Amazon Discount Store Shipping from China

Amazon’s move to compete with Temu, Shein & AliExpress

Amazon announced a new discount store that will ship products directly from China to the US. This is part of a strategy to compete head-to-head with discount options like Temu, Shein, and AliExpress. 

According to Reuters, “The e-commerce giant in a recent closed-door meeting told Chinese sellers it would start signing up merchants this summer and begin accepting inventory in the fall” 

 

 

What's the Buzz About?

 

Amazon is taking an unavoidable step to maintain market-share as wallets become thin. Budget Conscious shoppers have increasingly moved their dollars towards products at rock-bottom prices. 

 

The new marketplace will allow products to be shipped directly from Chinese warehouses to customers in the United States, cutting out “the middleman” and reducing costs even further. This move is Amazon's most aggressive campaign yet to rival the discount platforms that have taken over mobile and desktop shopping.

 

The term "Amazon China" will soon be synonymous with affordable shopping. This differs from the various “Alphabet Sellers” that are currently a large part of Amazon US. Those brands still require inventory to be imported to the US (mostly). 

 

This new channel will specifically call out the cheaper nature of products, but that doesn’t necessarily mean those same products won’t make their way into the Amazon search results that all sellers compete in.

One way or another, our brands are hoping Amazon will find a way to keep customers on their platform, and in the end - deliver a superior customer experience.

Here’s a snapshot of Temu’s recent growth, one of the largest competitors Amazon is looking to replicate. And here’s an article from Tech Buzz China that goes into more detail. 

 

 

 

Why This Move?

 

Amazon obsesses over customer experience. Prime membership offers fast shipping and a huge selection of products. However, platforms like Temu and Shein have carved out a niche by offering incredibly low prices, even if it means waiting a bit longer for delivery. 

 

By launching this new discount store, Amazon aims to capture that segment of shoppers willing to trade speed for savings.

 

​​The report added that sellers joining the bargain site can determine their product selection and pricing and can produce in small batches to test the demand for any new products they plan to launch.
Could this lead to better product launches? More knock-offs? 

We could also see Amazon customers “wise up” to the fact that their favorite American brands are not as American as they might think. 

“It is not clear if these shipments will be made using a US trade provision that exempts individual packages worth less than US $800 from US customs duties”, The Information reported.

 

 

What's The Offer?

 

The new store will feature a wide range of unbranded fashion items, home goods, and daily necessities. Most of these items will be priced under $20, making them highly attractive to cost-conscious consumers.

 

How It Works

 

Unlike the traditional Fulfillment by Amazon (FBA) model, where products are shipped to Amazon FBA warehouses in the US before being dispatched to customers, in this new model, Amazon will ship from China to the US directly. 

Temu and Shein have used this model to avoid tariffs. By sending small parcels, Temu can avoid 10%-20% import tariffs in the US because they stay under the $800 threshold of the de minimus rule.

 

There are a lot of Amazon brands who source from China, that could benefit from increased profitability. Will this program be used just for Temu-like products?  

 

Considering the enormous volume of packages (one-third of all packages arriving the rule has come under fire. Source - Tech Buzz China 

 

 

 

Amazon FBA Shipping Model vs Amazon "Direct from China" Shipping Model

 

Model	Amazon FBA Model	Amazon “Direct from China” Model
Fulfillment Process	Products are shipped from manufacturers to Amazon's US warehouses. Amazon handles storage, packing, and shipping to customers. Delivery is usually fast, often within two days for Prime members.	Products are shipped directly from Chinese warehouses to customers in the US. Delivery takes longer, typically 9 to 11 days.
Cost	Higher warehousing and fulfillment fees. Sellers bear the cost of shipping products to Amazon's US warehouses.	Lower warehousing and fulfillment fees. Potential savings on shipping costs, especially for low-value items.
Product Range	Wide variety of branded and unbranded products. Products must meet Amazon's stringent quality standards.	Focus on unbranded fashion, home goods, and daily necessities. Products are often cheaper and can be produced in small batches to test demand.
Seller Control	Sellers have limited control over the fulfillment process. Higher fees mean sellers must factor in these costs when pricing products.	Greater control over product selection and pricing. Flexibility to produce in small batches and adjust based on market feedback.
Consumer Experience	Fast and reliable delivery. Higher level of trust and customer satisfaction due to Amazon's reputation.	Longer delivery times compared to the FBA model. Attracts budget-conscious customers willing to wait for lower prices.

 

Here’s a quick rundown of the new process:

1. Product Selection: Sellers determine their product lineup and pricing.
2. Small Batch Production: Test the waters with small batches to gauge demand before scaling up.
3. Shipping: Products are shipped from Chinese warehouses and delivered to US customers within 9 to 11 days.

 

Benefits for Sellers

 

This new marketplace offers several advantages for sellers who beat the curve:

• Lower Costs: Sellers can save on warehousing and shipping costs by shipping goods from China directly.
• Flexible Production: The ability to produce in small batches could mean less risk and more flexibility.
• Market Testing: Easily test new products without committing to large inventory orders.
• Competitive Pricing: Compete with other discount platforms by offering lower prices.

 

Potential Challenges

 

While the benefits are clear, there are also some challenges to consider:

• Longer Delivery Times: The 9 to 11-day delivery window is longer than the usual Amazon Prime delivery, which might not appeal to all customers.
• Customs and Duties: It’s unclear whether these shipments benefit from the US trade provision exempting packages under $800 from customs duties. This could impact pricing and profitability.
• Quality Control: Ensuring the quality of products shipped directly from China can be tricky. Sellers will need to establish reliable relationships with manufacturers.
• Increased competition and supply chain disruption that may impact tenured sellers 

 

Competing with Temu, Shein, and AliExpress

 

Temu, Shein, and AliExpress have built their success on offering low prices and a vast selection of products, often with longer delivery times. Here’s how Amazon's new marketplace stacks up:

• Price: Amazon can offer competitive prices by cutting out the middleman and reducing shipping costs.
• Selection: With a wide range of unbranded items, Amazon can match the variety offered by its competitors.
• Convenience: While the delivery time might be longer than Prime, the convenience of shopping on Amazon and the trust in the brand could sway customers.

 

What's Next? 

 

Amazon plans to sign up merchants this summer and begin accepting inventory in the fall. As a seller, it’s time to start thinking about how you can take advantage of this new marketplace. Here are a few steps to get started:

 

• Research Products: Identify unbranded products that are in high demand and are in low competition.
• Find Reliable Suppliers: Establish relationships with manufacturers in China who can provide quality products at competitive prices.
• Test the Market: Use small batch production to test new products and gather customer feedback.
• Optimize Pricing: Ensure your pricing strategy is competitive while allowing for a healthy profit margin.
• Risk Analysis: Examine your competition and supply chain to protect your brand. 

 

Conclusion

 

Amazon's new discount store, which ships directly from China, is a game-changer for sellers and shoppers. By offering lower prices and a wide selection of products, Amazon is poised to capture a new segment of budget-conscious consumers. Amazon values customer experience above all else, so sellers must be prepared for that. 
 
This presents a unique opportunity for Amazon to expand its product offerings, reduce costs, and reach a broader audience.
 
A change this big disrupts the status quo. More sellers can enter the market. Margins may be tighter, which could impact shipping volume and shift manufacturers.

There’s speculation that the US government may step in if enough small businesses are impacted, but Amazon is moving on this quickly, and it appears the plan is well underway. 
 
At the end of the day, it's a delicate balance between keeping prices low for consumers and supporting small businesses. The government will have to weigh the pros and cons and decide what's best for the economy as a whole.
 
In the meantime, small businesses might need to adapt and find new ways to compete.

If you have questions about the impact of these changes on your business our team is always happy to chat.