Amazon’s Strategy to Combat Cheap Chinese Rivals: A New Discount Section

Amazon is rolling out a new discount section to compete with low-cost Chinese e-commerce platforms Temu and Shein. By offering unbranded items directly from China, Amazon aims to attract budget-conscious consumers with competitive pricing and fast shipping.

Amazon, the Seattle-based e-commerce behemoth, is feeling the heat from its low-cost Chinese rivals, Temu and Shein. Known for their ultra-low prices and aggressive marketing strategies, these platforms have been rapidly gaining market share, posing a significant threat to Amazon’s dominance. In response, Amazon is unveiling a new strategy to defend its kingdom: a discount section featuring unbranded items shipped directly from China to the US.

According to The Information, Amazon plans to introduce this new marketplace section later this year. The company has already presented this idea to Chinese sellers, signaling a significant shift in its approach to maintaining competitiveness. Customers can expect to receive their orders within nine to 11 days, a relatively quick turnaround for international shipping.

Amazon’s strategy mirrors a classic business adage: “If you can’t beat them, join them.” By sourcing products directly from China and offering them at lower prices, Amazon aims to retain price-sensitive customers who might otherwise turn to Temu or Shein. This move is part of Amazon’s broader effort to enhance selection, reduce prices, and increase convenience for its customers.

Historically, competitive pricing has been a cornerstone of Amazon’s business model. In 2009, Amazon introduced AmazonBasics, its private-label brand, which started with affordable electronics and later expanded into other product categories like pet food and clothing. This approach has been particularly relevant during economic downturns when consumers become more price-conscious.

Recent comments from Amazon CFO Brian Olsavsky highlight the current trend of American consumers prioritizing essential and consumable items, which are typically cheaper. “Customers in the US are being very thoughtful about their spend,” Olsavsky noted. “They look for deals, they trade down, and look for lower ASP (average sale price) products.”

While many companies might struggle to maintain profitability in a price war, Amazon’s vast resources give it a unique advantage. With a market capitalization surpassing $2 trillion, Amazon is well-equipped to engage in aggressive pricing strategies without jeopardizing its financial stability.

The new discount section is expected to launch in the fall, marking Amazon’s latest effort to stay ahead in the fiercely competitive e-commerce landscape. As consumers continue to seek out the best deals, Amazon’s ability to offer a wide range of affordable products could help it maintain its position as a leading online retailer.