Consumers giving up their rights - for the right price

Customers may love the low prices and convenient buying experience of ecommerce platforms such as Temu and Shein, but they now face a crackdown in the EU due to their approach to product safety, consumer protection, environmental and health standards, and intellectual property (IP).

In September, the German Ministry of Economics (BMWK) published its E-Commerce Action Plan, in a bid to stamp out “unfair competition in the ecommerce space”. The plan outlines how the largest consumer market in the European Union aims to initiate EU-wide rules around “unregulated mass imports” of low-value products from non-EU countries, specifically naming Shein and Temu.

Ironically, the two platforms have previously sued each other in the US over alleged anti-trust activity.

But, back to Germany, where BMWK’s plan contains three main elements. It calls for:

1. Better enforcement of Germany’s Digital Services Act (DSA);
2. Better adherence to environmental and consumer protection rules;
3. Stronger customs duties to prevent Temu and Shein exploiting current loopholes.

The current duty-free import threshold of €150 (US$165.7) allows both platforms to ship their ultra-low-cost products – in potentially large volumes – direct to consumers, without incurring duty charges. Similar “shipping loopholes” exist in the UK and US.

Germany’s plan would eliminate this threshold, therefore subjecting all imports to duty, including goods not shipped by Temu and Shein. It would also allow for increased control of imported products, and it is set to be implemented on a European scale.

BMWK says: “With the E-Commerce Action Plan, the BMWK is formulating a strategy that is intended to ensure better enforcement of EU regulations for all market participants. Among other things, it calls for stronger controls by market surveillance authorities and customs, as well as consistent enforcement of the DSA.”

Stronger enforcement of the DSA would give EU agencies the power to monitor third-country ecommerce websites for possible data breaches and conduct mystery shopping to find “product breaches of any kind”.

Why are Temu and Shein so popular?

There is a reason Temu and Shein were explicitly named in the BMWK’s plans.

Both have lured consumers around the world with ultra-low-cost versions of popular goods, undercutting – and sometimes outperforming – sites such as Amazon.

CX Network’s annual research into the Global State of CX has repeatedly found consumers are motivated by the cost, convenience and speed that are central to the experience offered by such websites. In 2024, when we asked practitioners to select the three customer behaviors having the most impact on CX, demand for convenience was the most selected choice (59 percent), and 38 percent said customers are spending less.

Following this, 24 percent said one of their top three customer behaviors is the use of social media for product/service research. The business models of both Temu and Shein are built around these behaviors.

However, the top 10 also included demand for instant service or delivery, and Temu for one has built quite a reputation for undelivered orders or weeks-long shipping times.

Meanwhile, customer demand for sustainable/ethical products and brands dropped to tenth most selected response this year, with only 16 percent of practitioners identifying it as a top customer behavior. We also found in 2024 that consumers have a growing awareness of the collection and security of their personal data (38 percent), as well as ethical working conditions (19 percent).

Despite the contradictions, millions of people around the world continue to use both Temu and Shien, and it is unlikely that shipping times and company ethics alone will turn the tide on their market dominance.

The cost of buying cheap

Despite the apparent consumer benefits offered by Temu and Shein, both sites have faced a number of scandals in recent years and in the long run, their cheap products potentially come at a very high price.

Whether it’s data breaches, claims of forced labor or simply the environmental impact of so many low-price goods being produced and shipped around the world Temu, sister site of Pinduoduo, has faced many controversies since launching in Western markets in 2022.

Temu’s controversies have included:

Aggressive data collection via the Temu app: The Temu app hits users with lengthy terms and conditions around how it will use their data, which few read or understand. Because the company is ultimately Chinese, despite headquarters in the US and other locations, all customer data can be stored in China and technically accessible to Chinese authorities. In early 2023, the app was temporarily suspended from the Apple store over data privacy and safety concerns.

Malware: Temu sister site Pinduoduo was suspended by Google for containing malware, which naturally led the US government to question the security of Temu.

Forced labor: An investigation by the US government found an "extremely high risk" that products sold by Temu could have been made with forced labour, specifically from Uyghur Muslims in China’s Xinjiang Autonomous Region.

Poor service: From weeks- and months-long delivery times to products that never materialize, Temu has repeatedly been highlighted for poor service and leaving customers out of pocket.

Fake reviews: Temu’s social media influencer program is reported to be the driving force behind the overwhelming number of positive reviews it has across the internet. Posters of these reviews are paid in credits or sometimes cash, as part of Temu’s affiliate program. Fake reviews are also now in the sights of US regulators.

Low product safety and quality: While nobody expects a 70-cent avocado slicer to last forever, low quality and unsafe products often flood the Temu site. In some cases, this is less of a concern, however, when it comes to children’s toys the game changes somewhat. As a marketplace connecting seller with buyer, Temu takes no responsibility for the quality or safety of the goods it sells, and Chinese manufacturers are not subject to the same safety standards as those in other jurisdictions.

Selling weapons: In late 2023, UK-based magazine Which? was able to buy knives and axes, without age verification checks, sometimes for as little as £5.

Meanwhile, Shein has been hit with claims of:

Copyright infringement: It’s not just that goods sold by Shein are cheap, they’re also cheap versions of goods that are sold for much higher prices by other retailers and brands. Independent designers have also sought damages for having their IP stolen. One US lawsuit went as far as to allege copyright infringement is so aggressive, “it amounts to racketeering”.

Unsustainable environmental impact: Fast fashion is a known contributor to global carbon emissions, water pollution and waste, not to mention the other resources that go into the overproduction and distribution millions of items with a drastically short lifecycle. Shein plays its part in all of this. Its annual carbon emissions stand at 6.3 million tons while its annual water use is seven billion cubic meters. In 2022 Iceland's annual carbon emissions were 3.5 million tons, up 15 percent on the year prior.

More forced labor: Shein, along with Temu, has been asked to explain how it prevents cotton produced in China’s Xinjiang Autonomous Region from entering its supply chain. The US has claimed China uses forced labor from Uyghur Muslims and other ethnic minorities to produce cotton – and other goods – in this region. It has also been accused of pressuring its suppliers into working 75-hour weeks to meet demand.

Scandal washing: To restore its image in the face of such scandals, Shein invited influencers from the US to visit its factories and report on the working conditions they witnessed during the trip. Needless to say, this PR stunt backfired for both Shien and the influencers in question.

Why do consumers to put price and convenience before safety?

Consumer rights vary drastically from one country or geographic region to another, however, all consumers should be able to buy products that are at least legal and safe for use.

That said, the ability for platforms such as Temu and Shein to operate at such a scale without meeting these minimum requirements raises a lot of questions about the power of transactional loyalty, particularly online.

It also raises questions about the existing means regulators have to ensure consumers are protected from fake, low-quality or illegal products, fake reviews and other anti-consumer practices. 

While many markets have started to investigate the dominance and impact of retailers like Shein and Temu, it is unlikely they will leave the marketplace.

Shein is planning to list on the London Stock Exchange while Temu is currently the second most-visited ecommerce site in the world. Shein’s IPO could be stopped by regulators if it is unable to prove its supply chains are free from forced labor, but so far, Temu’s dominance is threatened only by the potential for prices to increase if countries like Germany and the US adjust their minimum shipping duty thresholds.

What Temu says about its scandals 

Four days after publication of this article Temu reached out to CX Network to share its response to this article. Here is the response in full...

Malware 

The allegations in the report are completely unfounded and stem from a small short-selling firm with a questionable history. The report aims to incite panic and lower stock prices, allowing the firm to profit from short-selling. The motives behind this and the unusual actions taken are evident. Fortunately, most investors and consumers have recognized these groundless accusations, as evidenced by the more than 40 percent rise in the share price of Temu’s parent company, PDD Holdings, since the report’s release in early September.

Labor Practices

The Third-Party Code of Conduct mandates that anyone doing business with Temu must strictly comply with all regulatory standards and compliance requirements. The use of forced, penal, or child labour is strictly prohibited. Employment by all our merchants and suppliers must be strictly voluntary. They shall respect the freedom of association and workers’ rights to collectively bargain.

Temu’s merchants, suppliers, and other third parties must pay their employees and contractors on time and must comply with all applicable local wage and hours laws. We explicitly reserve the right to terminate any business relationship if a third party violates this Code of Conduct or the law. Though Temu is a young company with just a year under our belt, we've always prioritized following the rules and regulations. Our current standards and practices are no different from those of major e-commerce platforms, such as Amazon, eBay, and Etsy.

Quality Control

At Temu, we employ a comprehensive approach to vetting the sellers and products on our platform, ensuring a high standard of quality control that aligns with the requirements of the markets we operate in.

The process begins with the onboarding and vetting of sellers, where they are required to submit their business licenses and legal documentation. Additionally, they sign agreements affirming their commitment to product safety and adherence to regulations relevant to their intended markets. Temu supports this process by providing guidance and resources on compliance requirements for various markets.

Once sellers are onboarded, the focus shifts to reviewing product documentation. Sellers must submit essential documents, such as certifications, labels, testing reports, and registration records, to demonstrate product safety. Temu reviews these documents to ensure product compliance with safety regulations before allowing any listings to go live on the platform.

Physical inspection and enforcement form another critical component of Temu's quality control measures. Random spot checks are conducted to verify that the physical products match their descriptions and adhere to safety standards. This includes checking packaging, labels, and safety markings. If any products are suspected of non-compliance, Temu takes swift action, which may involve suspending the listing, requesting additional documentation, or removing the product altogether.

Ongoing monitoring and collaboration are also integral to maintaining quality control.

Temu closely monitors customer feedback to identify potential issues with products. When concerns arise, we take prompt action to investigate and, if necessary, remove any products suspected of being non-compliant or unsafe. Furthermore, Temu actively collaborates with consumer groups and regulatory authorities to address concerns and facilitate product takedowns or recalls when required.

Accountability and penalties are clearly defined within Temu's quality control framework. We continually guide sellers on the need for strict product safety compliance, ensuring they are fully aware of their responsibilities. Violations can lead to warnings, penalties, product delisting, account closure, or even referral to regulatory authorities for severe or repeated offenses. Temu maintains a blocklist to prevent problematic sellers from re-entering the platform.

Through these quality control processes, Temu ensures that the sellers on its platform meet the standards expected by consumers. Thank you for the opportunity to share our perspective, and we remain open to further dialogue and cooperation with all stakeholders to ensure the safety and satisfaction of our customers.

Responsibility for quality control lapses

At Temu, we aim to positively impact the everyday lives of consumers by offering quality goods that are affordable. We work with our sellers closely to ensure that we can meet and exceed the expectations of our customers. Customers can shop with peace of mind on Temu. In the event there is damage in connection with the use of products purchased through Temu, customers can contact us and we will work together with our sellers to come up with a satisfactory resolution.

The safety and welfare of our customers are of paramount importance to us. When it comes to issues of customer safety, customers can rest assured that we will look out for their interests and try our best to ensure their safety and security.

Special Report: The Global State of CX 2024

Now in its eighth year, this edition of our flagship annual report is also the first in the Global State series to examine the profit and loyalty benefits delivered by disruptor technologies such as generative AI and virtual reality. Download the Global State of CX 2024 now.

Download Now