Will a New Amazon Discount Section Compete With SHEIN and Temu?

A new Amazon discount section is set to be introduced in its online store. This new section will feature goods shipped directly from warehouses in China, according to a report from The Information that cited slides shown to Chinese sellers, marking a significant shift from Amazon’s current model where most products are shipped from U.S.-based warehouses.

Amazon has traditionally focused on providing fast delivery, a key selling point for many of its customers. However, there is a segment of shoppers who prioritize cost savings over quick shipping times. This is where Temu and SHEIN have found their niche, offering lower prices with the trade-off of longer delivery times. Amazon’s new discount section aims to cater to this price-sensitive demographic by providing items at competitive prices.

Shipping directly from China allows Amazon to potentially reduce the amount of unsold inventory, as products can be produced in response to customer orders rather than being pre-stocked in U.S. warehouses. This method minimizes the risk of inventory mismatches and helps streamline the supply chain.

Unlike Amazon Prime products that offer fast shipping, the new discount items will have a longer delivery time, ranging between 9 and 11 days due to overseas shipping. This aligns with the shipping times offered by competitors like Temu and SHEIN.

While Amazon is exploring this new approach, SHEIN is taking a different route by establishing U.S. warehouses to offer faster delivery times, a strategy reminiscent of Amazon’s traditional model. This dynamic illustrates the competitive landscape where both companies are adapting their operations to better meet the evolving preferences of consumers.

Amazon’s initiative marks a departure from its existing product lines, such as Amazon Basics. Instead of branded items, the new section will feature unbranded fashion, home goods, and daily necessities, offering budget-conscious consumers a wider range of affordable options.

The move is a direct response to the growing popularity of bargain seller websites and apps like Temu and SHEIN, which have gained significant traction in the United States by offering deeply discounted prices on items shipped directly from China. Temu, in particular, has become ubiquitous with its ads appearing across various platforms, including YouTube, daytime TV, and mobile games. Last year, Temu became the most downloaded iPhone app in the U.S., highlighting the growing demand for budget-friendly options. While SHEIN focuses primarily on clothing and accessories, Temu provides a broader range of products, posing a more direct competition to Amazon’s vast inventory.

In an effort to streamline this new venture, Amazon plans to introduce a dedicated section on its homepage for these bargain items, according to the report. Chinese sellers will have the autonomy to set prices and determine the products included in this section, allowing for a flexible and dynamic marketplace. This approach will enable sellers to test small batches of products before committing to larger-scale production, similar to SHEIN’s model of minimizing unsold inventory.

However, there are concerns about Amazon’s potential reliance on a U.S. trade provision that exempts packages worth less than $800 from customs duties. Both Temu and SHEIN currently benefit from this loophole. With increasing anti-China sentiment within the U.S. government, there is speculation that this tariff exemption could be closed, potentially impacting the operations of these discount platforms and influencing Amazon’s new strategy.

Amazon’s new discount section is expected to launch in the fall, with Chinese sellers being encouraged to sign up during the summer.