The low-price war of e-commerce has finally burned to foreign giants, and Amazon, which is as strong as the world's top 5, can't escape the spell of Pinduoduo.
In an internal meeting a few days ago, Amazon announced that it will open a new "low price" zone: low-cost products that are shipped directly from warehouses in China. The newly established zone has already begun to reach out to merchants and complete the contract, and is expected to be able to receive goods this fall.
In recent years, SHEIN, Temu (Pinduoduo overseas version) and other e-commerce companies focusing on "Made in China" and "high quality and low price" have entered the European and American markets, while the old e-commerce Amazon has been sung down again and again.
Since Temu launched its first ad in the Super Bowl of the "American Spring Festival Gala", Amazon has been very wary of this "new student" in the e-commerce industry, paying close attention to Temu's impact on their performance, and the details and cross-platform transaction data are clearly understood by Amazon's researchers.
According to the latest data, 6% of consumers who have made more than 20 purchases per month on Amazon in the past three months have also shopped at Temu and SHEIN. Amazon can't sit still at all, but can it learn to Pinduoduo?
Amazon "copied homework" to Temu
The announcement of this news immediately caused a strong reaction from the market, and the share price of Pinduoduo, one of Amazon's main competitors, fell by more than 2%. At the same time, it sparked a wide discussion on the Internet about this incident, some users believe that this move can make Amazon return to the king of e-commerce, and some think that this move is Amazon's "self-deprecation" and "self-depreciation".
Temu mentioned by netizens is the overseas version of Pinduoduo, which is the same as the domestic Pinduoduo, and it is also a low-cost wholesale of all categories of goods, reaching every European and American seller through convenient overseas direct mail.
And the low-price zone that Amazon wants to do this time is to copy Temu's ideas.
The business development of traditional e-commerce involves many links, especially cross-border e-commerce, and also involves cross-border logistics, which requires someone to produce and manufacture (suppliers), someone to inventory (warehousing), someone to transport goods across the border (cross-border logistics), and someone to distribute (overseas express delivery).
Temu's impact on local e-commerce giant Amazon relies on the optimization of the supply chain ——— the model of shipping directly from Chinese warehouses to overseas consumers.
Unlike Amazon, Temu operates under a "fully managed model": the Temu platform is solely responsible for pricing, stocking, and quality control of all products.
This model allows Temu to establish close wholesale relationships with Chinese suppliers and ship directly from China to the United States, significantly reducing the time cost of operations. However, this model also means that merchants will not be able to participate in the subsequent process after sending their products to Temu. However, Temu does not have the ability to carry out subsequent transportation and distribution, and can only be carried out through outsourcing means in cooperation with courier companies.
This time, Amazon intends to go back to Temu's path — shipping directly from its warehouses in China to overseas consumers.
PConline understands that Amazon is only preparing to experiment in a small area in a special area, set up a special area entrance, and make the low-price model independent of Amazon's main site. In addition, the low-price zone only sells fashion, home and lifestyle categories, and the price does not exceed $20. Although the current plan may be adjusted, Amazon's caution about trying the low-price model this time can be seen.
The essence is a supply chain war
It seems that Amazon is moving closer to Temu's fully managed model. In this new model, merchants only need to send products to Amazon's domestic warehouse, and Amazon will complete the subsequent fulfillment and delivery. According to the news, from warehousing to distribution, Amazon's one-stop service goes directly to the end customer, promising to deliver the goods to the buyer within 9-11 days.
But unlike Temu, Amazon still gives Chinese merchants the right to set their own prices, which is in stark contrast to Temu's "all-in-trust".
With a high degree of freedom pricing and nanny services, the number of Chinese merchants on Amazon has exploded in recent years, from less than 15,000 a decade ago to more than 1 million today. This trend has also prompted Amazon to adjust its strategy to trade longer shipping times for lower prices in order to be more competitive.
In fact, not only Amazon, but also in the fierce competition of e-commerce, supply chain efficiency has become the key to victory. For example, SHEIN, the "king" of the supply chain, was the first to play. It relies on the "small single quick reaction" supply chain model to lay a solid foundation in the clothing industry.
SHEIN places orders with suppliers for delivery within a few days, relies on real-time data to quickly analyze demand, and replenish orders as needed. This "lightning conversation" reduces warehousing costs and limits inventory waste. At the same time, due to category restrictions, SHEIN was able to "master the old road" of Zara, and even cleverly used e-commerce to set off a price war in the European and American markets.
Screenshot of SHEIN's website
SHEIN's winning formula is its unique on-demand production model. This not only greatly reduces inventory waste, but also allows consumers to enjoy a wide range of fashion products while also experiencing the benefits brought by "small profits but quick turnover". It is this subversive supply chain management model that has made SHEIN set off a whirlwind in the global market and is known as "China's Zara".
But SHEIN's ambitions clearly don't stop there. Last year, the fast-fashion giant made a big splash in the global market, launching a platform model in the United States, Mexico, Europe and Brazil. This move not only strengthens SHEIN's dominant position in the fashion and beauty fields, but also extends its tentacles to a wider range of product categories. This move is undoubtedly a heavy blow from SHEIN, directly calling out Temu, a rookie who also focuses on cross-border e-commerce, and Amazon, a veteran e-commerce company.
The war in the e-commerce market has finally burned overseas.
Who will be the winner?
The situation in the Amazon is not rosy. In the past, there was Temu, which occupied the user's low-cost mind, and then there was SHEIN, which gradually expanded its territory.
Amazon's low-price zone is a sign that the global e-commerce giant has officially entered the low-cost cross-border e-commerce field, and it is also a direct response to Temu and SHEIN by this veteran e-commerce.
Under the tripartite competition, Amazon's advantage lies in its strong brand reputation and mature logistics system, but the low-price strategy may affect its quality image. Therefore, as mentioned above, many users on the Internet have spoken on social media, believing that Amazon's move is a "confession" of Temu and SHEIN, and that the low price of the e-commerce giant is a "price drop behavior".
Temu, on the other hand, wins with low prices and category diversity, but due to the "low price strategy" it has always adopted, consumer expectations are not high, and product quality issues have little impact on the platform. And Reuters mentioned in a market analysis in January this year that Temu has occupied 17% of the market share of discount retailers, and can even catch up with the old "1 yuan store" Dollar Tree in Europe and the United States.
At the same time, SHEIN has performed well in responding quickly to market demand and frequently updating categories, and its revenue has soared to $23 billion in January this year, surpassing the old fashion FMCG H&M.
Now it seems that Amazon has to maintain its high-quality brand image and provide highly competitive low-priced products to compete for market share, both of which are indispensable.
After all, Americans are human beings, and they also like cheap and easy to use goods. The war in the overseas e-commerce market may only be the first half, and it remains to be seen whether Amazon's move will "muddy the waters" or "break ground".
In this competition of global e-commerce giants, the ultimate winners will be those platforms that can best understand and meet consumer needs while maintaining their unique advantages. Whatever the outcome, this competition is bound to drive the industry towards a more efficient, transparent, and consumer-centric direction.