The TEMU Invasion: Is the Chinese Marketplace Destroying Local Businesses?

Recently, the Chinese marketplace Temu, known for its low prices, has faced a growing wave of criticism and calls for a ban in various countries around the world, according to Doberman.media citing The Guardian.

The main argument against Temu is the claim that the influx of cheap Chinese goods is harming local small and medium-sized businesses (SMEs).

“Temu has found itself in the spotlight of regulatory authorities around the world. Today, many are discussing whether the rules governing cross-border imports should be revised,” — said Simon Torring, co-founder of the analytics firm Cube.

What is the crux of the problem?

Non-competitive prices: Local retailers and manufacturers cannot compete with Temu in terms of price, delivery speed, and, in many cases, product quality.

Minimum import taxes: Chinese goods are often subject to minimal import taxes, which makes them even more attractive to consumers.

Closure of local businesses: In some countries, such as Thailand, factories are closing and jobs are being lost, a trend attributed to increased competition from China. According to The Guardian, In Thailand, about 2,000 factories across various industries closed, and more than 50,000 people lost their jobs during the past fiscal year. This is attributed to increased competition from China and rising production costs.

What steps have already been taken?

Indonesia: Indonesian authorities have ordered the removal of the Temu app from app stores to protect local businesses.

Vietnam: Vietnam has threatened to ban Temu and Shein, accusing the companies of operating without the proper permits.

What is TEMU?

TEMU is an online shopping platform owned by the Chinese giant Pinduoduo. It targets the international market and offers a wide range of products at low prices, including clothing, electronics, accessories, home goods, and other categories. The app competes on the strength of its attractive pricing strategy, targeting a mass audience, and its wide range of categories makes it possible to find virtually any product.

One of the features of TEMU is that Many products are sold directly by Chinese manufacturers, which explains their low prices.

Why is a TEMU ban a bad way to go?

The fact is that TEMU offers consumers a wide selection. Temu provides consumers with access to a wide variety of products at low prices.

Also, TEMU stimulates competition, which local businessmen are usually not ready for, as they want to continue to manipulate prices and inflate the cost of low-quality goods by 100-1000%. Instead of increasing efficiency and improving the quality of their products, local businesses decided to simply cut users off from the cheap marketplace.

What's next?

The issue of banning Temu is complex and ambiguous. On the one hand, there are concerns that Temu is harming local businesses. On the other hand, Temu offers consumers more choice and can stimulate competition, for which small and medium-sized businesses are almost never prepared. Will governments be able to strike a balance between protecting the interests of local businesses and providing consumers with access to goods at competitive prices? This is the key question that remains unanswered.

• According to the report Bain & CoAccording to a report published in November, online retail sales could reach $160 billion in 2024.
• Li Jiangang, CEO of the venture capital firm Momentum Works, noted that Temu is actively expanding into international markets amid a slowdown in the Chinese economy.