Amazon silently competes with Temu and Shein

Haul is Amazon’s answer to booming shopping apps like Temu and Shein. Above CNBC, The company says it has had millions of people visit the section since its launch.

Like Temu, Haul offers products at super low prices, from $9.98 sneakers to $5.99 kitchen appliances and $2.99 ​​phone cases. The difference is that Haul imposes a ceiling price of 20 USD per item. They only offer free shipping for orders over 25 USD and the larger the order value, the bigger the discount. This encourages customers to buy several items at once.

“The interesting thing is that Amazon separates this segment from their main website. Maybe they don’t want customers to switch to cheaper products,” commented Neil Saunders – Director of retail research firm GlobalData Retail.

Besides, customers will have to make trade-offs when buying cheaper products. Delivery time instead of 1-2 days as usual, goods sold on Haul must take 1-2 weeks to reach customers who purchase the Prime service package. Although Amazon has worked with sellers in China for many years, they often act as intermediaries, storing items in advance at warehouses in the US. This reduces shipping time, but increases costs for Amazon. This cost will be passed on to consumers.

Haul and Temu keep prices low by taking advantage of the “de minimis” rule when importing goods from an existing network of sellers in China. “De minimis” means “too small to be meaningful”. It allows packages below a certain value threshold to be exempt from tax and customs inspection. This level in the US is 800 USD and 150 euros in the European Union (EU). However, this method has recently been noticed by US officials.

Single import leads to longer shipping times, but lower prices. Many Americans accepted this, causing Temu to explode after its launch here in September 2022. Temu belongs to e-commerce giant PDD (China) and is currently the most downloaded free application in Apple’s app store.

“The problem is not just about competing with Temu. This is an opportunity for the e-commerce giant to participate in the low-cost segment, which is growing very quickly throughout the retail industry,” Saunders said.

E-commerce websites filled with Chinese products are recording high growth rates, including Alibaba and TikTok Shop. Sellers flocked to TikTok, despite the risk of the platform being banned in the US.

Temu has also recently actively increased its global presence, avoiding dependence on the declining Chinese market. The total transaction turnover on this exchange (GMV) has grown exponentially. In 2022, GMV reached $290 million but last year increased to $14 billion, according to data platform ECDB. This figure is forecast to reach 29.5 billion USD this year and 41 billion USD next year.

However, the low-cost e-commerce platform model is causing a lot of controversy around the world, especially its impact on the environment and the level of compliance with labor laws. Shein, Temu and many other apps got into legal trouble over this.

Reply CNBC, Temu affirmed that it “remains committed to compliance with ethical and business regulations”. They also require “partners and third-party vendors to comply with regulations on labor, safety, and environmental protection.”

Amazon is also investigated by US officials because of the high rate of labor accidents at its warehouses. However, the company denies this. In July, a US official said that Amazon should be held responsible for defective product recalls.

However, these things do not stop companies from continuously setting sales records. “Consumers say they don’t like the consequences of cheap products. However, they still come and buy them,” Saunders said.

Although Haul is still in the testing phase, demand appears to have outstripped supply. During the 50% discount period on Black Friday, this application sold out many products. Amazon said it is expanding its listings to hundreds of thousands of products, with dozens of categories, in the coming weeks.