Amazon reports Temu-like discount store compared to a “slap in the face” by sellers

The new storefront will appear in a separate section of Amazon’s homepage, according to presentation slides from an invite-only meeting with Chinese sellers cited by The Information. Items will reach customers within 9 to 11 days, the slides also said. Amazon has told Chinese sellers that it will begin signing up sellers this summer and will begin accepting inventory in the fall. Previously, Chinese sellers routed items through Amazon’s warehouses in the U.S.

About a half-dozen Amazon sellers told Modern Retail that the prospect of a discounter threatens to erode their market share at a time when Chinese e-commerce platforms have already gained price-conscious American shoppers. Sixty-eight percent of American shoppers have purchased something on Temu in the past year, even though only 7% of Americans said they trust the platform, according to a recent study by e-commerce marketing firm Omnisend.

“This new storefront could significantly impact the ability of retailers to compete in the U.S.,” said Lori Barzvi, whose brand Pupiboo sells washable dog pee pads. “Amazon customers are already price-sensitive, and a dedicated discount section could further reduce our market share.” Although Temu and Shein have gained popularity in the U.S., many customers have hesitated to use them due to trust issues. But Amazon’s established reputation could eliminate that barrier, accelerating the transition to ultra-cheap shopping from China, Barzvi added.

The problem is compounded by a slew of new fees introduced by Amazon earlier this year, and Amazon sellers have said Modern Retail has forced them to modernize their operations while putting pressure on profit margins.

“The combination of these fee increases and downward pressure on prices to compete with the new discount platform could make it unsustainable for many small businesses to continue operating on Amazon,” Barzvi said.

“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 spokeswoman Maria Boschetti said in a statement.

According to Judah Bergman, CEO of Jool Baby, a company that sells baby products including swings and changing tables, private label brands that lack recognition are likely to suffer the most from the arrival of a bargain store on Amazon. Bergman is less concerned about his own brand, which rakes in eight-figure sales annually on Amazon and sells merchandise through major retailers including Walmart and Target. He’s more concerned about the rise of counterfeits, which are already a common problem on Amazon.

Amazon prohibits counterfeits and intellectual property infringement on its platform, and the company has taken steps to address the issue. Earlier this year, Amazon said it had blocked about 700,000 fake accounts. But eliminating the problem entirely is difficult. Well-known brands including Birkenstock and Nike have previously said they would not sell on Amazon because of counterfeits and Amazon’s lack of enforcement.

“I am afraid that making it easier for Chinese sellers to sell abroad and significantly lowering their prices will encourage many dishonest entrepreneurs,” Bergman said.

Meanwhile, Eva Hart, who sells candles and coffee products on Amazon, said the tech giant’s potential foray into a Temu-like discount store has her wondering whether she should abandon plans to open a separate home decor brand on the platform. “It makes me cautious about even thinking about introducing products that are going to be sold cheaper on this new platform,” Hart said.

The news is puzzling considering the e-commerce platform has doubled its efforts to attract big-name brands, including high-end brands, to its site, Hart said. In 2020, for example, Amazon introduced luxury stores that aim to give prestigious brands more control over how their goods are presented to customers on the company’s marketplace.

Cara Sayer, CEO of SnoozeShade, a children’s brand that sells sun shades for strollers and car seats, says Amazon’s bargain store also raises questions about product compliance and safety.

“Once this program is launched, it will be difficult to control the quality of the product and yet the customer will assume that something is on Amazon that it must be OK,” Sayer said. “Who is doing quality control on these products? Who will take responsibility if something goes wrong? You can’t go to a factory in China and have your child burnt because no one checked the product for flammability.”

Overall, Sayer said it’s been harder to stay competitive on Amazon since she first moved away from brick-and-mortar retail more than a decade ago to sell on the Seattle-based company’s platform. The prospect of a competitor like Temu only compounds that problem.

“We are all being squeezed so hard that many companies are going to fail,” Sayer said. “It’s kind of like a slap in the face, to be honest.”