Why Beijing has put e-commerce sector's 'refund-only' policy and PDD under scrutiny

South China Morning Post12-12

The "refund-only" policy in China's e-commerce sector - where consumers can get back money for goods bought from merchants, without returning the products - is now under scrutiny, as analysts point to...

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Photo: Shutterstock alt=PDD Holdings-owned budget-shopping platform Pinduoduo has been a major proponent of the \"refund-only\" policy. Photo: Shutterstock>. Recently, Pinduoduo has started to curb the practice, according to several merchants who declined to be identified. While the refund-only option remains available to consumers, merchants can appeal cases in which they have a high likelihood of victory.\"The r","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"PDD":"拼多多","LU0821914370.USD":"贝莱德亚洲成长领袖A2","LU1282648689.USD":"ALLIANZ TOTAL RETURN ASIAN EQUITY \"AMG\" (USD) INC","LU0370786039.SGD":"Fidelity Greater China A-SGD","LU1152091168.USD":"UBS (LUX) EQUITY FUND - CHINA OPPORTUNITY (USD) \"PM\" INC","LU0516423174.USD":"FULLERTON LUX FUNDS - ASIA FOCUS EQUITIES \"I\" (USD) ACC","LU0051755006.USD":"摩根大通中国A (dist)","LU1688375341.USD":"贝莱德中国灵活股票基金","LU0797268264.HKD":"ALLIANZ TOTAL RETURN ASIAN EQUITY \"AT\" (HKD) ACC","LU0708995583.HKD":"TEMPLETON CHINA \"A\" (HKD) ACC","LU1008478684.HKD":"UBS (LUX) EQUITY FUND -  CHINA OPPORTUNITY \"P\" (HKD) ACC","09988":"阿里巴巴-W","LU0633140727.USD":"AB EMERGING MARKETS MULTI ASSET PORTFOLIO \"AD\" (USD) INC","BK4504":"桥水持仓","LU1961090484.USD":"ALLIANZ ALL CHINA EQUITY \"A\" (USD) INC","SCMP":"Sucampo Pharmaceuticals","LU0359201612.USD":"贝莱德中国基金A2","LU0320764599.SGD":"FTIF - Templeton China A Acc SGD","LU0072462343.USD":"贝莱德亚洲巨龙基金","LU0823039010.USD":"AMUNDI FUNDS ASIA EQUITY FOCUS  \"A2\" (USD) INC","LU0650527681.SGD":"Fidelity China Consumer A-SGD","LU2399975544.HKD":"ALLIANZ ALL CHINA EQUITY \"AT\" (HKD) ACC","LU0251143458.SGD":"Fidelity Emerging Markets A-SGD","LU1808992512.USD":"AB ALL CHINA EQUITY PORTFOLIO \"A\" (USD) ACC","LU0516422952.EUR":"FULLERTON LUX FUNDS - ASIA FOCUS EQUITIES \"I\" (EUR) ACC","LU1105468828.SGD":"Allianz Total Return Asian Equity AM DIS H2-SGD","LU0140636845.USD":"施罗德大中华区股票A Acc","LU1323998911.USD":"BGF ASIAN MULTI-ASSET INCOME \"A\" (USD) ACC","LU0880133367.SGD":"UBS (LUX) EQUITY FUND CHINA OPPORTUNITY USD \"P\" (SGD) ACC","BK4531":"中概回港概念","LU0052756011.USD":"TEMPLETON GLOBAL BALANCED \"A\" (USD) INC","LU2087589342.USD":"BGF ASIAN MULTI-ASSET INCOME \"A6\" (USD) INC","BABA":"阿里巴巴","BK4533":"AQR资本管理(全球第二大对冲基金)","LU0823397285.USD":"BNP PARIBAS SUSTAINABLE ASIA EX-JAPAN EQUITY \"C\" (USD) INC","BK4587":"ChatGPT概念","SSTK":"Shutterstock Inc","LU1251922891.USD":"NINETY ONE GSF ALL CHINA EQUITY \"A\" (USD) ACC","LU1769817179.HKD":"UBS (LUX) EQUITY SICAV - GLOBAL EMERG MARKETS OPPO \"P\" (HKD) INC","LU1267930227.SGD":"TEMPLETON GLOBAL BALANCED \"AS\" (SGD) ACC A","LU0561508036.HKD":"ALLIANZ CHINA EQUITY \"A\" (HKD) INC","SG9999002463.SGD":"LionGlobal China Growth SGD","BK4535":"淡马锡持仓","HK0000306701.USD":"TAIKANG KAITAI CHINA NEW OPPORTUNITIES FUND \"A\" (USD) INC","LU2257852520.SGD":"JPMorgan Funds - Asia Growth A (acc) SGD","BK4579":"人工智能","LU1868837565.USD":"CT (LUX) I GLOBAL EMERGING MARKET EQUITIES \"1\" (USD) ACC","LU0067412154.USD":"UBS (LUX) EQUITY FUND -  CHINA OPPORTUNITY \"P\" (USD) ACC","BK4588":"碎股","LU2264538146.SGD":"Fullerton Lux Funds - Global Absolute Alpha A Acc SGD","LU0918141705.HKD":"ALLIANZ TOTAL RETURN ASIAN EQUITY \"AM\" (HKD) INC"},"translate_title":"为什么北京对电子商务行业的“仅退款”政策和拼多多进行审查","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"SCMP":1,"PDD":1,"SSTK":0.9,"BABA":0.79,"09988":0.6},"content_text":"The \"refund-only\" policy in China's e-commerce sector - where consumers can get back money for goods bought from merchants, without returning the products - is now under scrutiny, as analysts point to how the practice has been abused in the local market.\nChina's market regulator has directed PDD Holdings, operator of popular budget-shopping platforms Pinduoduo on the mainland and Temu overseas, to fix this refund-only practice, according to a Bloomberg report on Wednesday.\nThe State Administration for Market Regulation (SAMR) and the Ministry of Commerce have summoned PDD executives to a meeting in Beijing over the matter, according to the report. The regulators did not slap PDD with any punishment.\nDo you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team.\nPDD did not immediately respond to a request for comment on Thursday. No information about PDD's meeting was found on the two agencies' website.\nThe intervention by the SAMR and the Commerce Ministry reflects how an unchecked and aggressive \"refund without return\" practice has been abused and hurt online sellers' earnings.\n\"The policy has been used by platforms to leverage their dominant position to attract consumers at the expense of merchants, leading to unfair practices and market distortion,\" said Wu Libin, senior partner at M&T Lawyers. \"Regulatory intervention aims to balance interests between platforms and merchants, while ensuring fair competition.\"\n\nPDD Holdings-owned budget-shopping platform Pinduoduo has been a major proponent of the \"refund-only\" policy. Photo: Shutterstock alt=PDD Holdings-owned budget-shopping platform Pinduoduo has been a major proponent of the \"refund-only\" policy. Photo: Shutterstock>\nThe refund-only policy was initially adopted to protect consumers' rights and push merchants to improve product quality and customer service. It has also boosted sales for major proponent Pinduoduo, which has been keen to meet the needs of price-sensitive Chinese consumers.\nRecently, Pinduoduo has started to curb the practice, according to several merchants who declined to be identified. While the refund-only option remains available to consumers, merchants can appeal cases in which they have a high likelihood of victory.\n\"The refund-only policy has had a negative effect on the industry,\" said Li Chengdong, founder of Beijing-based tech consultancy Dolphin.\n\"As return rates surged, many products could no longer be resold, so waste has increased significantly,\" Li said, adding that merchants' profit margins \"are being squeezed\".\nThe policy fails to drive positive retail sector growth or support industrial upgrades at this moment, which prompted regulatory intervention, according to Li.\nIn October, Alibaba Group Holding's main e-commerce unit reported that it had rejected an average of over 400,000 refund requests from consumers per day in August and September, as part of efforts to balance the interests of merchants and consumers on its platform. Alibaba owns the South China Morning Post.\nAccording to a September report by Chinese e-commerce research institute 100ec, only 1.06 per cent of surveyed merchants said they had avoided disputes related to the refund-only policy, while 89.05 per cent expressed strong opposition. This report has been shared with the State Council, SAMR, the Ministry of Commerce and the Cyberspace Administration of China, according to 100ec.\n\nThe \"refund-only\" practice has been abused by unscrupulous parties to help lower shipping expenses. Photo: Shutterstock alt=The \"refund-only\" practice has been abused by unscrupulous parties to help lower shipping expenses. Photo: Shutterstock>\nMerchants have been concerned about exploitation of the policy by unscrupulous parties. At China's second-hand online markets, for example, sellers place orders on mainstream e-commerce platforms at full price, then secure refunds through the refund-only policy or by returning counterfeit or empty packages. The practice essentially has no costs.\nAnother form of abuse involves shipping insurance, originally designed to lower transaction costs by covering partial shipping expenses during returns. Some exploit this system by placing bulk orders for items covered by shipping insurance, applying for returns and negotiating lower shipping rates with couriers, pocketing the cost difference. Discussions on how to game this system are active on subforums on Chinese online community forum Baidu Tieba.\nPDD reported 99.35 billion yuan (US$13.7 billion) in revenue in the September quarter, recording a 66 per cent year-on-year increase in net income to 24.98 billion yuan.\nPDD chairman and co-chief executive Chen Lei said the firm is focused on \"driving the high-quality development\" of its platforms. In a statement, co-chief executive Zhao Jiazhen said: \"In the third quarter, we stepped up the investments in our platform ecosystem through merchant support policies and trust and safety updates.\"\nThis article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved. \nCopyright (c) 2024. South China Morning Post Publishers Ltd. 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