Analysts say Amazon faces tough challenge as it competes with Temu and Shein to court Chinese sellers

Amazon.com’s plan to launch a discount shopping section may attract suppliers from mainland China due to price flexibility. But analysts say competing with Temu and Shein in selling cheap goods won’t be easy.

The US e-commerce giant told Chinese entrepreneurs at an invitation-only meeting on Wednesday that the new low-cost online marketplace will feature unbranded clothing, household and daily necessities items that will be shipped directly to consumers from warehouses on… continent within nine to eleven days.

The plan, first reported by online tech publication The Information, has already made waves in China’s cross-border e-commerce community, with heated discussions about joining the marketplace and Amazon’s related policies. However, the program is only available to select sellers.

Have questions about the biggest topics and trends from around the world? Get answers with SCMP Knowledge, our new platform of curated content featuring explainers, FAQs, analyses and infographics from our award-winning team.

“The initial feedback from Chinese sellers has been very positive, even though Amazon has not officially launched the new program yet,” said Wang Xin, chairwoman of the Shenzhen Cross-Border E-Commerce Association.

Amazon.com has invited select mainland Chinese merchants to join its new discount shopping marketplace. Photo: Reuters alt=Amazon.com has invited select mainland Chinese merchants to join its new discount shopping marketplace. Photo: Reuters>

Amazon’s new discount marketplace resembles the model of low-cost e-commerce platforms like Temu, which work closely with Chinese suppliers to market and ship very cheap goods directly to global consumers.

According to Wang, sellers under Amazon’s new program can set their own product prices, which differs from Temu’s model. She said it would likely appeal to cross-border sellers and exporters from the mainland – especially those that have worked with Temu, Shein and TikTok Shop – thanks to the manufacturing capabilities, cash flow, talent and supply chain that could be important to Amazon.

The US company’s planned entry into the discount shopping segment underscores renewed efforts to expand the “Made in China, Sold on Amazon” community as many mainland suppliers struggle to boost their profits amid fierce competition among discount shopping platforms.

“By leaving pricing in the hands of sellers, Amazon has offered them a key way to stay profitable,” Wang said.

Amazon.com’s discount shopping initiative is expected to attract vendors that have partnered with rival platforms Temu, Shein and TikTok Shop. Photo: Shutterstock alt=Amazon.com’s discount shopping initiative is expected to attract vendors that have partnered with rival platforms Temu, Shein and TikTok Shop. Photo: Shutterstock>

Amazon is also trying to protect its domestic market from companies like Temu, Shein and TikTok Shop, whose aggressive promotions and cheap deals have won the hearts, minds and money of many American consumers.

“We are always looking for new ways to work with our retail partners to delight our customers with more selection, lower prices and greater convenience,” Amazon said in a statement responding to an inquiry about the new initiative.

In 2023, Temu topped the shopping app download charts in 125 markets, including the U.S., where Shein came in second, according to a Data.ai report.

Guangzhou-based clothing supplier Kenny Li, who works with Shein and Temu, said he was following news of Amazon’s plan closely and would be happy to join when he gets the chance.

The new online budget marketplace planned by Amazon.com will feature unbranded fashion, household and daily essentials shipped directly to consumers overseas from suppliers’ warehouses in mainland China. Photo: Shutterstock alt=The new online budget marketplace planned by Amazon.com will feature unbranded fashion items, home goods and daily essentials shipped directly to consumers overseas from suppliers’ warehouses in mainland China. Photo: Shutterstock>

“It would be a good opportunity for us to expand our sales channel and reduce risk,” said Li, whose factory produces T-shirts and jeans that sell for just a few dollars.

Li revealed he was restricting deliveries to Temu after being fined for goods returned by consumers. “It hurts our profits, so I would rather produce less than bear the cost of profits,” he said.

Chinese retailers are eager to join the new Amazon trend, but it won’t be easy for the American company to win over Temu and Shein’s discount-shopping customers, according to Zhang Yi, founder and chief analyst at consulting firm iiMedia.

“Amazon has targeted China as a huge and highly efficient manufacturing center to supply a wide range of low-cost goods, but the question remains whether the company will be able to smoothly transition from its current model to a low-cost model,” Zhang said.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative daily covering China and Asia for more than a century. For more SCMP articles, visit the SCMP app or the SCMP Facebook page and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.