Temu Suppliers Protest in China, Saying Low-Cost Site Squeezes Them

Video clips provided by protesters showed scores of angry merchants at the office whistling and demanding a resolution, with police maintaining order. It was one of a number of economy-related protests in China as the country grapples with sluggish growth and a real-estate downturn.

Suppliers said that many Temu merchants have shut down factories and incurred debts after Temu started imposing hefty penalties over what the platform deemed after-sales issues. Such issues arise if Temu finds fault with the products delivered or if consumers complain about their merchandise and demand a refund.

A spokesman for Temu confirmed that the merchants were unhappy over Temu’s handling of after-sales issues and said they were disputing an amount totaling several million yuan, equivalent to around $1 million or less. 

The spokesman said Temu’s policies ensured a high level of customer service and penalties were needed to maintain a high-quality marketplace. “The majority of our merchants experience success under these guidelines, benefiting from increased sales and positive customer feedback,” the spokesman said.

The shopping app backed by Chinese e-commerce company PDD Holdings has enjoyed a meteoric rise globally in the past two years. With 234 million users in more than 70 countries, Temu has provided a new avenue for thousands of Chinese factories and wholesalers to sell products to the world. 

Competition with other e-commerce sites such as Amazon and Shein is fierce, and suppliers face constant pressure to lower prices without compromising service. 

Temu allows buyers to get full or partial refunds without having to return their items in certain cases. Articles and videos that teach consumers how to receive free goods from Temu have circulated widely online, and suppliers believe they are bearing the brunt of the generous return policy.

“The more you sell, the more penalties you pay,” said Xiang Shihua, a Guangzhou-based garment-factory owner. “We’re all neck-deep in debt.” 

Xiang, who participated in Monday’s protest, said that since he started supplying Temu late last year, he has lost $41,000, laid off all his workers and built up tens of thousands of dollars in debt. Protesting merchants said they counted more than 400 suppliers at the demonstration.

Sellers say that after they ship products to Temu, the company conducts quality and size checks and returns items not meeting standards.

Earlier this year, suppliers such as Xiang said they started to notice frequent penalties amounting to as much as five times the shipment price of their products. The penalty notices usually cited subpar quality or sizes or colors failing to meet shoppers’ expectations, but Temu didn’t provide documentation or offer a way for sellers to appeal, according to suppliers.

“We have no visibility into return information and no contact with shoppers,” said Ke Ling, a Temu supplier based in Dongguan near Guangzhou. “I will willingly accept fines if you show me evidence. How can you not provide any documentation at all?”

The Temu spokesman said, “We prioritize transparency and clearly communicate our rules and penalties.” 

The suppliers also said Temu holds back full payment on goods, citing the need to reserve some of the money in case of after-sales disputes.

When she started supplying Temu in early 2023, Ke said there was no mention of penalties in contracts. Later the contracts were frequently updated and penalties started piling on, she said. 

“We were forced to sign those contracts,” Ke said. “There’s no way to proceed in the system without doing so.” 

The Temu spokesman said, “Merchants are not obligated to sell on Temu and are free to leave the platform at any time.”

Since May, hundreds of Temu suppliers have formed online chat groups to commiserate and discuss solutions. They have staged smaller-scale protests at Temu-affiliate offices and local government buildings in China.

Temu is based in Boston. In a May document for suppliers, Temu directed dispute arbitration to the Hong Kong International Arbitration Centre. Most suppliers are small-business owners lacking the means to seek international arbitration or a legal resolution.

At a protest in July, local police in Guangzhou collected merchants’ names and complaints and promised they would respond in a week, suppliers said. When no response came, hundreds of the suppliers descended on the Temu-affiliate office, with some flying in from other parts of the country, said Xiang, the garment-factory owner. 

Xiang said he stopped selling on Temu in April but still hasn’t been able to recoup the portion of his sales held by the platform as a reserve against penalties. On top of that, he said he was still paying penalties every day. 

He left the Monday protest without a clear resolution. “We’ll have to keep protesting,” he said. “How can we survive if we don’t get our money back?”

Clarence Leong contributed to this article.

Write to Shen Lu at shen.lu@wsj.com