In a significant turn of events, Vietnam’s trade ministry announced the suspension of operations for the Chinese online retailer Temu. The decision follows Temu’s failure to meet the business registration deadline set at the end of November. This move reflects growing apprehensions among local businesses and regulatory authorities regarding the consequences of aggressive pricing strategies adopted by Chinese online platforms.
The backdrop to this decision is rooted in the increasing concern about the impact of deep discounting practices, which many believe could undermine local businesses and potentially lead to issues surrounding quality control and counterfeit goods. Just recently, the Vietnamese government notified both Temu and another Chinese retailer, Shein, of the mandatory registration requirement, warning that failure to comply would result in blocking access to their apps and websites.
Temu, a subsidiary of the Chinese e-commerce giant PDD Holdings, had only begun its operations in Vietnam three months prior, in October. Despite this rapid entry into the market, the repercussions of non-compliance with local regulations became evident quickly. The trade ministry’s statement underscored the urgency of adhering to these regulations: “Temu operations will be temporarily suspended until it completes the registration procedure.” Currently, the platform’s application for e-commerce service activities is still under review by the relevant authorities.
As a consequence of the suspension, Vietnamese-language options disappeared from Temu’s website when accessed from within Vietnam, sending a clear signal to both local consumers and the wider e-commerce industry. The company acknowledged its participation in the registration process, stating that it is collaborating closely with the Vietnam E-commerce and Digital Economy Agency as well as the Ministry of Industry and Trade. However, the timeline for resuming operations remains uncertain.
Interestingly, the situation surrounding Shein is less clear. While Temu has faced an explicit operational suspension, it’s unclear whether Shein is experiencing similar hurdles, as its Vietnamese website was also inaccessible. Reports suggest that the company is similarly engaged in discussions to fulfill registration requirements.
The regulatory environment is tightening not just for Temu and Shein but extends to other foreign e-commerce platforms as well. For instance, in Indonesia, regulators have called upon tech giants Google and Apple to block Temu from app stores within the country. The move ostensibly aims to protect local merchants, reflecting a broader trend of increased scrutiny on foreign e-commerce competitors across Southeast Asia.
Vietnam is not just targeting e-commerce platforms for registration but has also enacted new legal frameworks requiring foreign operators to pay value-added tax (VAT). This shift, aimed at eliminating tax benefits previously enjoyed by foreign entities, marks a significant blow to the foreign-dominated e-commerce industry. Since 2010, such firms have benefited from tax exemptions, which were designed to promote market entry but are now under review.
The implications of these regulatory changes are profound, particularly for a market that has already seen challenges due to slowing growth rates and escalating competition. As platforms find themselves dealing with regulatory dilemmas, it will be crucial for them to weave compliance into their business strategy if they wish to thrive in Southeast Asian markets.
Vietnam’s approach highlights the delicate balance that emerging economies like Vietnam seek to maintain: promoting foreign investment while simultaneously safeguarding the interests of local businesses and ensuring consumer protection. By mandating these registrations, Vietnam aims to create a more level playing field, ultimately benefiting local players in an increasingly competitive e-commerce landscape.
In conclusion, the suspension of Temu’s operations serves as a powerful reminder that success in international markets hinges not only on market entry strategies but also on compliance with local laws. As the digital commerce environment shifts, businesses must adapt swiftly to navigate the regulatory landscape.
