Free to Read: Temu Suffers First Big Setback as Vietnam Suspends Its Operations

Experts believe Vietnam’s crackdown is partly to protect local businesses from Temu’s aggressive pricing policy

: Temu began its Southeast Asia expansion in mid-2023, launching in the Philippines, Malaysia, and Thailand.

Temu, the Chinese cross-border e-commerce platform owned by PDD Holdings Inc., has suffered its first major setback since launching in 2022 after Vietnam banned its operations citing regulatory non-compliance only two months after it entered the market.

Temu was ordered by the Ministry of Industry and Trade to stop using the Vietnamese language on its website and app, to notify customers that its e-commerce registration was under review, and to halt all marketing activities in the country, according to a report by Vietnam News Agency on Dec. 5.

The suspension is Temu’s first since expanding into more than 80 countries around the world.

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Shein, another Chinese e-commerce giant which started operating in Vietnam two years ago, also temporarily disabled its Vietnamese-language site, though Vietnamese customers can still shop through its international website. Unlike Temu’s platform-based model, Shein follows a direct-to-consumer strategy in Vietnam, avoiding similar regulatory issues.

In November, both companies were given a deadline to complete e-commerce platform registration. Nguyen Hoang Long, Vietnam’s deputy industry and trade minister, said his ministry was working with law enforcement agencies to tighten checks on unregistered platforms and warn consumers about potential risks.

On Nov. 25, Pham Minh Chinh, Vietnam’s prime minister, issued a decree, directing government agencies to strengthen e-commerce regulations. Measures include improving import-export management, enhancing tax compliance, strengthening cybersecurity and regulating digital platform logistics services.

Industry experts believe Vietnam’s crackdown is not just about regulatory compliance. Li Ming, founder of TikTok’s multi-channel network agency Vzone, the move was probably to protect local businesses while pushing cross-border platforms toward legal conformity. He warned that Temu’s low-price strategy could severely disrupt Vietnam’s developing e-commerce ecosystem if left unchecked.

Vietnam’s reliance on Chinese imports has long faced challenges from counterfeit goods. Li said Vietnamese consumers tend to choose branded products over generic ones, trusting that established brands offer better quality even at budget prices.

Liu Wei, co-founder of logistics firm Yuancang Warehouse, highlighted Vietnam’s growing e-commerce infrastructure. He said that although Vietnam currently generates the least business among Yuancang’s Southeast Asia markets, its strong consumer demand and young, brand-conscious population signal vast growth potential.

Vietnam’s e-commerce sector has boomed in recent years. According to the 2024 Southeast Asia E-commerce Market Report by Momentum Works, Vietnam posted a 52.9% growth in gross merchandise value in 2023, with $13.8 billion in sales, making it the region’s third-largest e-commerce market after Indonesia and Thailand.

Shopee dominates Vietnam’s e-commerce space with a 61% market share, while TikTok Shop, launched in April 2021, has rapidly gained a 24% share, driven by the country's enthusiastic embrace of live-stream shopping, according to the report.

Temu began expanding into Southeast Asia in mid-2023, launching in the Philippines, Malaysia and Thailand. Its aggressive pricing strategy, however, has sparked concerns about its effect on small businesses in these markets.

Indonesia is also a target for Temu, though legal obstacles has stalled progress. Since 2022, the company has failed several times to register its brand there due to naming conflicts. Its latest application was filed last July.

Indonesia’s regulatory concerns stem from Temu’s factory-to-consumer business model, where sellers focus on production while Temu handles logistics, marketing and customer service. Authorities argue this model bypasses local distributors, violating Indonesia’s Presidential decree of 2021, which prohibits direct factory-to-consumer sales.

Budi Arie Setiadi, the country’s minister of communication and information, said on Oct. 1 that Temu’s model threatens small businesses that are crucial to Indonesia's economy. As a result, the country’s ban on Temu remains firmly in place.