The Rise of Temu and Shein: What It Means for Amazon and Its Sellers
Explore how Amazon's latest strategies to compete with rising Chinese e-marketplaces like Temu and Shein impact sellers and consumers.By Rachel HornerAugust 12, 2024
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Amazon, with nearly half of its top third-party sellers hailing from China, has long dominated e-commerce. In recent months, it faces a new threat from Chinese marketplaces like Temu and Shein. These platforms are shaking up the industry with ultra-low prices and direct shipping from China, challenging Amazon’s traditional model.
But Amazon is shaking things up too. It’s slashing fees on low-priced clothing and launching a new section for bargain shoppers, offering direct shipping from China to the U.S. This shift could make Amazon’s prices more competitive, but it also raises new challenges for sellers and consumers alike.
It’s too early to fully gauge the impact of this shift, but there are pros and cons to consider. We’ll explore the implications of Amazon’s latest strategy and how leveraging AI-powered technology can provide an edge — even in the face of new competition.
The Bad News: New Competitors Could Squeeze Sellers Further
The surprising rise of Temu and Shein highlights a key trend: for today’s budget-conscious consumers, price outweighs speed. While Amazon has long conditioned US shoppers to buy unbranded goods from Chinese sellers at low prices, Temu and Shein are capturing attention with even lower prices, despite longer shipping times. Together, Shein, Temu and AliExpress, another Chinese e-marketplace, now collectively receive over 1 billion monthly web visits — double that of Walmart’s. Experts predict a significant shift this holiday season, with 63% of U.S. consumers planning to use Chinese e-marketplaces for their holiday shopping.
Amazon’s creation of a discount section aims to recapture price-conscious consumers. With Amazon’s strong brand trust, combining lower prices with reliability could give them an advantage over Temu and Shein.
Amazon isn’t just targeting shoppers; it’s also courting Chinese sellers. Temu’s direct-from-China model eliminates warehouses and many fees, offering ultra-low prices. Amazon aims to replicate this model with its own dedicated, discount e-marketplace to attract these sellers.
Seller sentiment about Amazon’s new move is grim—and for good reason. New storage fees and growing demand for cheaper items mean sellers are already stretching their profit margins thin. Competing with ultra-cheap Chinese marketplace sellers adds to their challenges.
Private-label brands without strong name recognition are among those to be hit hardest by the prospect of an Amazon bargain store; Amazon’s move raises concerns about the rise of counterfeits, which are already a widespread issue on the platform.
The move could also hurt Amazon’s reputation. An influx of items that forgo Amazon’s warehouses and customs will make it harder to control the product quality — and yet a customer will be none the wiser, assuming because something is on Amazon, it must be okay to use. Degradation in Amazon’s brand reputation could hurt merchants across the platform, especially those on the higher end who have built stronger customer trust.
Rachel Horner serves as a Content Marketing Writer for Feedvisor. She has extensive experience in writing for diverse B2B brands, particularly in the tech industry, and is dedicated to fostering meaningful brand-audience connections.
The Silver Lining: Healthy Competition Could be In the Favor of Sellers
Amazon has long been the uncontested leader in e-commerce, with only Walmart coming close—yet Amazon’s scale far surpasses Walmart’s. Pressure from Chinese e-marketplaces, though relatively small, is forcing Amazon to adapt.
For instance, competition from Shein and Temu has led Amazon to lower fees, allowing sellers to reduce prices and, consequently, driving more purchases on the platform. Earlier this year, Amazon reduced seller fees for clothing priced under $15 from 17% to 5%, and for items between $15 and $20 to 10%. By March, this fee reduction extended to its European, Canadian, and Japanese marketplaces.
With Shein and Temu posing a threat to Amazon’s third-party sellers, Amazon will likely need to introduce more changes to attract and retain sellers, which will benefit both sellers and customers in the near future.
Final Thoughts: Competition Isn’t a Concern When You Have the Leading AI in Your Arsenal
Facing a wave of new competitors can be daunting, especially when they rely on drastically low prices. However, low prices alone don’t secure the Buy Box. In fact, setting prices too low can harm your brand and raise consumer suspicion.
Achieving Amazon success is all about leveraging a pricing strategy that outsmarts and outpaces your competitors. Get ahead of the competition, no matter who it may be, with Feedvisor’s sophisticated AI-powered algorithms, which continuously assess the competitive landscape, brand strength, and consumer demand. By correlating these factors with price elasticity and seasonal trends, Feedvisor’s sophisticated pricing technology determines the optimal price to achieve your unique strategic objectives.
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