A flood of low-quality counterfeit products inundates the market, leaving both sellers and buyers in despair. The introduction of a 7-day ‘no-questions-asked return policy’ and a ‘refund-only option by e-commerce platforms’ has opened Pandora’s Box, and the problem is only worsening.
The sheer volume of returns is overwhelming, with piles towering taller than a person. This trend has become a hot topic in e-commerce, and it isn’t limited to China.
International platforms have also adopted similar models, referred to as “return nice refund”. Platforms like Pinduoduo and Taobao introduced consumer-friendly policies such as refund-only and shipping insurance, but these have further squeezed retailers’ profits.
According to many sellers, the number of ‘refund-only’ requests has skyrocketed, leading to significant financial losses. A seller noted that they’ve been in e-commerce for five years and found it increasingly challenging each year.
They predicted that many e-commerce sellers might exit the industry by the end of the year. Core problems include high platform traffic fees, increasing return rates, and intense competition among sellers.
Not making sales is stressful, but even when sales boom, it’s still stressful. Take the women’s clothing industry as an example.
For many Chinese consumers, the most noticeable change has been a shift from recognizable brands to unbranded goods and, eventually, outright counterfeits. China’s richest man, Zhong Shanshan, remarked, “China appears to be in an era where everything can be faked.”
If one product suddenly becomes a bestseller, competitors will copy it and undercut prices, driving return rates up to 90%.
Advertising expenses are real, but while you can refund customers, the platform won’t refund your advertising costs or promotional fees.
A shop owner in Shanghai, Yao, revealed that over 400 dresses bought by students from a vocational college in Heilongjiang were returned.
The dresses, worn and washed, arrived back in unsellable condition, resulting in an 8000 Yuan loss. In the past, returning substandard or mismatched goods required tedious negotiations, but ‘refund-only’ policies have simplified the process for consumers.
While these policies enable quick compensation for defective products, they are also being exploited. Some buyers cite questionable reasons for refunds, and platforms often side with consumers when quality issues are mentioned, leaving sellers powerless.
Merchants complain about financial losses and damaged reputations, while consumers argue that refund-only policies help combat counterfeit goods.
Lou, a consumer from Shandong, believed that ‘refund-only’ policies are essential because some products are of poor quality and the shipping costs for returns are often higher than the product’s price.
Another consumer Li from Beijing added that as long as the product quality is good, there’s no need to worry about refunds. She suggested that instead of blaming platforms and customers, sellers should focus on improving their products.
The rise of e-commerce has disrupted brick-and-mortar stores, leading to widespread closures.
However, with China’s economy in decline, even online businesses face mounting challenges, including platform penalties, excessive return rates, and declining consumer spending. Many sellers are left with no choice but to shut down.
One e-commerce seller posted online, “Over half of each e-commerce store might close this year. Factories are overloaded with unsold inventory, and they’ll clear out at 30 to 40% discounts.”
The future of e-commerce isn’t just about price wars; it’s about factories competing on costs. Only two types of e-commerce will survive — branded sellers with pricing power and manufacturers who sell directly to consumers.
The policies meant to protect consumers often result in significant financial losses for sellers. As competition intensifies, the quality of products and customer satisfaction must remain the focus to ensure a sustainable and prosperous e-commerce future for all parties involved.
Recently, Le Monde, a French newspaper, reported on Pinduoduo’s international platform, TEMU. While TEMU has attracted millions of users, its aggressive pricing strategies have sparked dissatisfaction among suppliers.
Reports suggest that the core issue lies in TEMU offering suppliers extremely slim profit margins, barely enough for survival.
If customers are dissatisfied with products, deliveries are delayed, or shipping errors occur, TEMU imposes heavy fines on sellers.
Additionally, TEMU has retained Pinduoduo’s refund-only policy. This policy, coupled with TEMU’s promise of “shopping like a billionaire” and its relentless drive for lower product prices, has led to manufacturers cutting corners and compromising product quality.
For many Chinese consumers, the most noticeable change has been a shift from recognizable brands to unbranded goods and, eventually, outright counterfeits. China’s richest man, Zhong Shanshan, remarked, “China appears to be in an era where everything can be faked.”
Overall, the issues plaguing the e-commerce industry create a challenging environment for sellers and buyers alike.
The policies meant to protect consumers often result in significant financial losses for sellers. As competition intensifies, the quality of products and customer satisfaction must remain the focus to ensure a sustainable and prosperous e-commerce future for all parties involved.
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