Hundreds of traders in China have gathered at the southern offices of PDD Holdings Inc. to protest the unfair penalties imposed by TEMU’s owner.

Why is the backlash against TEMU increasing?

Hundreds of traders gathered at the southern offices of parent company PDD Holdings Inc. to speak out against TEMU’s increasing penalties. The group, made up of small businesses, consists of suppliers who sell Chinese goods to Western customers through the platform.

Holding banners and chanting slogans, the traders gathered in front of the office in Guangzhou, and some stormed the offices to try to meet with senior executives.The traders are against PDD’s withholding of payments from sellers who do not meet customer expectations and imposing fines that are many times higher than retail prices. In recent months, these penalties have reportedly been increased frequently and without explanation.

Sellers say they are subject to these penalties for a variety of reasons, from missed delivery dates to incorrect product listings.PDD Holdings’ global expansion efforts have introduced the Temu brand to the world. The platform, which made a big splash with its Super Bowl commercial in 2023, has grown rapidly. Temu has begun competing with giants such as Amazon and Shein, and has also launched in Turkey in recent months.

Of course, the sellers’ protests are hindering PDD’s global expansion strategy. PDD, which has turned to foreign markets due to the sluggish consumption in China’s domestic market, is also competing with Shein, ByteDance’s TikTok Shop, and Alibaba’s Aliexpress. This competition is squeezing profit margins and increasing costs.The protest is one of at least two demonstrations held since May. A Temu representative admitted that it has had disputes with about a dozen sellers over after-sales issues. The representative noted that these merchants have chosen to protest instead of the normal mediation and legal channels.

TEMU is seeking solutions to satisfy its merchants and continue the platform’s growth. However, this dissatisfaction with the penalties could lead merchants to switch to other platforms, which could negatively impact Temu’s growth strategy.PDD doubled its revenue in March and has expanded to over 60 countries. However, this growth also risks increasing regulatory scrutiny in key markets such as the US. European consumer groups filed a complaint with the European Commission this year alleging that Temu failed to protect consumers and used manipulative practices.