Temu’s market share has soared as the app comes under scrutiny for forced labor and data harvesting concerns.
A mobile phone displays the app of cross-border e-commerce platform Temu in Shenzhen in Guangdong Province, China, on Oct 28, 2022. (CFOTO/Future Publishing via Getty Images)
Temu founder Colin Huang has become China’s richest man with a net worth of $48.7 billion, according to the Bloomberg Billionaires Index, in a reversal of fortunes.
Huang, a former Google engineer, started ecommerce platform Pinduoduo in 2015 and saw his wealth rise to $71 billion in 2021 before he lost 87 percent of it the next year amid the Chinese regime’s regulatory “crackdown” on the tech industry. Now Huang is the 25th richest man in the world as shares in his PDD Holdings Inc. rise with Temu eating market share from ecommerce giants such as Amazon and other Chinese companies like Alibaba.
At the same time, Americans have been warned to stop shopping via the Chinese app, which Arkansas Attorney General Tim Griffin calls a “data theft business” in a recent lawsuit.
“Temu purports to be an online shopping platform, but it is dangerous malware, surreptitiously granting itself access to virtually all data on a user’s cell phone,” the complaint reads.
The shopping platform is app-only, requiring users to install its software onto mobile devices in order to purchase items that are deeply discounted through gamified mechanisms.
Temu launched in the American market in 2022 and has expanded aggressively, becoming the most downloaded free app in the United States by the end of the year. It spent $2 billion in advertising in 2023 alone, expanded into the European market, and recently announced local warehouses so as to compete with Amazon on timely deliveries.
The company’s business practices have come under scrutiny.
A report by Grizzly Research, which analyzes publicly traded firms, calls Temu a “notoriously bad actor in its industry,” estimating that Temu loses $30 per order and claiming it needs to “illegally sell stolen data” to make up for the loss.
A Temu spokesperson has pushed back on the allegations, stating the lawsuit is “based on misinformation circulated online, primarily from a short-seller, and are totally unfounded.”
Beyond data concerns, Temu has also been accused of skirting U.S. labor laws meant to prohibit slave labor, according to a 2023 congressional report.
A congressional committee asked Temu whether it has systems in place to prevent goods made with slave labor from being sold to the United States, and the platform responded that the prohibitions in UFLPA “do not apply directly to Temu’s activities as an online platform operator.”
On the supplier side, merchants have also reported dissatisfaction with the platform. On July 30, merchants launched a protest at Pinduoduo’s office in Guangzhou over the app’s practice of offloading the cost of consumer dissatisfaction onto suppliers via heavy fines and lack of protection for sellers.