Exclusive: The pricing power belongs to the merchants, and Amazon's low-price store begins to attract investment
Latest update time：2024-07-05
Reads：
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Merchants have the right to set their own prices, and Amazon does not review prices; only refunds will be made for orders below $3.
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Author | Dai Runze
Leifeng.com Jingxi exclusively learned that on June 26, Amazon launched a new low-price store at an investment promotion event.
It is currently in the investment promotion stage and is expected to be launched in August 2024. The first categories open for investment promotion are fashion clothing, home furnishings and daily necessities. The signing time is in the summer of 2024, and inventory will be accepted in the fall. Jingxi learned that the launch event was held in Yiwu on July 5.
As soon as the news came out, it caused a stir in the entire industry.
01
Policy rules
If you look closely, Amazon's low-price store is on the homepage of Amazon's main site, which is a store-within-a-store model.
Currently, for all categories of small items, the price
is less than 20 US dollars and 1 pound (about 0.453 kg), and the size is within the range of 14x8x5 inches (about 0.35x0.2x0.127 meters)
. And it needs to be safe, such as non-spreadable and non-edible properties.
Amazon will give merchants suggestions on the quantity of goods to prepare for shipment and fulfillment. Sellers store goods in Amazon's warehouse in China, and Amazon will directly ship small packages from the warehouse in China after the order is placed.
The entire cycle, from order placement to delivery, takes 9-11 days.
Temu's full hosting takes 15-24 days.
Merchants have the right to set their own prices and participate in promotional activities, and Amazon does not determine prices.
However, it sets price caps for different categories, which means that sellers' independent pricing is limited to a certain range.
For products below $3, low-price stores only refund.
However, there are corresponding rules to deal with the wool party. The balance is not tilted one-sidedly towards consumers, and there is no follow-up sales.
In terms of commission, low-price stores are similar to the main site
at 15%
. Merchants do not need to buy traffic for their own promotion, as Amazon will take care of it. To form product links, you can use the AI tools provided by Amazon or modify existing link information.
For merchants who have already settled in Amazon, the evaluation method of low-price stores is completely separate from that of the main stores and is evaluated separately. In other words, the performance of low-price stores will not affect the ranking of the main site in principle.
Moreover, low-price stores do not require merchants to display their brands. White-label merchants operate independently within the scope of compliance and do not need to be trapped by the traffic rules of brands in low-price stores. In other words, there is no need to force yourself to build a brand in the short term.
The above are the basic rules of Amazon’s low-price store.
02
Discussion on the possible existence of low-price stores
Although the concept of Amazon's fully managed low-price store is good, Whale Rhino visited several industry players and discussed the issues that need to be considered.
Firstly, how to settle the logistics fees on the merchant side; and for consumers, low-price stores have to pay how much US dollars for free shipping.
Secondly, how does Amazon allocate traffic between existing sellers on the main site and merchants in low-price stores?
According to Amazon, the platform distributes the traffic it obtains to products, and the ranking of products in low-price stores is determined by the weight of the products.
In fact, there are many examples of global e-commerce platforms that have returned to low-price e-commerce but have not met expectations. The core problem is that the distribution of traffic between low-price stores and the main site has not been resolved. They are all on the same platform, but cannot generate traffic themselves. It is very difficult to lean towards either side, and if the struggle lasts for a long time, there will be internal friction.
Amazon re-launched its advertising business a few years ago, trying to use streaming media to gradually generate traffic on the platform. However, this vast business is facing competition from Google and Mate (formerly Facebook).
As for the discussion about discount stores, Jingxi heard that consumers are used to comparing the prices of discount stores and main websites on the platform. So, will low-price stores damage the core interests of existing large sellers and shake the foundation of the Amazon platform? Will it be good for real brand merchants such as Anker and branded merchants in the future?
And Amazon does not have strict control over selling prices. So among similar products of the same price on the entire network, how does Amazon compare with Temu and SHEIN in terms of price-performance ratio? Which one can ultimately continue to provide value to users?
03
Full and semi-hosting services are good for small and medium-sized overseas merchants
Some Amazon merchants confessed to Jingxi that products priced below US$20, white-label, and small and lightweight are not loved by anyone on Amazon and are basically working for logistics.
In addition to the impact of Temu's full hosting in the past two years, and the siege of SHEIN in the low-priced fashion clothing category for many years, and the lack of the financial and resource advantages of traditional Amazon big sellers, everyone has a hard time under the multi-faceted attack.
Now Temu's full hosting has expanded the market size of products below $20, while Temu's semi-hosting at this stage is not suitable for small and light items below $20 in terms of profit margin. It is a great opportunity for Amazon to open a low-price store at this time.
Since there is a market, the traffic of low-priced and light items needs to be received.
Therefore, Amazon's fully managed low-price store can give hope to some traders who are hesitating whether to give up Amazon, dare not do Temu, cannot compete with SHEIN in clothing, and do not quite understand TikTok.
For the industry, with Amazon opening its low-price store, self-delivery and drop shipping from overseas warehouses seem to have become a new trend in overseas e-commerce for the second time.
For many years, the expensive storage fees of Amazon and other platforms have made merchants miserable, and the inventory pressure also needs to be relieved. The original distribution model only has revenue figures, but the turnover rate is slow, and the risk increases with the scale. Many merchants with a scale of 100-500 million dare not expand to a scale of more than 1 billion.
From this perspective, full and semi-hosting are friendly to small and medium-sized sellers.
Amazon's fully managed low-price store is currently in the internal testing phase, and all investment invitations are internal. As for the future trend of this business, we need to wait and see for two or three quarters before making an evaluation.
It is too early to draw a conclusion now.
Also,
let’s wait and see when Temu’s semi-trusteeship can regain the absolute cost-effectiveness of low-priced, light and small items.
The low-price business is ultimately a matter of efficiency. Whether it is the efficiency of management or the AI algorithm drive, Jingxi has been paying attention for a long time. For stories about merchants going overseas, please contact the author Dai Runze (WeChat
dairunze0429
).
—About Whale Rhino—
Whale Rhino was jointly initiated by Lin Jun, founder of Leifeng.com, and Yao Kaifei, founder of Brand AI. Its predecessor was the WeChat group of Guangmingding, a global e-commerce company. This WeChat group, which adds members monthly, includes industry evergreens, serial entrepreneurs, top sellers on Amazon, early co-founders of Duoduo, the earliest gold fingers to bet on SHEIN, DTC brands blessed by Zhang Yiming, super players in traffic and logistics ecology, executives of Alibaba, Xiaomi and JD.com, and top players in smart hardware. In the future, they will all appear on stage in Whale Rhino Live, so stay tuned.
In 2024, Jingxi will regularly carry out online and offline activities, and sincerely invite people from all walks of life to join! To join the group, please contact Jingxi assistant, please note " name-company-position ".
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