Online retailers like Temu and Shein have brought a sea change to the world of e-commerce, offering a variety of ultra-low-priced products shipped from China. Now, Amazon appears to be firing back, after announcing plans to launch a new online store of its own that directly mirrors the model of their Chinese competitors. But can the U.S. retail giant beat them at their own game?
Much like Temu and Shein’s direct shopping model, the new section on Amazon’s website will reportedly sell unbranded items at a fraction of their normal cost, shipped straight to consumers from sellers in China. It marks a significant departure from Amazon’s tried and true regional approach, where they instead ship items to stateside warehouses in areas where they know consumers are more likely to purchase them, all in service of faster deliveries from a network of local distribution centers. What it really represents, though, is the first shot across the bow at Temu and Shein from any U.S. e-commerce retailer.
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“What Amazon is attempting here is unprecedented,” says Michael Zakkour, founder and chief strategist at retail consulting company 5 New Digital, noting that no U.S. company has ever tried to roll out a large-scale cross-border program to ship goods from China straight to domestic consumers. But with Temu spending $20 billion on advertising in the U.S. in 2023, Amazon has been forced to find ways to protect itself from an overseas competitor that had more than doubled its base of active users in the U.S. by the end of last year.
“E-commerce in the West is being disrupted in the way that e-commerce disrupted retail 15 years ago,” Zakkour says.
While he says that it’s too early to know what Temu’s success in the U.S. will mean for other retailers down the line, “it’s certainly telling how it got Amazon’s attention to this level.” Amazon also has plenty of decisions to make in terms of what this pivot should look like moving forward. As Zakkour points out, the company will still have to figure out how to have this new online store co-exist with its current distribution model, while balancing the two approaches against each other to determine what their customers value more: faster deliveries or cheaper products.
“Some of that is going to be dependent on which way the wind blows in terms of consumer sentiment,” he says. “People are picking Amazon on convenience and brand, and on the other side, they’re picking price.”
“Keep in mind, Temu and Shein want to be Amazon,” Zakkour adds. “What’s happening here is those guys are working on building their ecosystem status, while Amazon has the ecosystem and is trying to fit in this direct shopping model.”
Amazon will have to overcome a number of controversial aspects to Temu and Shein’s model as well. Both Chinese companies’ low prices have allegedly come at the cost of forced labor and poor working conditions in several of their suppliers’ factories in China. By shipping products in smaller lots, they’ve also managed to skirt “de minimis” rules in the U.S. and the European Union for years, under which duties and increased scrutiny are imposed only on imports valued over a certain amount. The approach has drawn the ire of U.S. and EU customs agencies, both of whom have made recent changes to their de minimis rules in response to the flood of low-value, duty-free shipments arriving from China.
Bearing all that in mind, Zakkour says that Amazon is likely looking at Temu and Shein’s model, determining what they can feasibly do to stay competitive, and boiling that down to one, simple strategy: “It works for them, let’s see if it works for us.”
