Hello everyone, this is Cissy from Hong Kong.
Is China’s e-commerce sector on the verge of major change? In May, I began hearing from sources that cross-border sellers on Temu planned to stage demonstrations at the platform’s operations headquarters in the southern city of Guangzhou to protest what they saw as the platform’s unreasonable fines.
According to them, several protests have ended. At first, photos and video showed only about a dozen vendors gathered outside the Temu office building. Last week on Monday there were more than 100 and by this Monday hundreds of vendors had joined the protest. Dozens of them broke into Temu’s office demanding the return of allegedly unfair fines, and Temu asked all his staff to evacuate the office, according to multiple sources.
More than a dozen sellers said the platform began increasing the pace of fines since the start of the year, mostly for reasons such as “buyer doesn’t like the product” or “items not meeting expectations” without further explanation. Sellers would only be notified of which order and which item was returned, but not the specific customer.
Protests like these are symptomatic of the fierce price wars that bargain apps like Temu and compatriot Pinduoduo have unleashed in China’s e-commerce industry. Bigger rivals have tried to fight back with their own ultra-low pricing strategies, but now change is in the air.
Realizing that they can’t win on price alone, some of China’s biggest online retailers are trying to shift to a more sustainable growth model.
How low is too low?
A heated price war between China’s e-commerce platforms is showing signs of cooling down, with TikTok’s sister app Douyin and Alibaba’s Taobao shifting from favoring ultra-low prices to boosting overall online sales, Nikkei Asia’s reports. Cissy Zhou.
More e-commerce platforms are realizing that price competition is not a viable strategy to take on Pinduoduo, which has built a reputation for offering the best deals over the years. Douyin, for example, implemented a “low price first” strategy in the first half of the year, but overall online sales grew slower than expected, between 30% and 40%, compared with more than 50% last year, people familiar with the situation told Nikkei.
Meanwhile, Taobao has launched a “store experience” rating system that drives traffic to merchants with better customer service scores, while downplaying its “five-star pricing system” introduced last year, which ranked product prices against similar items on other platforms.
The move comes as temporary anti-unfair competition regulations for the internet industry take effect on September 1. The new rules prevent platforms from “imposing unreasonable restrictions on the prices of goods”.
The commotion
Online marketplace Temu has taken e-commerce by storm since its launch in September 2022. Bernstein analysts predict the Chinese platform will generate $54 billion in gross merchandise revenue, or the total value of goods sold on its platform, this year.
But while shoppers in the West are rejoicing in the low prices of goods brought in from warehouses in China, Temu’s supplier base in the southern city of Guangzhou is pushing back against the platform’s increasingly aggressive tactics, they write Eleanor Olcott and Tina Hu for the Financial Times.
Earlier this week, the company’s Guangzhou offices were swarmed by dozens of suppliers protesting the platform’s practice of handing out fines for issues ranging from faulty packaging to customer complaints about a mismatch between a product and an online description.
The protests come as Temu makes an ambitious key overhaul of its business model – a plan that relies on building a large and trusted supplier base – in a bid to compete directly with Amazon.
Discount dissatisfaction
The Thai government may be celebrating the opening of BYD’s $486 million factory in early July, but the Chinese EV maker’s car owners aren’t thrilled, according to Nikkei Asia. Francesca Regalado.
In an effort to maintain its lead in a competitive market, BYD last month offered additional discounts of up to 340,000 baht ($9,460) on its Atto 3 SUV. The move has angered BYD’s current owners, and some are exploring the possibility of a class-action lawsuit.
As Asia’s second-largest auto market, Thailand faces the triple threat of weak economic growth, high consumer debt and an abundance of electric vehicles imported mostly from China. In this situation, Thai drivers are delaying their purchases and expect even more discounts from car manufacturers towards the end of the year.
Total car sales in the first six months of this year were down 24% compared to the same period in 2023. Only 47,600 cars were sold in June, nearly 17,000 fewer than last year.
TSMC heads to Europe
Taiwan Semiconductor Manufacturing Co. will hold a groundbreaking ceremony for its first factory in Europe next month, the latest milestone for the world’s leading chipmaker as it expands its global manufacturing footprint, sources briefed on the matter told Nikkei Asia’s. Cheng Ting-Fang.
TSMC Chairman and CEO CC Wei will lead a delegation from the company and a host of equipment and material suppliers, clients and government officials in Dresden on August 20 in a demonstration of the chipmaker’s commitment to its investment in Germany.
The Dresden plant is scheduled to be operational by the end of 2027 and will represent “a new dimension for sustainable semiconductor manufacturing in Europe,” according to Nikkei Asia’s invitation.
TSMC’s European joint venture has secured major chip-making clients such as Infineon, Robert Bosch and NXP, each of which holds a 10% stake. Costing more than $10.8 billion, this massive project is designed to meet the European Union’s need for localized automotive and industrial chips.
Recommended reading
1. India expands airport facial recognition over surveillance fears (FT)
2. Samsung comeback marred by AI chip issues despite strong Q2 (Nikkei Asia)
3. US Reveals Security Concerns About TikTok and ByteDance (FT)
4. Honda, Nissan and Mitsubishi join forces to catch Tesla in EV race (Nikkei Asia)
5. Price is key for Southeast Asia to attract EV investment, says BCG (Nikkei Asia)
6. Mitsubishi Electric bets on price hikes amid headwinds in China, Europe (Nikkei Asia)
7. Apple’s iPhone drops out of top 5 in China by domestic smartphone competitors (FT)
8. Is the tech sell-off only worth yen? (FT)
9. Japanese snack giant Calbee is trying to bring AI to potato chips (Nikkei Asia)
10. UK electoral body failed to protect voter data from Chinese cyber attack, watchdog says (FT)
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