Amazon’s new budget storefront to compete with Temu and Shein, offering $20 sofas and low-cost goods

In Summary: Amazon is set to launch a budget storefront to compete with Shein and Temu, offering rock-bottom prices on a variety of unbranded items. Internal documents reveal extreme price caps, with items like sofas priced at no more than $20.

In June, Amazon announced plans to create a secondary storefront for Chinese sellers, enabling them to ship directly to US consumers. This move is in response to the success of Shein and Temu, known for their low prices despite quality concerns.

Amazon has also made eco-friendly packaging changes, replacing plastic air pillows with crumpled paper worldwide.

The new store will feature items priced under $20, with Amazon imposing strict price caps on merchants. For example, jewelry will be priced at $8, bedding at $9, guitars at $13, and sofas at $20.

Amazon plans to offer lower fulfillment fees for items sold through the budget storefront, with shipping costs ranging from $1.77 to $2.05 for 4-to-8-ounce items. This represents a significant savings compared to their standard Fulfillment by Amazon program.

The items will be shipped from Guangdong, China, resulting in longer shipping times of nine to 11 days for US customers. Despite this, Amazon’s sales growth is slowing, increasing by only 5% in Q2.

Amazon has seen a 20% increase in Chinese sellers on its marketplace, with a 30% rise in Chinese merchants generating over $10 million in sales. Additionally, Shein has gained popularity among American teenagers due to its low prices and innovative fashion strategies.