Shoddy Goods 002: WTemuF

I’m Jason Toon and this is Shoddy Goods, a newsletter from Meh about the stuff people buy, sell, and make. Ever wondered “what’s the deal with Temu?” Good question.

“If I could talk to Congress, I’d tell them to forget about Tiktok. Temu is gathering much more sensitive data.”

I’d called a friend of mine to get his thoughts on how enshittification plays out in ecommerce. The conversation took some turns. And we never even got around to Temu’s body-horror nightmare ads for bondage-like “face exercisers” and trypophobia-inducing foot pads.

I’ve never seen the Saw movies but now I feel like I get the gist.

This friend is an ecommerce executive I’ve known for years. Online marketplaces are his thing. He’s set up, run, and consulted for a bunch of them on several different continents. He’s still deeply involved in the industry, which is why I’m not naming him in this piece. He knows his stuff.

He hadn’t heard the term “enshittification”. It was coined by author and activist Cory Doctorow to explain why all your favorite apps and websites seem to suck harder every day until you finally stop using them. As Doctorow put it: “first, they are good to their users; then they abuse their users to make things better for their business customers; finally, they abuse those business customers to claw back all the value for themselves. Then, they die.” You can trace the same arc for everything from Facebook to Etsy to Snapchat.

Enshittification by any other name would smell as bad

But if the word itself is unfamiliar, this friend of mine recognizes the process all too well. Right now, he says, big marketplaces like Amazon and eBay are focused on squeezing sellers to drive prices down and offer fast, cheap shipping. For those of you following at home, that would be Doctorow’s next-to-last stage of enshittification: the platforms turning against their vendors.

It’s been accelerated by the impossibly low prices and shipping charges of Chinese competitors like Temu and Shein. I asked him if Temu et al. could possibly stay in business with a model where they’re clearly losing buttloads of money - $30 per order, according to a report on Wired last year.

“Oh, that’s not their goal,” he says. “Temu doesn’t plan to make money with retail, nor have they, ever. It’s all about customer acquisition. They want the data.”

OK, sure, they’d hardly be the first online platform to lose gobs of cash harvesting data. What’s the big deal? Two things, my source says.

First, what could Temu be planning to do with that data that’s worth $30 per order? Maybe nothing more alarming than selling it to the usual third parties, or using it for, say, their own AI-generated micro-targeted Tiktok flash sales. “These sellers have an endless ability to produce and ship, whether it’s one million units or one,” my source says.

But… we don’t really know. Temu’s losing money on an unprecedented scale, to where it’s hard to see any future data play paying off - at least, in strictly financial terms. And that brings us to the murky question of what influence the Chinese government has over Temu.

What Greek-letter level of masculinity is this? I can’t keep up anymore.

Just because you’re paranoid doesn’t mean they’re not following you

My former colleague isn’t the only one raising the question. A report released in May by the Australian Strategic Policy Institute details how Temu’s parent company, PDD Holdings, has a data-sharing agreement with People’s Data, the data arm of the Chinese Communist Party’s state-owned newspaper, People’s Daily.

Exactly what data is shared isn’t publicly known. But we do know that the state-owned People’s Data’s remit includes monitoring public opinion. Which makes it an unsettling partner for an ecommerce app that can access your social media photos, posts, and messages.

Earlier this month, Arkansas Attorney General Tim Griffin called Temu “a data-theft business” that is “functionally malware and spyware” in a lawsuit filed against PDD Holdings. Griffin’s complaint cited everything from Temu gaining access to users’ texts, calendars, and wifi and Bluetooth networks, to misleading trade practices like false discount pricing and counterfeit goods.

Yes, of course, when politicians do things, politics are involved. But you don’t have to be a frothing Sinophobe to be skeptical that there’s such a thing as a Chinese company that’s totally independent of home office in Beijing.

Billionaire Alibaba founder Jack Ma found that out the hard way when he was mildly critical of some Chinese state enterprises. The Chinese government cancelled his company’s IPO and Ma, a fixture of the international conference circuit, disappeared from public view for several months.

After the Temupocalypse

But OK, let’s say it’s the best-case scenario. All those concerns are just New Cold War paranoia. Temu turns out to be the Pets.com of the mid-2020s, just a silly misguided ecommerce folly that collapses under the weight of its staggering losses, only with more lead in its products. Indeed, my source thinks it’s more likely than not that the Temu (and Shein etc.) bubble will burst before too much longer. They’re already losing users and market share in South Korea.

The second, maybe even bigger thing he’s worried about is what Temu will leave behind after it passes its peak. He’s seen the effects before with one-time discount sensations like AliExpress and Wish. “I call them wave marketplaces,” he says. “They come in, flood everything, then go away - but suck everything out to sea with them.” Temu and Shein are doing it on a vastly bigger scale.

What that means is that even if Amazon stops feeling the pressure of Temu’s low prices, they’re never going back to their old arrangements with sellers. As for the rest of us, the next ecommerce race to the bottom will demand even lower environmental, labor, and quality standards.

Local supply chains for entire retail categories could be driven out of business, making whole national economies vulnerable to supply disruptions and shortages. When nobody else can make a profit selling product X because of Temu’s low prices, eventually Temu will be the only place to buy product X. Are we OK with them having that much power?

“Honestly, it should be raising alarm bells,” my friend says.

And this brings us back to enshittification. Cory Doctorow nailed the process by which online services make their customer experiences worse to ultimately profit their shareholders.

But what happens when a marketplace’s customer experience is a trivial expense, a loss leader? What happens when the choice for other retailers is to enshittify or die?

For as long as Temu is willing to lose money, they could more or less preserve their own customer experience while enshittifying the rest of ecommerce. Any marketplace that survived would get more ruthless, more focused on the short-term squeeze for every penny from customers and suppliers rather than longer-term quality, and even less socially responsible.

And personally, I find that more disturbing than a tray full of teeth.

A note from Jason: my unnamed source in this story has never worked for Meh’s parent company Mercatalyst or, as far as either of us know, any company that has done business with Mercatalyst.