Temu has implemented new policies again, sellers say they will eventually be squeezed out

Sellers fear being squeezed out due to Temu's new policies

In order to compete with the sellers who joined Temu and couldn’t be beaten, how are they doing now?

This month, after Temu launched a new policy to reduce prices, it released a new policy on quality inspection at the end of the month. The platform has raised the requirements for quality inspection and has the final say on returns of stocked goods. Some sellers couldn’t help but sigh, “We can’t lower the price to the lowest and still maintain quality!”

Temu wants both quality and price, and this combination has made sellers worried. Some of them choose to quit, while others think it’s only a matter of time before they are squeezed out by the platform.

Temu’s new policy on quality inspection gives the platform the final say on returns of stocked goods

Recently, Temu informed the sellers that the platform has strengthened its requirements for quality inspection, and the new policy is to give the platform the final say on returns of stocked goods.

According to seller Wanli, the platform’s new rules are not communicated via email, but are generally known through pop-up messages and announcements in seller groups. Temu’s quality inspection is very strict. The platform compares the product’s pictures in the system and pays very close attention to details. Once a discrepancy is found between the product and the picture, the goods will be returned. For example, as shown in the picture below, if the actual product differs from the picture, it will be judged as unqualified.

(Unqualified goods inspected by Temu)

Seller Wang Lin said that the glasses he sent to Temu were returned due to a scratch. The product itself cost only a little over one yuan, but SF Express charged more than 20 yuan for the return. The worst thing is that the platform inspects the samples sent. If there are two out of 100 samples with problems, it will return the entire package without consulting you. Some goods sold by others at a clearance price of two or three yuan have also been returned one after another.

“The quality inspection standards of each of their warehouses are inconsistent. The same goods may be qualified in some warehouses, while being unqualified in others. After selling the products for several months, when they stocked up in a new warehouse, they were unqualified again. If the quantity of goods shipped is large, they will be sent back in batches. This is what Wanli expressed.

Multiple sellers have reported that if the goods received by Temu’s warehouse are unqualified, the seller and the platform cannot reach an agreement. The goods will be gradually or completely returned, and the seller will be forced to pay for the shipping fee.

According to the new regulations, Temu has the final interpretation right for the return of goods received in the warehouse. Combined with the bidding policy released about half a month ago, Wang Lin appears helpless: “The platform requires low prices, but also demands good quality. This is a contradiction in itself.”

Li Tianlin is also helpless like Wang Lin. He has his own factory, but still find it difficult to balance low prices and quality. In Li Tianlin’s view, Temu initially let the sellers place orders and tasted the sweetness. Then the buyers began to “perform”: “We found a cheaper product on 1688 that is exactly the same as yours. Others can offer this price.” They bargain while letting the seller stock up first. When the seller’s bulk goods arrive, the buyer will start promotions, telling the seller how much they will bear and how much the platform will bear, so everyone will lose some profit and let the consumers benefit. At this time, the seller’s goods have already been shipped. If they do not agree to participate in the promotion, the buyer will ask them to return the goods.”

Now the bidding policy and quality inspection requirements have come together. If the platform wants poor quality, then they can replace all the accessories with garbage. But if they demand quality, and it is not up to standard, the seller will bear the burden of after-sales refunds. In any case, it is very tricky!

Sellers: It’s only a matter of time before they are squeezed out by the platform

Facing the new contradiction, Li Tianlin felt a chill and decided to completely withdraw from the Temu platform after clearing his inventory. Like Li Tianlin, more sellers are retreating in the face of harsh new policies.

A seller on Amazon said that there are also peers who do 10,000 orders a day on Temu. I am still running with a few hundred orders to clear inventory, so I’m ready to withdraw after clearing it. This may be a personal problem rather than a platform problem. As a seller, if you feel that Temu is suitable for you, having an additional sales channel is not a bad thing. If it doesn’t suit you, focus on your own field.

Many Temu sellers are ultimately afraid of not earning money, losing their goods, and being fined… Just like the problem of inconsistent quality inspection standards, it makes many people doubtful. Some sellers speculate that the platform may be messing around in order to fine sellers later.

However, there are still sellers who are doing well on the Temu platform, and Wang Dong is one of them. Wang Dong does Amazon business in a central city. In November last year, he met Temu’s investment manager through a friend’s recommendation. At that time, the platform was just looking for categories in which Wang Dong had a supply chain advantage, and the investment manager encouraged him: “This product is relatively scarce, so hurry up and get on board.”

Before the product was put on the shelves, Wang Dong learned about Temu’s related policies. At that time, he priced his products high, quoting around 70 or 80 yuan for products that were priced at around 30 yuan. When buyers further lowered the price, they could still be within his expected range. After running for a period of time, Wang Dong’s products encountered buyers’ price reductions again, but he still made a profit.

Currently, Wang Dong’s business on the Temu platform is steadily growing, and the company’s employees are therefore more confident. However, facing more competitors and the platform’s tightening policies, Wang Dong feels a lot of hidden worries.

Hidden worry one: Constantly decreasing profits. Currently, the platform is constantly recruiting merchants to enrich their product categories. If the categories become too diverse, the seller’s profits will definitely not be guaranteed.

Hidden worry two: Stockpiling pressure on the seller. In order to ensure sufficient supply, Temu’s buyers set the seller’s inventory levels relatively high, requiring them to constantly stockpile. This carries a great risk, as unsold inventory cannot be returned to the factory.

Hidden worry three: Eventually being squeezed out. Most cross-border e-commerce sellers are traders and intermediaries. Once Temu’s product categories reach a certain level of diversity, they will first squeeze the profits of intermediaries, just like Pinduoduo in China, pushing out the traders and then squeezing the factory’s profits. The platform’s original intention was to eliminate intermediary fees, and eliminating traders is just a matter of time.

An industry insider analyzed Temu’s business model as follows: In the early stage, they recruited merchants like crazy, basically approving every product’s pricing, obtaining a massive supply of SKUs, and having sellers stockpile in their warehouse. After the data comes out, products that aren’t selling well start to be aggressively discounted. If the seller refuses to approve the pricing, Temu will remove the product and demand a return. They then aggressively spend money to attract new users, advertising and pulling new users at any cost, raising all kinds of data, and finally cashing out through financing and going public. In short: Thin profits and high sales, save all costs, get all the benefits, and harvest more traffic.

Despite the rapid growth and popularity of Temu as a platform for online trading, Wang Dong believes that it is not a sustainable platform for long-term business operations. As a trader, he only seized the opportunity and benefited from information asymmetry during the early development of the platform. His logic is to do business only if there is profit, and to exit and switch to other opportunities if there is no profit.

Wang Dong’s other opportunities are the fully managed platforms that sellers are currently focusing on. The “Four Little Dragons of International E-commerce”, including Temu, SHEIN, AliExpress, and TikTok, have fully embraced the fully managed model and are competing to extend an olive branch to cross-border sellers. Wang Dong has already tried to lay out these platforms to share the operating risks. In his opinion, compared with Amazon’s operation, the fully managed model is easier, and actively trying new platforms and new business models can sustain the gold rush.

Like Wang Dong, many trading-type cross-border sellers are actively embracing the fully managed model while sticking to their Amazon business stronghold. They plan to put more eggs in different baskets so that they can quickly react in different stages.

(Wan Li, Wang Lin, Li Tianlin, and Wang Dong are pseudonyms used in the article.)

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