What Vietnam’s Setback on Temu Reveals About Global E-Commerce Trends

The Challenge of Scaling Across Borders

Temu’s suspension in Vietnam, following its failure to meet local registration requirements, reflects more than a regulatory hiccup—it is a case study in the evolving tensions between the global ambitions of e-commerce giants and the protective instincts of national economies.

The platform, which has rapidly become one of the world’s largest e-commerce players with $20 billion in sales in the first half of 2024, has thrived on aggressive pricing and deep discounts. While this strategy has wooed millions of consumers worldwide, it has also triggered alarm bells in many countries, including Vietnam, where concerns over its impact on local businesses and regulatory compliance have come to the forefront.

Vietnam’s Calculated Regulatory Pushback

Vietnam’s decision to suspend Temu’s operations can be viewed as part of a broader strategy to manage the growing influence of foreign e-commerce platforms. The Ministry of Industry and Trade’s concerns about Temu’s “unusually low prices” and their potential to harm domestic industries are not unique to Vietnam. Across Southeast Asia and other emerging markets, governments are reasserting control over the digital economy by tightening tax laws, mandating compliance, and scrutinizing business practices.

For Vietnam, Temu’s suspension also signals a commitment to maintaining a level playing field for local players. The recent scrapping of VAT exemptions for low-value imports—a move that disproportionately affects foreign platforms—is another example of this resolve. By halting Temu’s operations, Vietnam is sending a clear message: compliance is non-negotiable, no matter how large or fast-growing the platform.

Lessons for Global E-Commerce Players

Temu’s predicament is not an isolated incident. In the past year, regulatory actions against platforms like Shein, TikTok Shop, and Alibaba have highlighted the challenges of scaling e-commerce operations across diverse regulatory landscapes.

What makes Temu’s case noteworthy is its heavy reliance on pricing as its competitive edge. By offering discounts of up to 90% and free shipping, the platform has disrupted traditional retail models but at the cost of attracting regulatory scrutiny. This pricing model, while effective in capturing market share, raises questions about sustainability and the true cost to local economies.

A Wake-Up Call for Digital Marketplaces

Temu’s suspension is a wake-up call for e-commerce companies eyeing rapid global expansion. The regulatory environments in emerging markets like Vietnam are becoming more complex, as governments seek to balance consumer interests with economic sovereignty.

For platforms like Temu, this means that compliance cannot be an afterthought. Proactive engagement with regulators, transparent business practices, and sensitivity to local market dynamics are now prerequisites for success.

Implications for Africa: A Market in Waiting

Temu’s challenges in Vietnam could hold valuable lessons for its potential entry into Africa, particularly Nigeria. Africa’s burgeoning e-commerce market, with its youthful, tech-savvy population, presents a significant opportunity for platforms like Temu. However, the continent’s regulatory environment, while less developed than Southeast Asia’s, is quickly catching up.

For instance, Nigeria’s recent moves to regulate digital platforms and enforce tax compliance suggest that companies entering the market will face similar hurdles. Temu’s early missteps in Vietnam highlight the importance of getting it right from the start in Africa. This includes building trust with regulators, investing in local partnerships, and offering value beyond low prices.