As China ends "refund without return" policies, merchants finally get a reprieve — but the scars of involution-style competition remain.
Merchants win, freeloaders lose: China cracks down on “free refund” abuse to stop the bleeding.
Refund without return is dead in China
After four years of merchant pain and customer free-riding, China is finally putting a bullet in one of the most abused ecommerce policies in the game: refund without return.
By July 2025, Chinese ecommerce giants — including Pinduoduo, JD.com, Taobao, Douyin, and Kuaishou — will terminate their “refund only” (仅退款) policies after pressure from regulators. From then on, only merchants will be able to initiate a refund, and only if they want to.
Platforms like Temu (PDD Holdings) rolled this out in 2021 to juice growth and simplify returns. But what started as a customer-friendly policy spiraled into a loophole for grifters — and a financial death spiral for sellers, who were losing both inventory and revenue.
The catch: a weak economy made this unsustainable
China’s government isn’t doing this because it suddenly loves merchants.
They’re doing it because small businesses are suffocating, and they need to stop the bleeding.
Merchants across categories — clothing, appliances, household goods — have been loudly protesting the policy, culminating in mass demonstrations outside Temu offices last summer. Some cited losses from refund scams where buyers received the item, kept it, and got their money back.
The phrase “involution-style competition” (内卷竞争) — a term for self-destructive arms races — has become the scapegoat for the whole mess. And Beijing wants out.
According to a survey from the E-Commerce Research Institute:
- 89% of merchants opposed the policy
- Just 1.39% supported it
- Only 1.06% of merchants had not encountered refund fraud
Enough said.
Operator POV: this is a win for common sense
Let’s be honest — the “refund without return” model was never sustainable.
It was a VC-fueled mirage, designed to goose NPS scores and reduce customer service friction, regardless of merchant pain. That might fly when capital is cheap and growth trumps profit, but in a downturn? It’s suicide.
This isn’t just a Chinese story. It’s a cautionary tale for any market tempted to over-index on customer-first policies while bleeding merchants dry.
Because if you don’t have profitable sellers, you don’t have a marketplace. Period.
What this means for global ecommerce
- 🛑 Expect U.S. platforms to start pulling back on similar refund-loosening perks, especially if returns abuse continues to rise.
- 📉 Short-term hit to GMV? Maybe. But long term, this strengthens platform economics and merchant trust.
- 🇨🇳 For Temu and others expanding globally (hi, America 👋), this change could signal a pivot to more balanced, merchant-friendly policies.
- 📦 Returns logistics companies (like Happy Returns or Loop) might benefit, as platforms reintroduce physical returns as a core process.
The bottom line
China’s ecommerce giants gambled on extreme consumer-first policies — and lost. Refund-without-return was a Band-Aid that turned into a hemorrhage.
Now, the pendulum is swinging back. And for every merchant that’s been quietly eating costs to keep up with platform expectations?
This is long overdue.
🧠 Pro-consumer doesn’t have to mean anti-merchant. This is a lesson the whole ecommerce world should tattoo on its homepage.
