Amazon may launch low-price store similar to Temu

At present, Amazon has basically achieved “many” (a large number of SKUs + unlimited shelves), “fast” (same-day or even next-day delivery with the blessing of FBA logistics), and “good” (algorithms and scoring systems force sellers to compete for product quality).
As for “savings”, Amazon has always done well, and its product prices are basically better than many offline physical stores.
However, things are changing, and Temu appears out of nowhere, dropping boulders on the lake and creating huge waves.
When consumers mention “an e-commerce platform that saves enough money,” the first thing that comes to mind is often not Amazon, but Temu. This shift in mental cognition is a huge loss for Amazon.

Third-party data agencies have detected that Amazon has suffered wave after wave of traffic losses.
Seeing that the situation was not good, Amazon made a series of reactions, including cutting the commission for clothing categories to single digits (minimum 5%), reducing the overall commission for light and small items in Japan, and removing Temu. Outside of its own price comparison system – under this price comparison system, the price of a seller’s products on sale on Amazon must not be higher than the price on any platform outside the site, otherwise the seller will be restricted or have his or her shopping cart (BuyBox) taken away.

Recently, another news has circulated in Shenzhen’s cross-border seller circle: Amazon has fired a new shot in order to fight back against Temu and will launch a “low-price store”.
Some sellers in Shenzhen were invited to participate in Amazon’s closed-door meeting.
According to sellers participating in the meeting: “Amazon Low Price Store is a store that specializes in providing customers with low-priced white-label fashion, home furnishing and daily necessities categories. Fulfillment and distribution is carried out by Amazon’s warehouses in China, and it is expected to be between 9 and 11 Deliver goods directly to customers within days.”

The keywords are “low price”, “fashion, home and daily necessities categories” and “Amazon handles the logistics and delivers it in 9 to 11 days.”
These attributes mean that the business of low-price stores highly overlaps with Temu.
It was revealed that some Shenzhen sellers received targeted invitations to participate in Amazon’s closed-door investment meeting and posted screenshots of the meeting presentation PPT. These PPTs were all marked with a “No Photography” notice, but some sellers still took photos of them.

Investment policy of “Amazon Version Temu”

Based on the information disclosed by sellers participating in the meeting, we have summarized and refined the investment policies of “Amazon Low Price Store”:

1. The positioning and traffic entrance of the low-price store: On the homepage of Amazon’s main website, open an entrance to the “low-price store” that shares the same underlying technical framework as the main website, but the browsing interface and presentation method are different from those of the main website’s products. The pages are quite different.

According to the design drawings leaked on site, the “low-price store” is indeed very different from the “frigid” restrained style of Amazon’s main website. It is mainly warm-toned, lively and unrestrained, and has “Chinese genes” with Shopee, AliExpress, Lazada, etc. The e-commerce platform is very similar.

2. The first batch of open categories and product selection requirements: Currently, only fashion, home, and lifestyle categories are open. These are popular categories of Temu. The intention to compete with Temu is obvious, while other categories are still being gradually studied. , or the scope will be expanded appropriately in the future.In terms of product selection, there are three main points: low price (sales price within 20 US dollars), low weight (less than 1 pound, and size within the range of 1485 inches), and safety (non-spreading, non-edible properties).
3. Do not display brand information: “Low-price stores” mainly sell unbranded products, that is, white-label products. Low-priced products originally do not pay attention to brand and are driven by low prices, which may attract a large number of factory-type sellers to enter. This means that Amazon will compete fiercely with Temu for suppliers in various industrial zones in the future.
4. Logistics and delivery timeliness: Amazon will be responsible for logistics and deliver goods directly to consumers from domestic warehouses, and it will be delivered to consumers in about 9-11 days. Starting this fall, we will begin receiving merchandise for storage.
5. Sellers’ independent pricing and inventory management: However, unlike Temu’s fully managed model, sellers will have the right to independently determine the price of products and adjust inventory quantities. This may mean that sellers have to bear the storage costs themselves. Obviously, this is the biggest difference between Amazon’s low-price store business and fully hosted models such as Temu.
6. Division of powers and responsibilities and distribution of interests between Amazon and sellers: Amazon handles the traffic, is responsible for on-site advertising promotion and off-site promotion, and collects commissions from sellers. The rates are consistent with the main site, while sellers are responsible for selecting products, pricing and participating in promotional activities. . Under this model, Amazon solves the most difficult problem of “logistics”, while simultaneously solving “information flow” (product display and traffic) and “fund flow” (payment infrastructure), while sellers focus on solving “commodity flow”. Achieve a good division of labor.
7. Supplier backend management and assessment methods: The management backend of the low-price store is shared with the backend of the main website. The two are slightly different, but the basic functions are similar, and they can be switched with one click. Because the low-price store and the main website have different backends, the performance appraisal is completely separate from the main store and is assessed separately.
8. Return and refund principle: Because it is a low-priced product, we only refund but not return the product. This is similar to the “refund only” rule of many e-commerce platforms that focus on low prices.
9. Seller registration: It is currently in the initial stage, all are internal invitations, and some qualified sellers will receive an email invitation from the investment manager.
10. Mechanisms such as follow-up sales: Low-price stores are different from the main website. There is no follow-up sale mechanism, and no additional fees will be charged for excess inventory.
11. Relationship with main site FBA products: Low-price stores have independent search results display, and existing FBA products will not appear in the search results of low-price stores, which makes low-price store sellers more assured. It is convenient and low-priced to compete with competitors for traffic and users without fundamentally disrupting Amazon’s existing ecological structure.

Some “powerful” sellers said they have received invitation calls from Amazon. Therefore, this news is not groundless in general.At present, the news of “low-price stores” has caused a big shock in the cross-border industry, and sellers have different opinions on this.

Some sellers think that this is an additional platform for money testing and are full of expectations for it. Some sellers think that if you don’t pay advertising fees, the price will be very low. After deducting commissions, the profit will be very low, etc.

Is it possible to launch an “Amazon version of Temu”?

The above information is all shared by sellers and summarized and refined by us. It has not yet been officially confirmed by Amazon.

We also tried to ask Amazon relevant personnel, but did not receive a positive response. This matter must be subject to official information released by Amazon.

However, we can still throw some light here and explore the possibility of Amazon launching a “low-price store”:

1. Amazon urgently needs to regain the “low-price mental recognition”, stick to users, and consolidate the moat: After the emergence of Temu, Amazon lost a lot of traffic. The mental cognition of “low price + saving money” has been transferred to Temu.

The continuous loss of traffic and users is tantamount to a small opening in a dam. Although the opening is small at present, it will become larger and larger as the water flows away, and the dam may be in danger of breaking in the future.

Therefore, the most urgent thing for Amazon is to retain users at low prices. To this end, Amazon has reduced commissions on clothing, one of the three major categories, and has also reduced logistics fees for light and small items through its FBA logistics policy.

But judging from actual feedback, these are far from enough. Temu is still like a black hole, sucking away a large amount of traffic and users.

then what should we do?

Set up a “low-price store” in the main website to help sellers solve logistics and information flow (traffic and advertising), and then allow sellers to sell at absolutely low prices with peace of mind. In this way, a large number of users who like low prices can be retained in the main site, forming a mutually beneficial relationship with the current mall of the main site. This can help to achieve “low-price mental awareness”, retain traffic and users, and then consolidate itself. of moat.

2. Low-price stores can avoid antitrust risks: If Amazon wants to be purely fully managed, it may be restricted by many objective conditions, including European and American antitrust policies. Today’s “seller’s independent pricing + inventory management” model is an incomplete custody business model. It is still essentially a “third platform model” and is relatively safe in terms of policy.

This model can not only differentiate itself from Temu and others, but also avoid some policy risks.

3. Cooperate with the “branding” of Amazon’s main website: Another function of the “low-price store” is that it can differentiate itself from the main website and form a good cooperation:

In recent years, Amazon’s main website has been vigorously supporting sellers’ “brand flagship stores” and has a strong tendency to push “brand flagship stores” into “independent stations”. The purpose is to improve the competitiveness of Amazon’s main website in the “brand dimension” and differentiate it from Temu’s model of purely product and low price.

For example, Amazon recently added three new store indicators for “brand flagship stores”, including average bounce rate (Avg. Bounce Rate), average dwell time (Avg. Dwell Time) and new visitors (New to Store Visitors).

These three indicators are often used to measure the quality of an independent website. Today, Amazon focuses on launching these indicators, which means that its on-site brand flagship store will become more and more “independent” and will become a relatively independent “brand backend”. Garden” and “Flow Reservoir”.

We also observed that one of the indicators of Amazon’s flagship store is very eye-catching, and that is the “number of followers”, that is, the number of customers who follow the brand through the “follow” button on the brand store or on the post. This feature has been available for a long time. Although it is still in beta, it is almost a big concession for Amazon: it means that Amazon allows sellers to save money on the site and use their own brand private domain traffic.

For example, in order to allow sellers to take advantage of fans of their brand flagship stores, Amazon will launch a new tool in July last year – brand customized promotions. Using this tool, sellers can create exclusive discounts for “buyers who have followed or purchased their products” to “attract store fans to repurchase” and “recover more traffic.” To a certain extent, this is because Amazon allows sellers to build brands and form a certain degree of brand private domain.

To sum up, in the coming time, Amazon’s main website will devote more resources to the “branding” of sellers’ stores to create greater differentiation from competitors such as Temu.

Temu’s parent company, Pinduoduo, was once a haven for white-label goods. Likewise, Amazon’s main site was once a haven for white-label products.

A paradise for white brands is often a nightmare for brands. Brand owners have always been shunned by Pinduoduo.

In 2019, Pinduoduo spent a lot of money and launched a “tens of billions of subsidies” so that many consumers can “buy a cheap genuine iPhone with confidence” on Pinduoduo.

In order to convince consumers, Pinduoduo’s iPhone under the “tens of billions of subsidies” comes with a series of “promises”: quality insurance from the People’s Insurance Company of China, 10% compensation for fake products, 7-day no-reason returns, SF express delivery, etc. These promises finally made many consumers feel relieved and placed orders for Apple machines. According to third-party statistics, more than 2 million iPhones with “tens of billions of subsidies” were sold to consumers in 2019.

After initially achieving results, Pinduoduo began to let go and follow the same pattern, continuing to engage in “tens of billions of subsidies” and “authentic product commitments” on brands such as Wuliangye, Moutai, and Dyson hair dryers.

In this way, the understanding that “you can also buy genuine big-name products on Pinduoduo” has penetrated into the minds of consumers. Pinduoduo did this because the sales growth of white-label products was slowing down at that time, and it also wanted to reap the profits of the brand’s high premium. Today, this strategy has achieved great results. In 2023, the sales volume of branded products will account for close to 30% of Pinduoduo’s overall sales.

This huge success is likely to be copied to Pinduoduo’s overseas version of Temu.

At the time of Temu’s rise, Amazon was losing traffic on a massive scale.

Therefore, Amazon needs to increase its efforts to develop brand flagship stores, open “private domain traffic” to sellers to a certain extent, so that more sellers’ brands can grow, and more importantly, it must attract existing well-known brands (such as Eddie Das, CK, etc.) settled on Amazon to form a huge brand moat.

In this way, Amazon’s main website can allow more sellers to compete with Temu’s “white label products” with “branded products”. At the same time, Amazon will provide an entrance for “low-price stores” to sell similarly low-priced products. The “white label products” compete with Temu’s “white label products”.

In this way, Amazon is equivalent to using its arms of “branded products” and “white-label products” at the same time to compete with Temu’s one-handed arm, ultimately holding on to traffic and defending the moat.

Therefore, the possibility of Amazon launching a “low-price store” is still relatively high. Once launched, a new pattern may emerge in the cross-border e-commerce industry.