Is There Such a Thing as Too Cheap?

Let's dig into online shopping, specifically the types of webstores that offer prices that seem impossibly low, such as Wish, Temu, and Shein. The earliest forms of e-commerce can be dated back to the 1960s, with IBM's online transaction processing, though online shopping mostly finds it roots in the beginnings of the internet back in the 80s and 90s. However, in the early days, there were few shoppers online and they were primarily rich, white, men over 30. Ever since the rise of Amazon and eBay both starting in 1995, more and more people and services have joined the online marketplace, and now, billions of online transactions take place every day.

Amazon is still the most dominant force in e-commerce today, with a 2018 survey that found two-thirds of Americans had bought something from Amazon, with 40% of online shoppers buying something from Amazon at least once a month. In recent years, however, there have been new contenders hoping to get a piece of the trillion-dollar market that is e-commerce. There have been may strategies, from catering to very niche markets, to attempting to sell everything Amazon does, but cheaper. That second focus is the subject of this article, as I attempt to explain what these other companies do to sell their products at such a low price.

I'll start with Wish, another American company offering cheaper versions of virtually every product imaginable, from dollar-priced piercing kits to HD mini cameras priced under five bucks. In 2018, Wish was the most-downloaded e-commerce application worldwide, and the company doubled its revenue to $1.9 billion. By 2019, Wish was the third-biggest e-commerce marketplace in the United States by sales. Wish has been heavily criticized, however, as it frequently lists poor quality or counterfeit goods, while simultaneously selling products that may be illegal in nations besides the U.S. As a result, in France, the Wish e-commerce system, including the website and smartphone applications, were delisted from Google's search results and from Google's French app store, though just last week, Wish was reinstated in the European nation. While there are still concerns about quality, if you are just looking for cheap little gadgets, clothes, or other relatively unimportant items, and you’re willing to wait the one to three weeks it takes for them to arrive, you could do worse than Wish.com.

Let’s move to Shein, the Chinese online fast fashion retailer founded back in 2008. Shien hosts a series of controversies that frankly put Wish to shame, ranging from tax evasion to child labor, but the company’s nearly unbeatable prices paired with a fashion landscape that changes almost weekly, if not faster, has caused most consumers to look the other way. Shein exploded in popularity over the pandemic, becoming especially popular with teens on TikTok, as the company was an early adopter of advertising on the Chinese social network. By May of last year, it is the largest fast fashion firm in the world. The fast-fashion retailer makes predictions on trends and produces items as quickly as three days after the identification of a new trend, but such an efficient and rapid process does not come without its costs.

Many have criticized Shein and fast fashion in general for targeting young adolescents more susceptible to poor financial decisions, as well as the environmental impact of so many people buying cheap clothes that end up lining a dumpster after only a couple weeks. In addition, Shein has been found to sell items containing an unsafe amount of lead, with a Canadian consumer watchdog discovering that toddlers' jackets sold by Shein contained almost 20 times the amount of lead permitted under Canada's health and safety regulations. Shein has also been found to be in violation of China’s already lax labor laws, with employees working over 75 hour workweeks, and the company was also discovered to be a financial beneficiary of forced Uyghur labor. However, short of banning the site, western nations have few methods of punishing the company, with Shein’s small batch shipping skirting most import taxes, and laws outside China will never really have an impact on any Chinese-owned company.

Going to another shopping service tied to China, let’s talk Temu. Unlike Shein, Temu is based in the United States, with its business model designed to allow Chinese vendors to sell direct to American consumers. Even more so than Shien, Temu experienced a meteoric rise in popularity, launching in September, and already having been downloaded 24 million times with more than 11 million monthly active users. The company even aired a Superbowl ad, and the company’s growth hardly seems to be slowing, with, as of the writing of this script, the app still topping Apple’s top free app charts. Jacob Cooke, CEO of WPIC, an e-commerce consulting firm, said quote, “Temu is the real deal. It has rocketed in popularity and has become one of the most downloaded apps in the US, offering a range of product categories such as beauty, fashion, tools, pet supplies, and more. Temu is able to leverage PDD’s relationships with low-cost manufacturers [to offer wholesale prices to retail buyers]” end quote.

So, what about PDD? Though Temu is based in Boston, the company is owned by PDD Holdings, who, according to their website, “is a multinational commerce group that owns and operates a portfolio of businesses, including Pinduoduo, a social commerce platform in China with agriculture as one of its pillars, and Temu”. The PDD stands for Pinduoduo, which seems to be the company’s primary source of revenue prior to Temu. The company has offices in Boston, Dublin, Hong Kong, Shanghai, and Singapore, and proports to leverage a network of over 11 million suppliers globally. The company also claims to have handled 61 billion orders in 2021, which of course is before Temu was even founded. Since Temu is ultimately built off the groundwork laid by Pinduoduo, let’s examine the sister company to Temu.

Most articles and publications discussing Temu are glowing with praise, citing a higher Better Business Bureau score than Amazon, along with the company’s mission to provide its customers with quality products at an affordable price point. However, just like Amazon, those prices come at another cost. Pinduoduo, which again, is the sister company and backbone of Temu, has faced harsh criticism for working conditions in China. According to a Chinese whistleblower, PDD’s employees are forced to work at least 300 hours a month, with staff on the grocery e-commerce team expected to work 380 hours a month: over double what a full-time employee works in the United States. Around the same time this employee came forward, two Pinduoduo employees died; one collapsed during her 1:30 AM commute home, while the other, sincere content warning here, tragically committed suicide after a request for time-off was denied. PDD Holdings changed their name from Pinduoduo Inc., established recent offices in Boston and Dublin, and claims itself as a “multinational commerce group” as an effort to obscure that it is very much a Chinese company with aims to further Chinese goals.

What does all of this mean for us, however? Plenty of American companies overwork their employees, or get products produced in factories that severely overwork employees. I'm not saying to completely avoid using these e-commerce sites, but it is important to know the sacrifices made to keep their prices so remarkably cheap. When doing any form of online shopping, but especially with these sites, be especially careful with the information you share. Use PayPal, Apple Pay, or another trusted payment service to avoid giving these other companies direct access to your payment information; this is especially true of Shein, who had a severe data breach in 2018 that they handled very poorly, and Temu, whose sister site was just accused of hosting malware, as we reported on earlier in this episode. Online shopping has made all of our lives much easier and more convenient, but China has even less respect for data privacy than private American companies do, so be cautious on the areas where you personally cut costs.