Amazon‘s throwing its hat into the ring when it comes to selling items at rock-bottom prices.
According to reporting from The Information, the behemoth plans to launch the Low-Cost Store, which will specifically feature items at bare bones prices shipped directly from China. The offerings will differ from Amazon‘s current ones when it comes to price and shipping time. While the company has become famous and favored by consumers for its two-day Prime shipping, the direct-from-China goods will take longer to arrive on consumers’ doorsteps—reportedly, between nine and 11 days.
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When it comes to pricing, Amazon will reportedly put caps on goods by category. For instance, jewelry will not cost more than $8, while bedding will be limited to less than $9 and sofas will be sub-$20 purchases. The company has not indicated whether it will invite U.S. sellers, Chinese sellers or both, but regardless of which sellers join the program, they will not be eligible to fulfill orders themselves; Amazon will handle all fulfillment from a warehouse out of Guangdong, China.
The e-commerce player may see a bit of a threat from ultra low-priced goods purveyor Temu, which has gained market share among international consumers, but especially those in the U.S., in recent months.
In a statement to Reuters, a spokesperson for Amazon said, “We are always exploring new ways to work with our selling partners to delight our customers with more selection, lower prices and greater convenience.”
The Information reported that sellers participating in the low-priced marketplace will pay between $1.77 and $2.05 to ship items that weigh between four and eight ounces; the same items would cost between $2.67 and $4.16 to ship via Fulfilled by Amazon (FBA), Amazon’s current fulfillment business used by over three-quarters of the company’s third-party sellers. While the FBA fees are higher, there are also no price ceilings on goods.
This is not the first time Amazon has made a foray into the ultra low-priced market. In April, it launched Amazon Bazaar, a similar concept to this new marketplace, for consumers in India. That launch was likely a way to compete against Flipkart, which Amazon rival Walmart owns a majority stake in.
Though Shein and Temu are widely considered enemies and neck-in-neck rivals, it seems Temu’s marketplace-only business model is attracting attention from e-commerce’s largest player in a different way. While Shein does offer a marketplace function, it also manufactures, lists and sells a slew of its own, Shein-branded products to consumers at rock bottom prices. That in mind, its core business model differs from both Temu and Amazon—and Amazon hasn’t made a heavy play targeted directly at defeating Shein in the same way it appears to be doing with Temu.
Part of Amazon’s latest leap could be that Temu has, in some ways, begun to encroach on Amazon when it comes to fast-turnaround shipping for U.S.-based consumers. Temu has begun setting up a network of U.S. warehouses over the past few months, and has been looking to recruit U.S. sellers, particularly by peddling the notion that selling items on Temu costs less for the seller than selling goods on Amazon—in part because of the fees associated with FBA.
Amazon’s latest interest in China also comes at a time when the future of the de minimis provision, which allows goods under certain categories valued less than $800 to enter the United States with less scrutiny and without tariffs, remains in limbo, particularly for goods coming in from China. The Biden-Harris administration has vowed to crack down on the “abuse of the de minimis exception,” noting a special focus on “China-founded e-commerce platforms.”
Members of Congress have also expressed their concern over and distaste for the ways that Shein, Temu and other players impact American business and tap into potential forced labor sources, particularly in violation of the U.S.’s Uyghur Forced Labor Prevention Act (UFLPA), which prohibits goods made in whole or in part in China’s Xinjiang Uyghur Autonomous Region, where advocates say forced labor runs rampant, from being brought into the U.S.
While Amazon itself was not founded in China, and Temu’s global headquarters are in Boston, the purported pending rules could force both companies to relinquish or alter the models that make direct-from-China goods so inexpensive for global consumers—especially those in the United States.
