Amazon is set to launch Temu, Shein and Speedpost competitors, specializing in low-priced items shipped directly from China. Amazon's main mission remains Prime membership, but it has embraced a new side mission.
Amazon will launch a separate section on its app and website that specializes in inexpensive, slow-shipment items. They will ship directly from warehouses in China to shoppers in the U.S., giving up fast delivery and significantly lower prices. On Wednesday, Amazon held an invitation-only event in Shenzhen, inviting some sellers to show off their ideas for the new marketplace model. Some of the sellers then leaked presentation materials. According to the presentation, the new marketplace will offer unbranded fashion, home furnishings and daily necessities at prices below $20 and weighing less than 1 pound.
For nearly a decade, Amazon has been the primary channel for Chinese sellers to reach Western shoppers. They represent nearly 50% of the top third-party sellers on Amazon, according to Market Pulse research. Until now, Chinese merchants have sold their goods via FBA. The new marketplace introduces another channel.
Amazon's Fulfillment by Amazon (FBA) is supply chain consolidation at the destination; it will be consolidation at the source in China. Millions of sellers have used ocean freight alone to move inventory from China to FBA warehouses in preparation for two-day or faster domestic deliveries. Now, sellers can ship to Amazon warehouses in China, and customer orders will be shipped by air to shoppers in the U.S. in 9-11 days, under a minimum threshold and therefore duty-free. The new marketplace is similar to the fully managed marketplaces of Temu, Shein and Global Express, where sellers offload their products onto the marketplace, but on Amazon they will retain pricing and selection control.
Last year, in response to Shein, Amazon reduced the transaction fee for apparel priced under $15 from 17% to 5%. However, this is only a half-solution, as Shein offers not only low prices, but also, more importantly, rapid overlap through small batch production. The new China Direct Market is a complete solution. It addresses Shein's core strengths in categories such as apparel, which benefit from being shipped directly from China, resulting in lower prices, a more dynamic selection, and reduced inventory risk for sellers.
As soon as you change the supply chain model, the sales model changes - what a brand sells in a department store is not the same as what it sells on Amazon, and what it sells on Amazon is not the same as what it sells on Shein. Price and speed of delivery are not the only factors; the supply chain also tells us what is being made.
China's retail apps can't match Amazon's one- or two-day delivery, but they can offer cheaper prices while requiring a week's delivery time. Products sold by Amazon ship quickly; products sold by Tianmu, Shein, and Sizzler ship more slowly. The speed of transportation is inseparable - logistics is as much a part of the product as the product itself. The only way Amazon can match this is by overriding the supply chain advantage.
The reason the same product sells for $7 on Temu and $20 on Amazon is not because they come from different manufacturers. They are the exact same product. The price is higher on Amazon because Amazon is more convenient, which means sellers pay more for that convenience. Amazon has spent decades and hundreds of billions of dollars betting that convenience is worth paying higher prices. And they were right: "In March, nearly 601 TP3T of Prime member orders arrived the same day or the next day in the top 60 largest metro areas in the U.S.," wrote Doug Herrington, CEO of Amazon Stores Worldwide.
Meanwhile, Temu, Shein and Global Express are betting - rightly so - that a portion of their customers are willing to spend less and wait longer to receive certain shipments. It's estimated that the combined global sales of Tmall, Shein and Sizzler this year will be close to $200 billion. The integration of the supply chain at the source has allowed them to offer reliability, consistency and speed not seen in the early attempts of eBay, Wish and Speedpost, where items took weeks to arrive and sometimes didn't even show up. A year ago, Amazon said that Temu did not meet its standards and was therefore excluded from its fair pricing policy, but today, Temu was forced to take action.
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