Below is the English translation of a note on Amazon’s Low Price Segment that has been widely circulating amongst ecommerce seller groups in China. We are not sure who the author is or whether it is indeed factual. 

What we do know is that the note resonated a lot with the sentiments of the cross border sellers from China – just to quote the comment from some cross border veteran of 20 years: 

“Do you know how easy it is for a factory in China to supply goods to Temu? The complexity of Amazon’s backend is already driving the factories to the grave!” 

The translation (as well as the original note screenshot) below: 

Amazon Low-Price Segment Merchant Recruitment Meeting Summary and Outlook

  1. A Few Key Points:

  1. The Low Price segment will have separate pages and separate consumer traffic. It will not appear in the same search results as FBA (Fulfilment by Amazon) and FBM (Fulfilment by Merchant). Not possible for merchants to have “Sell yours on Amazon”;
  2. Same backend as Amazon main site for merchant, can switch with SellerCentral (but not VendorCentral); 
  3. Goods sent to Amazon warehouses in China, similar to SHEIN, Temu, Aliexpress and TikTok Shop; 
  4. Sellers can set up their prices, but not allowed to create ads; 
  5. Amazon will charge a commission for the low price segment at the same rate as main Amazon site (not sure whether low price fashion commission level will vary the way the main sit does);  
  6. Only refund, no return; 
  7. Invite only for now. 
  1. Deductions:

  1. Consumer traffic for the Low Price Segment is allocated, and the segment will not participate in the search results. This means it is hard for new sellers on the segment to build volume; 
  2. As the same account is used for the Low Price segment and SellerCentral, the risk is high for sellers. What happens if one part has a problem and the account is frozen or cancelled by Amazon. Amazon did not explain the policy here clearly; 
  3. Did not mention about warehouse and logistic costs – I feel these will be levied on the sellers; 
  4. FBM on Amazon allows refund only (no return) for goods below US$25. They are more aggressive towards merchants in this regard than Temu; 
  5. They did not mention any subsidy to consumers or merchants. I think they do not plan to give any; 
  1. Outlook:

  1. Not optimistic about traffic for the Low Price Segment. A few points to note:
    1. Not showing on the main page, as it will affect the overall brand image and customer loyalty of Amazon; 
    2. Amazon does not have the motivation to push for the Low Price segment. If the same goods are sold at US$15 on its main site, will it promote it on the Low Cost segment where the selling price is only $8? It would severely impact Amazon’s profits; 
    3. Why would Amazon give a lot of traffic to low price Chinese sellers? Existing sellers (local or Chinese) will protest and be less willing to sell on Amazon;

  2. Amazon’s low-price segment has no future; 
    1. Temu’s price is already the best. There is no way Amazon can match that price while still maintaining a profit; 
    2. Because Temu works a lot directly with factories and manufacturers, with a price structure that sellers/traders on Amazon can’t match; 
    3. Amazon allows sellers to set the price, and will levy a commission. Which means price on the Low Price Segment will not be that low; 
    4. Taobao and JD have struggled to compete with Pinduoduo on low prices. How will Amazon do it?

  3. It’s too slow:
    1. This model requires heavy investment in operations including warehouses. Now most sellers are concentrated on Temu, convincing them to switch to Amazon might not be straightforward; 
    2. Amazon’s efficiency and transparency are questionable – over the years they have not even managed to beat AliExpress. How would they beat the much more efficient Pinduoduo?

  4. Seller recruitment will not be easy;
    1. Allowing sellers to use the same accounts as for Amazon main site will deter sellers from actually using the Low Price segment. Big sellers care about risk and small sellers do not have credible accounts; 
    2. Same as other Amazon seller recruitment activities: high posture, slow and small steps; 
  1. A few thoughts:

  1. Looking at the merchant recruitment activities, Amazon is very cautious and slow. This is a weakness compared to Pinduoduo/Temu which goes all-in once they decide on something. Amazon does not even want to give subsidies for this segment; 
  2. Amazon’s only advantage is consumer traffic but they do not seem to be willing to give the Low Price Segment more traffic. What other advantages do they have? 
  3. A few people said that selling cross border on Amazon is less risky compared to on Temu because of the geopolitics. However, have you all forgotten that Amazon arbitrarily closed 50k Chinese seller accounts just a few years ago?
  4. I do not have high hopes for Amazon’s Low Price Segment. Highly likely this would be a forced reaction on Temu’s growth. It is born prematurely, and will unlikely have enough nutrition fed from the mothership.

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected].