USA (Washington Insider Magazine) – Amazon, the US e-commerce behemoth, is to launch a discount shopping service in response to the growing popularity of Chinese platforms Temu and Shein. These platforms have captured US shoppers with their low-cost goods, pushing Amazon to consider similar measures to retain its customer base.
The De Minimis Advantage
Shein and Temu’s business strategies are based on the “de minimis” clause of Section 321 of the Tariff Act of 1930, which waives import taxes for shipments valued at less than $800. These companies transport products directly from suppliers, primarily in China, to consumers, circumventing all tariffs. This method reduces inventory costs in the United States while sacrificing delivery speed for lower pricing, appealing to cost-conscious consumers prepared to wait for their purchases.
Explosive Growth of Temu and Shein
According to Busniess2community, Temu, and Shein have seen remarkable growth. According to Sensor Tower, Temu is currently the most downloaded free app on the Apple App Store, while Shein ranks fifth. On Google Play Store, Temu holds the top spot, and Shein is sixth. Temu, owned by Chinese tech giant PDD, boasts over 50 million monthly active users in the U.S., with Shein having 17.3 million active users.
Amazon’s Strategy and Market Position
Amazon remains a prominent participant, with around 180 million Prime users in the United States. Despite its large user base, Amazon’s growth has been slower than that of Temu and Shein. Amazon’s North American sales climbed by 12% in 2023 and 13% in 2022, indicating a significant slowdown from previous years.
Inside Amazon’s Discount Store Plans
Amazon is eyeing the fast-growing discount shopping market. A Wall Street Journal report revealed that Amazon held a meeting with Chinese merchants to discuss launching a new channel for unbranded fashion and household products from China. Unlike Temu, where prices are fixed, Amazon’s platform would allow sellers to set their prices. The logistics would also differ, with products shipped directly from suppliers to buyers within nine to eleven days.
Regulatory Challenges and Market Opportunities
Amazon’s discount store could capitalize on the increasing regulatory scrutiny of Chinese e-commerce companies in the U.S. The Biden administration has enacted laws targeting Chinese tech firms, raising concerns about data security and tariff evasion. Shein and Temu face are alleged to exploited the de minimis rule and used forced labor in their supply chains. A 2023 report by the U.S.-China Economic and Security Review Commission raises concerns over Shein’s data collection practices.
Potential Revenue Boost for Amazon
Despite regulatory challenges, the discount store could boost Amazon’s revenues. If successful, it could capture market share from Temu and Shein, especially if regulatory pressures intensify against these Chinese platforms. Shein, which had planned a U.S. listing, has reportedly postponed it due to scrutiny and is now considering a London listing.
Navigating the Transition
While the shift to discount shopping could drive growth for Amazon, it presents challenges. Zhang Yi, founder, and chief analyst at iiMedia, noted that Amazon’s transition from its current model to a low-cost one requires careful navigation to protect its brand and maintain its market position. Amazon aims to leverage its extensive user data and artificial intelligence capabilities to create a compelling discount shopping experience.