PDD Holdings, the online retail giant established by Colin Huang, China’s second-richest billionaire, is currently embroiled in a crisis following vendor protests in Guangzhou against perceived mistreatment on its global e-commerce platform, Temu. On Tuesday, the company’s shares fell by 3.5%, resulting in a $1.6 billion loss in Huang’s net worth, which now stands at $43.4 billion.
The vendor protests have raised investor concerns about potential scrutiny from Chinese authorities over PDD’s treatment of its vendors, according to Robert McKay, a senior research associate at Blue Lotus Capital Advisors. A video clip on China’s Weibo platform showed hundreds of merchants demonstrating at PDD’s Guangzhou offices, demanding better treatment and more transparency regarding the fines imposed on them by Temu.
Merchants have accused Temu of withholding payments and imposing fines for quality issues or poor after-sales service without adequate explanation. McKay noted that these fines could be up to five times the value of the sold products, a situation he hasn’t observed on other platforms. Some vendors are considering moving to AliExpress as an alternative.
A spokesperson for Temu acknowledged that a group of merchants had gathered at a logistics affiliate in Guangzhou and stated that the company is working to address their grievances. The spokesperson mentioned that the merchants were dissatisfied with how Temu handled after-sales issues related to product quality and compliance, disputing amounts worth several million. These merchants have refused to resolve the disputes through the standard arbitration and legal channels outlined in their seller agreements.
Colin Huang, a former Google engineer, founded PDD in 2015 and launched the budget shopping site Temu in 2022 to expand internationally. Temu offers low-cost goods from China and has used aggressive discounts and marketing tactics to attract global consumers. For instance, Temu gained significant attention in the U.S. through its Super Bowl commercials, which included over $15 million in coupons and giveaways and featured slogans like “Shop Like A Billionaire.”
Temu’s expansion into Europe and Southeast Asia has been crucial for PDD’s rapid growth. Analysts from Blue Lotus Capital Advisors highlighted in a May report that Temu’s improving unit economics—such as increased sales and reduced logistics costs—contributed to higher-than-expected profits for PDD in the first quarter of 2024. The company’s sales more than doubled to $12 billion from the previous year, while net income soared by 246%.
Late last year, PDD briefly surpassed Alibaba as China’s most valuable e-commerce company by market capitalization. This remarkable growth prompted Alibaba co-founder Jack Ma to write an internal letter expressing his belief that Alibaba would need to change and adapt in response to PDD’s challenge. Ma, currently China’s sixth richest person with a net worth of $24.9 billion, underscored the need for Alibaba to amend its strategies to compete effectively.
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