Amazon plans to launch a low-priced store program as a direct response to Temu. Under competitive pressure, Amazon is taking the threat of Temu seriously and is preparing to counter it with a new low-priced store. Here’s a detailed look at this strategic move.
Amazon’s Low-Priced Store Program
Key Features
1. Direct Delivery from Domestic Warehouses
Logistics Managed by Amazon: Similar to the fully managed model, Amazon will handle logistics, ensuring direct delivery from domestic warehouses to consumers.
2. Unbranded Products
Opportunity for White-Label Goods: The store will primarily sell unbranded products, offering a huge opportunity for white-label goods to appear at competitive prices.
3. Seller Autonomy in Pricing and Inventory Management
Seller Control: Sellers will have the autonomy to determine product prices and inventory quantities. While sellers may bear their own warehousing costs, moving to domestic warehouses is expected to be significantly cheaper than overseas options.
have to be aware of is, sellers can select products, set prices, and participate in activities but do not have the right to advertise and promote.
What Are White Label Products?
White label products are goods produced by one company and rebranded by another company for sale as their own. The term comes from placing a blank label on a product, allowing the marketer to add their own branding.
Key Features
1. Unbranded Production: Products are produced without any branding.
2. Rebranding: Sourcing companies can add their logos, packaging, and other branding elements.
3. Distribution and Sales: The rebranded products are sold and distributed by the sourcing company as part of its product line.
Amazon’s Strategic Moves
Amazon aims to attract price-sensitive consumers through this low-price strategy while maintaining competitiveness in the cross-border e-commerce space. However, some sellers believe Amazon’s policy complements rather than competes with Temu.
Key Information
1. Reduced Delivery Fees: Slight reduction in delivery fees and a 15% delivery fee out of the order to charge.
2. Customer Base Overlap: The customer base still overlaps with Amazon’s main platform, making it a good model for sellers to test.
3. Pricing Power: Unlike Temu, Amazon allows sellers to control pricing, highlighting product differentiation and stability.
Comparing Amazon’s Low-Priced Store and Temu
1. Pricing Rights
Amazon: Sellers have pricing rights with a price cap, reducing risk and offering more freedom.
Temu: Criticized for controlling pricing, leading to instability.
2. Platform Traffic Distribution
Amazon: Uses the A9 algorithm for comprehensive traffic distribution, considering various dimensions and providing fairness.
Temu: Focuses mainly on price competition, lacking in fairness, risk, and stability.
Amazon, despite risks, adheres to compliance and maintains strong principles. Conversely, Temu is often seen as exploiting sellers, with frequent penalties and poor customer service.
Amazon’s low-priced store is a strategic response to Temu’s market model. This dual-store approach allows Amazon to suppress Temu’s low-price market while focusing on branding and innovation in the regular market. With time, Amazon’s transformation towards branding and innovation is expected to be successful.
28 Jun, 2024
