‘Looking ahead, revenue growth will inevitably face pressure due to intensified competition and external challenges,’ PDD’s vice president of finance said.
Temu’s parent company, PDD Holdings Inc., reported lower-than-expected sales in the second quarter, and share prices fell by 15 percent on Aug. 26 before the market opened in New York City.
Although revenue has increased, totaling more than $13 billion, the growth rate has stalled, and analysts had predicted higher sales for the second quarter. The company said in an Aug. 26 statement that its revenue increase came largely from increased revenue from online marketing and transaction services. PDD Holdings owns not just Temu but also Chinese online retailer Pinduoduo.
“In the past quarter, our revenue growth rate slowed quarter-on-quarter. Looking ahead, revenue growth will inevitably face pressure due to intensified competition and external challenges,” PDD Vice President of Finance Jun Liu said in the statement. “Profitability will also likely to be impacted as we continue to invest resolutely.”
Lei Chen, chair and co-CEO of PDD, also acknowledged in the quarterly announcement that there are “many challenges ahead.” He added that PDD executives also referenced supporting “high-quality merchants.”
“We will vigorously support high-quality merchants while firmly tackling low-quality ones, continuously building a healthy and sustainable ecosystem,” Executive Director and co-CEO Jiazhen Zhao said in a statement.Temu entered the U.S. market in 2022. It was the most downloaded shopping app worldwide in 2023, with more than 337 million downloads—about 1.8 times as many as the Amazon Shopping app, according to analytics website Backlinko.
Since May, protests have broken out in front of PDD offices in China, with sellers alleging they have been subjected to unsustainable and punitive business practices. On July 30, protesters held a large-scale demonstration at PDD’s Guangzhou office, with hundreds of merchants storming into the building.
As part of PDD’s effort to prioritize high-quality merchants while “firmly tackling” low-quality merchants, as per Zhao, the company levies fines on vendors if there are consumer complaints.
Several merchants shared their concerns with The Epoch Times at the time.
Some said that PDD does not offer an explanation when it issues a fine, and there is no appeals process, so vendors have no way of knowing whether they took a loss on a sale.
One vendor described the “bidding” process that vendors have to use to price their products on Temu as forcing low prices on the platform but not allowing vendors to set and control their own prices.
Another merchant said he had created an original product, but after launching it on Temu, he found counterfeit versions of the item that were priced as low as a third of what he was selling it for.
Several merchants said they would be switching platforms.
“Temu shows no concern for the authenticity of products, pushing genuine manufacturers to either drastically lower prices or cease production as inferior quality goods flood the market,” one vendor said.
“On Amazon, if you are penalized, at least you understand the mistake, you can appeal, and learn how to avoid future errors. Temu, however, leaves its merchants in the dark about the reasons for penalties, preventing any chance to rectify issues.”
The low prices and allegations of counterfeiting have created problems for Temu on other fronts.
Temu was recently sued by rival Shein, another Chinese discount e-retailer with a large presence in the U.S. market, on allegations of counterfeiting and copyright infringement. Shein claims that Temu actively encourages vendors to counterfeit products, including ones found on Shein, and to price them lower than they’re priced on Shein. The lawsuit was in response to a suit filed by Temu against Shein with similar claims.
Both companies have also come under fire for refusing to take measures to ensure they are not benefitting from slave labor.
The Chinese Communist Party (CCP) is known to persecute Uyghur Muslims in the Xinjiang area, where the vast majority of China’s cotton is produced. Uyghurs and other ethnic minorities in the region are detained in labor camps by the CCP, and a United Nations investigation confirmed they are subjected to torture, abuse, and forced labor.
Though a law went into effect in 2022 prohibiting the import of goods made involving slave labor, specifically targeting the CCP’s persecution of Uyghurs, Shein and Temu have both declined to answer directly when asked by U.S. lawmakers whether they have taken steps to ensure they are not selling goods made with Xinjiang cotton, instead arguing that the law is not enforced on imports valued below $800.
Temu also faces a lawsuit from the office of Arkansas Attorney General Tim Griffin. He told Fox Business last month that the app is a “data theft business that sells goods as a means to an end.”
The company uses malware and spyware to “get into your phone, your device, and to collect your data,” Griffin said.
A report by Grizzly Research found that Temu loses approximately $30 per order and allegedly makes up for the loss by profiting from user data.
“[Temu] already, or intends to, illegally sell stolen data from Western country customers to sustain a business model that is otherwise doomed for failure,” the report says.
The report also found that once downloaded, the Temu app could access data on the user’s phone and potentially install spyware without the user’s knowledge.
In a statement to The Epoch Times, Temu stated the allegations in the Arkansas lawsuit “are based on misinformation circulated online, primarily from a short-seller, and are totally unfounded.”
“We categorically deny the allegations and will vigorously defend ourselves,” it added.
Attorneys general from 21 states this month demanded answers from Temu over its connections with the CCP, citing concerns about slave labor and data theft.
While some states and countries have laws prohibiting the sale of user data, the CCP passed its own security law, which runs counter to international laws and regulations. The law requires companies and other entities operating in China to share data with Beijing upon request.
Grace Hsing, Sean Tseng, and Jack Phillips contributed to this report.