New Amazon Low-Cost Store to compete with Temu

For 30 years, Amazon have been building an ecommerce infrastructure so complex and efficient that goods can be delivered next-day, or in many cases same-day, offering convenience and speed. Now they have a new competitor in the form of Temu who have copied many of Amazon’s best features but offer goods cheaper in exchange for forgoing speedy delivery. Amazon have decided they’re not going to stand by and lose sales, so will launch an Amazon Low-Cost Store to compete.

What Temu have done is to take broad selection, starting with low-ASP, low-quality goods, build warehouses in China just outside the chinese factories, consolidate consumer orders and ship via air freight direct to consumers. However Temu are already moving upmarket with better quality goods and are recruiting UK, EU and US sellers to ship from local warehouses in the consumers own country. But, they still have a big base of low-ASP products on offer and Amazon want a slice of this.

Amazon’s proposition is to enable retailers to ship to an Amazon warehouse in China – effectively long distance FBA in the manner Temu are operating. Often, it’s the exact same goods that you can buy on Amazon and Temu, but due to shipping costs, storage costs (usually FBA), and selling fees, and often a middleman retailer adding on a margin, the price on Amazon is significantly more. Back in March we pointed to a product available next day on Amazon for £15.99, which if you are willing to wait about 10 days you could purchase from Temu for £6.98. This is the price differential Amazon want to close with the Amazon Low-Cost Store.

And of course, we shouldn’t forget SHEIN, Amazon will have fashion items in the new Store to directly compete with SHEIN as well!

The reality is that the retailer will probably be cut out of the chain in the Amazon Low-Cost Store, with chinese manufacturers acting as the seller, just as they already do on Temu. That’s where a big slice of the margin disappears, although de minimis thresholds allowing goods into countries without any tax/duty paid also helps at the moment.

In the Amazon Low-Cost Store, products will be listed with the brand as ‘Generic’, and there will be strict price points to ensure that they are genuine bargains. Plus sellers will have to be approved in order to list in the store.

What remains to be seen is whether Amazon shoppers that have been trained for years that two-day, next-day, or same-day deliveries will be willing to sacrifice speed for price… especially as they’ll have to look for the cheaper priced offering and will still see more expensive identical goods offered with speedy delivery.

More than anything, the upcoming Amazon Low-Cost Store shows the impact that Temu has had and will continue to have on the ecommerce landscape. While Amazon looks to protect it’s business by embracing lower cost goods with slower delivery, Temu will continue to make inroads into higher priced higher quality products with local sellers, so this isn’t a battle that’s going to be settled any time soon.