China's government has asked e-commerce platforms like Temu, JD.com, and Alibaba to stop insisting that merchants refund customers without requiring them to return the products.
To help alleviate financial pressure on Chinese merchants, the government informed marketplaces that the practice must end in July, from which point only merchants will be able to initiate a refund, as opposed to the marketplace automatically issuing one for the customer.
The refund-without-returns policy was designed to benefit buyers with easy returns, while giving consumers more confidence in shopping on the platform. PDD pioneered the policy in 2021, which prompted rivals to follow suit.
Many merchants have since reported that the policy is detrimental to their bottom line, as they risk losing both money and products. Last July, hundreds of merchants gathered at a Temu office in southern China to protest against its refund policy, which regulators subsequently ordered the company to revise. Now regulators are taking their efforts to protect merchants further by requiring all marketplaces to drop the policy.
For merchants — it's a huge win, as customers were beginning to exploit the system, getting refunds for items that they had no intention of returning. Now customers may think twice before requesting refunds without real issues if it means having to ship products back to China.
The downside of the change is that consumers have become accustomed to this easier refund policy and may be less satisfied with having to go through the process of shipping items back and receiving refunds slower. It also means that marketplaces and merchants will have to deal with the logistical costs of processing, shipping, inspecting, and restocking more returns. Not to mention the environmental impact of shipping items back and forth across the world.
Some merchants may voluntarily continue the refund-without-returns process, as it's just not worth the time or energy for them to receive some products back, but at least it'll be on their terms.