Amazon decides speed isn’t everything

Amazon has put one thing above all else for the past two decades: speed. How has the e-commerce giant stolen business from bookstores, hardware stores, clothing boutiques, and many other types of retailers? By selling cheap stuff, or more precisely, selling cheap stuff that arrived Quick. It built the most expansive and brutally optimized logistics empire the United States has ever seen, capable of delivering almost any product imaginable to consumers within two days. In March, some 180 million Americans were Amazon Prime subscribers, an all-time high. Even at a time when many are reporting financial hardship, most still think it’s worth spending $139 a year to make sure products arrive at their doorsteps quickly, sometimes within hours.

But Amazon has recently faced a new threat to that model. Tens of millions of Americans have started shopping on Shein and Temu, two Chinese e-commerce platforms that ship products directly from China without a middleman. Shipping takes longer, but prices are lower. Shein specializes in women’s clothing and accessories, such as $6 crop tops and $12 dresses. Temu’s main selling points are housewares, décor, and electronics; you can buy an Android tablet for $52 and a box of latex-free gloves for $3.

Now Amazon is slowing down for once. Earlier this week, information it was first reported that Amazon plans to follow Shein and Temu’s lead and open a new online store with cheap products shipped directly from China. It will focus on unbranded clothing and home goods priced under $20 and weighing less than a pound, and orders will arrive in nine to eleven days — a relative eternity compared to how long most customers are accustomed to waiting. An Amazon spokesperson did not deny any of these details, saying only that the company is “always looking for new ways to work with our retail partners.” When given a choice, Amazon seems to realize that many people will choose things that are really cheap over things that arrive really quickly.

In some ways, Amazon is already very similar to Shein and Temu. All three platforms rely on the same factories and sellers in China to produce products. When Temu launched in the fall of 2022, I reported that it sold electronics from at least some of the same Chinese suppliers that Amazon used. According to tech investment consultancy Tech Buzz China, there was about 10 percent coverage between Temu sellers and Amazon sellers as of December this year. When I did a quick search on Shein and Amazon earlier this week, I discovered that the same Chinese sellers were offering a number of identical products on both sites, including Stanley Cup-shaped dog toys and pink memory foam slippers. But they were a few bucks cheaper on Shein. If the products are the same, why are prices higher on Amazon?

The most basic explanation is that when customers buy things on Amazon, part of what they are paying for is fast delivery. This speed is possible because Amazon has poured billions into building warehouses and other logistics infrastructure in the United States. Fast shipping is a convenience that comes at a price. In other contexts, consumers understand and accept the trade-offs they make for convenience, albeit reluctantly. Most of us understand that buying a sandwich at the airport is more expensive because it is faster and easier than packing a sandwich at home before a flight.

On Amazon, the trade-offs are less clear: After all, products are usually cheaper than in the local store. But Amazon didn’t anticipate that consumers would eventually get attractive options that went straight to the source.

Earlier this month, Jason Wong, the CEO of a packaging company, caused a minor stir on social media when he claimed to have bought a $700 couch that a luxury furniture retailer was selling for $4,000. He did so, he said, by finding the company’s supplier in China and ordering directly from them. In March, two tech entrepreneurs launched a service called Dupe.com that purports to help people buy knockoff furniture in a similar way. Temu and Shein do much the same thing, giving customers direct access to warehouses in China where they can buy similar or identical products to those offered on Amazon, without the convenience markup.

But as this type of ultra-cheap shopping takes hold, there are downsides that go beyond slower shipping times. Retail margins allow brands to cover expenses like advertising and marketing, which may seem unnecessary but play a big role in helping consumers identify the things they want to buy. (Wong said he originally saw the couch in the ad.) Then there are the costs of managing inventory, running brick-and-mortar stores, providing customer service and designing new products to sell. While corporations moved manufacturing to China decades ago, millions of workers in the United States are still employed to provide those services, including at Amazon.

But in the logic of this new economy, store clerks, marketing executives, furniture designers, importers, and even Amazon warehouse workers — everyone except factory workers and logisticians in China — are seen as gatekeepers and middlemen who stand in the way of people buying more quantity of cheaper things. The fact that goods arrive a little slower is just a minor inconvenience, the last thing Shein and Temu can take on and optimize.