Last week, Amazon announced it would open a dedicated section offering low cost, unbranded items shipped directly from China.  Reports from Chinese and international media see this as a major attempt by Amazon to counter the growth of Chinese rivals especially Temu and SHEIN. 

The new discount section was communicated during a closed door seller meeting on 26 June in Shenzhen, China. Although the slides used during the meeting had clear watermarks PHOTOGRAPHY PROHIBITED (“禁止拍照“), participants promptly shared photos on social media.

Under the scheme, sellers will send the goods (typically below US$20 in value) directly to Amazon’s warehouses in China, and Amazon will handle the cross border shipping and last mile fulfilment. Amazon expects that the end-to-end fulfilment cost will be almost half of the current FBA model.  

Unlike Temu’s full consignment model, sellers for Amazon’s low price service will be able to set their own prices, with Amazon providing guidelines on the upper limits. 

According to media reports, the low price service will be activated as soon as this autumn, in markets including but not limited to the US. Details are to be finalised.


Will Amazon succeed? 

One argument is that it will.

Amazon is an execution focused company and has been able to implement complex operations in a very rational and competitive manner. It has built an extensive user base and fulfilment infrastructure that could be leveraged.

Amazon is also a much bigger company. At the end of June 2024, Amazon’s market cap was US$2.01 trillion, more than 10 times bigger than Temu’s parent Pinduoduo, which was valued at US$184.6 billion. Hence, Amazon has advantages of scale and cost of capital if it wants to confront Temu face to face.

Besides, Amazon is seen as a friendlier platform by local governments, industry associations and ecommerce service providers in China. Amazon does not squeeze the ecosystem as aggressively as Pinduoduo does; its closure of ~50k Chinese seller accounts in 2021 seems like a fair enforcement of platform policy compared to the fines & price squeezes that many sellers are experiencing with Temu. 

Many sellers can still tell stories of themselves, or their friends, getting rich through the Amazon platform – the most powerful testament for Chinese businesses.


Many sellers are sceptical

However, amongst the major sellers and service providers we have spoken to, many are also sceptical. 

A few questions were raised during these discussions, including: 

  1. “Will this be executed by the Amazon China team, or will the orders come directly from the US headquarters? If the former, how much decision power are they willing to cede to the China team?”
  2. “There is very little overlap between Amazon’s and Temu’s use bases. Which means to make this service worthwhile, Amazon needs to make a lot of dedicated effort and changes. Do they have the determination to do so?”
  3. “We have seen similar initiatives from Amazon targeting unbranded goods directly from China, but they flopped in execution. How will this time be different?”
  4. “Will Amazon be willing to channel its precious consumer traffic to unbranded, cheap goods, cannibalising more premium products and brands which are more profitable for the platform?”
  5. “Logistics bosses in China are extremely canning old hands, much harder to deal with than their US counterparts who are more rule bound. Will Amazon be able to handle them well?” 

Here is our favourite: “Will seller BD reps from Amazon ever be as aggressive and determined as those at Temu, who do not have fixed targets but need to show Month on Month growth EVERY month?” 

As for the argument that Amazon is 10X bigger than Pinduoduo, some pointed out that at the end of 2018, Alibaba market cap was 14X that of Pinduoduo. Now Pinduoduo is valued more than Alibaba.


Again, will Amazon succeed?

Many of the challenges mentioned above are tactical and strategic at the same time – they should not be critical if Amazon is determined, but they can be otherwise.

We do not yet know how exactly the decisions are made internally at Amazon with regards to this low price service. Is it a trial project whose test ROI needs to be measured first, or is it a strategic initiative with determined top level support?

What we do know is that the execution path is clear: build the warehouses in China, allocate dedicated traffic, and optimise, optimise, optimise. The “Choice” section on Lazada provides a reference point, albeit with a very different context.

The key success factor here is not much experience, financial resources, or goodwill from the ecosystem. Amazon has all of those. Instead, what matters the most is the determination of the leadership, as well as how people and organisation are aligned.

Precisely the points we have been arguing in our book “Seeing the unseen: behind Chinese tech giants’ global venturing”. 

POP-Leadership is a strategy framework created by Guoli Chen, professor of strategy at INSEAD, and Jianggan Li, CEO of Momentum Works.

Years ago, Amazon flopped its operations in China’s consumer market in a controlled, planned, and well-executed manner. Yet, the current initiative should be different in importance, because it is about defending its home turf.

Ultimately, Chinese sellers power at least half of Amazon’s marketplace GMV, and Amazon can’t afford to let Temu, or anybody else, take more control or leverage over that ecosystem.

Temu might be only targeting the lower end of the market, no one should, however, underestimate its ambitions.

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].


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Jianggan Li is the Founder & CEO of Momentum Works. Prior to founding Momentum Works, he co-founded Easy Taxi in Asia, and served as Managing Director of Foodpanda. The two years running Rocket Internet companies has given him a lifetime experience on supersonic implementation, and good camaraderie with entrepreneurs across the developing world. He holds a MBA from INSEAD (GMAT 770) and a degree in Computer Engineering from Nanyang Technological University. Unfortunately he never wrote a single line of code professionally - but in his first job he was in media, travelling extensively across Asia & Europe, speaking with Ministers & (occasionally) Prime Ministers. Apart from English and his native Mandarin, he is also fluent in French and conversational in Cantonese & Spanish. He tried to learn Latin (for three years) and Sanskrit (for six months) as well. In his (scarce) free time, he reads, travels, hikes and dives. Pyongyang, Tehran & Chisinau are among the interesting cities he has been to.