merchants believe that they do not object to the platform issuing fines, provided that the fines should be accompanied by evidence and provide channels for appeal.

One merchant showed his backend records, which showed that when TEMU deducted money, it was only marked as "after-sales compensation" or "product quality reasons", but did not specify the specific problems of each fine, which made him feel very unfair.In contrast, some other cross-border e-commerce platforms require users to provide photos or videos as evidence when dealing with similar issues, giving merchants the opportunity to make reasonable explanations.

A merchant's backend shows a penalty information

At present, the merchants who arrived at the scene to "force the palace" on July 29 have basically dispersed. Ma Kaiyue, the founder of Lao Ma E-commerce Circle, said that most merchants have registered the fines, but there is no solution. The merchants in the community who went to the scene will use legal means to protect their rights later.

“On August 2, TEMU sent a survey form to merchants, showing its willingness to negotiate with them. It also unfroze part of the after-sales reserve funds of some merchants, but without major external intervention, TEMU is unlikely to compromise."Ma Kaiyue said.

In this survey of leading merchants, TEMU stated that it would optimize the penalty page and account reconciliation and settlement products, and hoped that sellers would provide feedback and suggestions to improve operational efficiency.

Prior to this, many e-commerce practitioners said that TEMU’s new regulations are usually pushed to merchants in the form of pop-up windows, and some people accidentally click to agree. If they disagree, the system will restrict the merchant’s use of backend functions, thus affecting the normal operation of the store, leaving the merchant with no choice but to accept it.

3. Cross-border e-commerce “siege”

Those who were "hurt" by TEMU want to get out, and those who have never done it want to get in. When the domestic e-commerce market competition is extremely fierce, cross-border e-commerce has become a good medicine to alleviate growth anxiety.

Data from the Ministry of Commerce show that in the past five years, the scale of my country's cross-border e-commerce trade has increased more than 10 times. In the first quarter of 2024, the import and export volume of cross-border e-commerce reached 577.6 billion yuan, a year-on-year increase of 9.6%, of which the export volume was 448 billion yuan, a year-on-year increase of 14%.

The "Four Little Dragons" of cross-border e-commerce - TEMU, TikTok Shop, SHEIN, and AliExpress - together account for about one-third of the market share, and the full-hosting model has played an important role in this process.

Under the full-hosting model, sellers only need to deliver the goods to the platform warehouse, and the platform will be responsible for subsequent pricing, operations, after-sales service, logistics, etc. This greatly reduces the threshold for cross-border e-commerce, and even a novice can easily go overseas.

The result of this model is that the scale of sellers expands rapidly and the prices of goods continue to fall.A product that costs 3 yuan may be initially priced at around 10 yuan, but after rounds of price wars, it will soon drop to 5 yuan. Considering the costs of logistics and after-sales, the seller is likely to face losses.

Judging from the feedback from many merchants, TEMU's early advantages were large shipments and stable orders, which easily made people hallucinate and become dependent on it. The degree of dependence of different merchants on TEMU determined their attitudes in this rights protection.

For example, a jewelry merchant settled in TEMU at the end of 2023. Its sales accounted for only about 10% of the total business. The rest of the inventory could be sold through other platforms or traditional foreign trade distribution channels, so it seemed relatively calm.

Another merchant engaged in the sale of women's clothing is highly dependent on TEMU. Due to problems such as size mismatch and outdated packaging, he is frequently fined. From the beginning of the year to date, the amount of fines has accounted for 37% of his total revenue. It is difficult to pay the workers' wages, and he said frankly that he is "very angry."

In fact, the so-called after-sales problems are not always the responsibility of the merchants. Sometimes it is because of "online zero-yuan purchases" initiated by overseas users who exploit loopholes.

Several users who have been working in Japan, the United Kingdom and Germany for many years told Leopard Change that on overseas social media such as YouTube and TikTok, many users share how to use after-sales policies to achieve "zero-yuan purchases", that is, applying for a refund without return on the grounds of after-sales service, and the merchants become the party that bears the consequences.

Overseas bloggers share online strategies for "zero-dollar shopping"

In Ma Kaiyue's opinion, for some businesses, whether to do TEMU or not has nothing to do with money, but a question of values, just like even if the rules allow taking other people's items, some people will restrain themselves morally and not take them, but it is inevitable that "wool parties" will appear. Therefore, some businesses have actively chosen to refuse to cooperate with TEMU.

also,Changes in platform policies have also put increasing pressure on the survival of small and medium-sized sellers.In 2024, in investment promotion activities in many places in Zhejiang, the "Four Little Dragons" began to emphasize the semi-trusteeship model, aiming to allow merchants to enjoy the logistics, warehousing and marketing support provided by the platform while retaining a certain degree of autonomy.

Different platforms have different semi-hosted policies. In the case of TEMU, product pricing, price verification and after-sales management are still controlled by the platform, while sellers are mainly responsible for order import, delivery and contract fulfillment. This is conducive to attracting large sellers with rich cross-border e-commerce experience to improve product variety and quality, but it also makes the situation of a large number of small and medium-sized sellers who entered TEMU in the early stage more difficult.

Ma Kaiyue believes that e-commerce has now reached an era of little or no profit, and will only become more competitive in the future, with more than 80% of merchants likely to be eliminated.Merchants need to adjust their mindset, accept reality, and continuously strengthen their supply chain capabilities in order to survive.

Compared with the domestic market, the overseas market has better growth prospects. For merchants who still want to do TEMU, Ma Kaiyue suggests that they should look at fines rationally and include fines in cost considerations.

The original intention of e-commerce platforms is to “make it easy to do business in the world.” It is not difficult for platforms to grasp information advantages, customer advantages, and market advantages. The difficult part is to maintain the original intention and ensure that it does not become “making it impossible to do business in the world.”