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In brief: Following reports earlier this year that Amazon is responding to competition from Shein and Temu with its own budget storefront, internal documents have revealed the kind of prices it will be charging. Merchants will be subject to extreme price caps, including no more than $20 for sofas.
Back in June, Amazon announced that it was launching a secondary storefront at an invite-only conference for Chinese sellers. The store will enable them to ship their items directly to US consumers, allowing Amazon to compete with Temu and Shein, which have been attracting more customers thanks to the rock-bottom prices they offer – despite the often dubious quality.
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Amazon said at the time that the storefront would feature a variety of unbranded items, many priced under $20.
According to a new report from The Information, Amazon has informed merchants about the price caps it is imposing on its secondary store. The messages include a list of 700 items, such as $8 for jewelry, $9 for bedding, $13 for guitars, and $20 for sofas.
Amazon plans to charge sellers lower fulfillment fees for items sold through the low-cost storefront. Sellers would be charged between $1.77 and $2.05 to ship a 4-to-8-ounce item. That represents significant savings over the $2.67 to $4.16 Amazon charges for items of a similar weight shipped under its Fulfillment by Amazon program from a domestic warehouse.
The items will be shipped to customers in the US directly from a facility in Guangdong, China. The report says that the store's shipping times would be a lot slower than Amazon's main store: between nine and 11 days.
The rate at which Amazon's sales are increasing is slowing. They were up just 5% in Q2, down from 7% in the previous quarter.
Amazon said the number of Chinese sellers on its marketplace grew by 20% year-on-year in 2023. The number of Chinese merchants with sales over $10 million also increased, by 30%.
A survey of 7,000 American teenagers in 2022 ranked Shein as their second favorite e-commerce website. Its low prices, along with its strategy of predicting and testing fashion styles, and strong social media marketing, help it appeal to Gen Z consumers in the US.