Analysts say Amazon faces an uphill battle against Temu and Shein in its bid for Chinese sellers

Amazon.com’s plan to launch a discount shopping section could attract suppliers from mainland China because of its pricing 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.

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“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.

Selected sellers from mainland China have been invited by Amazon.com to join its new discount shopping marketplace. Photo: Reuters alt=Selected sellers from mainland China have been invited by Amazon.com to join its new discount shopping marketplace. Photo: Reuters>

Amazon’s new discount marketplace is similar to the budget e-commerce model of platforms like Temu, which work closely with Chinese suppliers to market and ship cheap goods directly to consumers around the world.

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 U.S. company’s planned entry into the discount shopping market is evidence of a renewed effort to expand the “Made in China, sold on Amazon” community as many mainland Chinese suppliers struggle to increase profits amid fierce competition among discount shopping platforms.

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

Amazon.com’s discount shopping initiative is expected to attract suppliers that have partnered with rival platforms Temu, Shein and TikTok Shop. Photo: Shutterstock alt=Amazon.com’s discount shopping initiative is expected to attract suppliers 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 in response to inquiries about the new initiative.

According to a report by Data.ai in 2023, Temu topped the lists of most downloaded shopping apps in 125 markets, including the US, where Shein took second place.

Kenny Li, a Guangzhou-based apparel supplier who works with Shein and Temu, said he has been closely following news of Amazon’s plan and is eager to join it whenever the opportunity arises.

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, household 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 cutting supplies to Temu after being penalized for goods returned by consumers. “It hurts our profits, so I would rather produce less than pay the cost of profits,” he said.

While Chinese retailers are eager to capitalize on Amazon’s new trend, it will be hard for the U.S. company to win over Temu and Shein customers in the discount shopping segment, said Zhang Yi, founder and chief analyst at market consultancy iiMedia.

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

This article originally appeared on the South China Morning Post (SCMP), the most authoritative newspaper reporting on China and Asia for over a century. For more SCMP stories, visit the SCMP app or follow SCMP i on Facebook Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.