Amazon's New Challenge: Maintaining Brand Tone or Entering the Low-Cost Market?

Golden10 Data ·  09/22 16:36

Source: Golden Ten Data
Author: Zheng Yao

At a time when market share growth is nearing a standstill, the US e-commerce giant is weighing how to deal with threats from Shein and Temu.

Shopping platforms Temu and Shein are soaring in popularity among American consumers.This pair of e-commerce giants$Amazon(AMZN.US)$That's not good news.For years, Amazon has been busy dealing with what comes from$Walmart(WMT.US)$It's a challenge with rivals such as Target, but two companies, Temu and Shein, are currentlyBreak into the market with low-priced items that don't require fast delivery.

US consumers who are wary of inflation are increasingly willing to try out Temu and Shein.Although the items may take a week or more to arrive, Temu and Shein's bargains are still attracting a large number of customers.

Steve Tadelis (Steve Tadelis), a former Amazon executive and professor of economics at the University of California, Berkeley, said that Shein and Temu“Not looking for two-day delivery or better customer service,” they target the “low end” market—cheap products people are willing to wait for. The reason why commodity prices can be lower is mainly because the company ships many products directly from China according to consumer demand,Instead of storing large amounts of inventory in the warehouse ahead of time.

Unlike Amazon, Shein and Temu cannot replace supermarkets and stores, and becauseAmazon has spent years building a huge logistics network, and Shein and Temu are generally unable to compete with them for delivery advantages.Regarding Temu, UBS analysts wrote in a research report released Tuesday: “The proportion of web traffic driven by direct search and organic search remains below the industry average and significantly below Amazon.”

“Despite rapid growth, this shows that Temu has yet to become the 'preferred' channel for the average US consumer.”

Allegedly, 93% of users who visited Temu also viewed products on Amazon. However, only 8% of Amazon's audience will also visit Temu. However, some Amazon customers say these companies offer products similar to those on Amazon, and at lower prices.

According to the analysis company$Comscore(SCOR.US)$It is estimated that since the US service was launched in September 2022, the number of monthly unique visits by US customers to the Temu website and app has increased more than tenfold, reaching about 70.5 million as of March. Since August 2021, Shein's number of unique monthly visitors to the US has almost doubled, reaching around 41 million in March.

Meanwhile, Comscore estimates that the number of monthly unique visitors to Amazon in March decreased from about 217.5 million in September 2022 to about 211 million.Amazon's share of the US e-commerce market has also begun to stagnate.After years of rising, the company's online shopping in the USThe share has remained around 38% since 2021, and is expected to hover around this level for at least the next few years.

Perhaps these two emerging platforms still have a long way to go before they surpass Amazon. Despite this, people familiar with the matter say Amazon executives are considering how to deal with these two competitors. Executives have seen that there is indeed a market for cheap goods that have been delivered over a long period of time and doesn't matter.But it takes time to figure out if this type of product should be offered on Amazon.

Tadlis, a former Amazon executive, saidAmazon must balance its brand as a reliable retailer with launching low-priced products that could reduce its image.


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