Amazon to Compete with Temu and SHEIN with Direct Shipping from China
In a surprise move, Amazon announced that it will offer low cost items shipped directly from China, to its U.S. customers. This seems to be a direct response to the growth of SHEIN and Temu and their threat to Amazon’s share of the marketplace.
What does this mean for Amazon Marketplace 3rd Party Sellers?
On the surface this would add another challenge to an already challenging environment for Amazon 3P Sellers. Which has led many sellers to question whether it is worth selling on Amazon in 2024. Before we address how sellers should respond to an increasingly challenging environment, and whether it is worth selling on Amazon in 2024, lets take a deeper dive into Amazon’s likely motive.
The most likely explanation (Occam's razor) is that Amazon sees the success of these companies in the U.S. market as both a threat to its business, and opportunity to be an engine for future growth, and want to get in on the game.
SHEIN’s revenue already exceeds $30 billion in global sales. In addition, SHEIN has captured 40% of the U.S. “fast fashion” market. While Amazon isn’t considered a “fast fashion” company, Amazon’s sales in the clothing and fashion category are expected to exceed $70 billion in 2024. So it is likely to view SHEIN’s growth as a challenge, as well as an opportunity to capitalize on the growing “fast fashion” segment.
Temu’s seemingly also represents a threat to Amazon. Temu’s global sales exceeded $14 billion in the first quarter of 2024. While Amazon’s sales in the U.S. Marketplace alone exceeded $86 billion for 2024 Q1, the fast rise of Temu in the U.S., make it difficult for Amazon to ignore.
While the case can be made that Amazon is trying to fend off competitors as well as tap into a new market, the move also presents a number of challenges for Amazon, which leave open a possibility that Amazon has other intentions (say tuned for the next post).
So how can Amazon 3P Sellers Respond?
Evolve; Amazon is still by far the biggest online marketplace for 3P sellers it is too big to either ignore or willingly withdraw from. But what Amazon Sellers need to do is to constantly evolve and optimize their efficiency. Stay on top of your marketing, keyword rankings, listings etc. to make sure you are performing optimally.
Amazon Sellers who have been successful in the past are hesitant to make any changes, using their past success to argue against innovation. But times have changed, and success on Amazon has become more difficult. if you aren’t constantly analyzing and adjusting, but instead are relying on the status quo, it is only a matter of time until there is a negative impact on sales.
Diversify; A strategy i discussed in an earlier post. Amazon is the biggest marketplace for 3rd party sellers, but it is not the only one. Selling via a direct to consumer website provides benefits no marketplace can match. In addition, depending on your product, Walmart, Ebay, Etsy, Target+, TikTok Shop and others all have viable 3rd party marketplaces (Target+ recently announced an expansion of their 3rd Party Marketplace in partnership with Shopify)
None of them will get you the sales or exposure that Amazon will. In fact, all those marketplaces combined do not equal Amazon’s 3P Marketplace, but they do provide additional exposure for your products, and an opportunity for sales. Having your products on additional marketplaces can also hedge against being solely reliant on Amazon.
In addition, some of what has been hampering the growth of these other marketplaces, is Amazon penalizing sellers if they offer their products on a different marketplace at a lower price. This is one of the practices being addressed in the FTC antitrust suit against Amazon.
If the FTC overturns this practice, I would expect it to open the door for other marketplaces, and force online marketplaces including Amazon to compete for sellers with more seller friendly policies.
If you sell products on Amazon, contact O2 Consulting for a free, no obligation consultation.