Amazon has no choice but to guard against Temu and Shein's low price campaign, announcing that it will drastically reduce the commission rate for cheap clothing merchants starting January next year.

On December 5, Amazon issued an announcement stating that the commission rate for clothing products priced below 15 US dollars has been reduced to 5%; the commission rate for clothing products between 15 and 20 US dollars has been reduced to 10%. Previously, the commission rate for both types of products was 17%.

Although Amazon did not explain the reason for changing the commission rate, industry insiders generally believe that this shows that Amazon is “rubbing hands” and is preparing to fight a price war with Shein and Temu, who have adopted ultra-low price strategies to attract American consumers.

Analysts believe that in the past, Amazon would rarely reduce the percentage of commissions it charges to merchants. At the same time, it should be noted that this change in the commission ratio did not involve other product categories, which means that Amazon is currently particularly interested in attracting sellers who offer low-priced clothing products.

Lucas Barnes, a former Amazon executive, said that reducing the commission fee ratio will increase Amazon's competitiveness in the field of low-priced clothing, because a garment that is 1-2 dollars cheaper can make a big difference:

Amazon clearly doesn't want too many Prime members to be tempted by Shein's cheap clothing.

According to Insider Intelligence, Amazon currently still dominates e-commerce in the US, accounting for 37.6% of e-commerce sales this year. According to sales ranking, it ranked first among the top 15 retail e-commerce companies in the US, reaching 431.11 billion US dollars, far behind Walmart, which ranked second. The latter's e-commerce sales this year were only 73.45 billion US dollars.

However, it is this e-commerce giant that has also felt a crisis in Temu and Shein's low price strategy.

Amazon is being “rushed” by China's cross-border e-commerce

Wall Street reports suggest that under high inflation, Americans also love cheap products. Shein and Temu both use ultra-low price strategies to attract American consumers, and their target consumers are all Gen Z consumers.

Compared to Shein, Temu has a wider variety of products, including not only clothing, but also household goods, auto parts, electronics, and musical instruments. Shein, on the other hand, mainly sells fashion women's clothing.

Although Temu only entered the US market in September 2022, according to Similarweb data, it has already surpassed Shein in online traffic and purchases in the US. According to an industry statistic, Temu is now the fourth most visited retail website in the US, behind Amazon, Walmart, and eBay.

What is undeniable is that Temu and Shein still have a long way to go if they want to surpass Amazon in the US e-commerce field. According to Similarweb data, 93% of users who visit Temu also use Amazon, while only 8% of Amazon users use Temu at the same time. Amazon's conversion rate is close to 12%, compared to Shein and Temu's conversion rates are only around 5%.

Perhaps Shein and Temu will not be able to shake the status of Amazon as a “towering tree” in the short term, but as the global economy may gradually enter a downward cycle, Amazon is likely to be threatened by the “extreme cost performance” of these Chinese e-commerce businesses in the future. Amazon must raise the spirit of 12 points in this regard.

Editor/phoebe