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Written by Sun Yuhao

When giants turn around, are they following the trend or leading the change? Amazon's low-price journey is quietly starting. At a closed-door meeting in Shenzhen, Amazon began to learn from Pinduoduo, JD.com and other companies, quietly unveiling the mystery of low-price stores. A battle between price and market is quietly unfolding on the global e-commerce stage.

With the growth of e-commerce platforms such as Pinduoduo, Tmall, and JD.com, and the continuous rise of Chinese companies going overseas, Amazon is facing unprecedented pressure and decisions.

In September, a low-key and mysterious closed-door meeting was quietly held in Shenzhen, with the protagonist being the global e-commerce giant Amazon. On the conference table, a blueprint slowly unfolded - Amazon's upcoming "low-price store", like an undercurrent in the autumn wind, foreshadowing the waves that are about to be set off in the e-commerce world.

This is not Amazon's first attempt, but it is particularly significant after Chinese cross-border e-commerce companies swept the US market like a storm. Last September, Chinese cross-border e-commerce companies broke into the US market with a fully managed model, and in just one month, GMV exceeded the million-dollar mark.

Amazon, the former overlord, had a net sales of US$143.313 billion in the first quarter of fiscal year 2024, but was dubbed a "middle-aged man" in its competition with Chinese cross-border e-commerce companies.

However, Amazon did not sit still. From reducing delivery fees to adjusting commission rates, every step revealed its determination to defend the low-price market. Now, the launch of the "low-price store" is more like Amazon's strategic deployment to face the challenge head-on and give Amazon a taste of its own medicine.

In Yiwu Marriott Hotel, a low-key investment promotion conference was held. The invited merchants gathered here with curiosity and expectation about the unknown. Amazon's invitation letter was like a declaration of war, inviting them to join the low-price war. The full trusteeship model means that merchants only need to supply goods, and the rest is handled by the platform. This is undoubtedly a shot in the arm for merchants who have been deeply involved in the supply chain.

Low price is a strategy, but also an art of survival. In Amazon's plan, the "low price store" will become an exclusive territory that directly reaches hundreds of millions of customers. Selected categories, increased exposure, and Amazon's promise of promotion and traffic diversion all paint an attractive blueprint for sellers. What's even more exciting is the promise that existing FBA products will not appear in the search results of the low price store, providing sellers with a more fair playing field.

However, low prices are not without cost. Under the shadow of Chinese cross-border e-commerce companies, merchants have already understood the truth that "low prices mean big profits". The price-setting model of Chinese cross-border e-commerce companies allows the platforms to firmly control the pricing power, and merchants have to hover on the edge of small profits or even losses. The emergence of Amazon's low-price store is like a beam of light, illuminating the hope in the hearts of merchants - to set prices independently and allow free market competition.

But the market has never been a gentle ocean.

Although Amazon's low-price stores provide many conveniences for merchants, the shadow of price wars still lingers. In a free market environment, merchants may find that the promotion and logistics costs they originally saved are ultimately passed on to consumers in the form of price cuts. This is a war without gunpowder smoke, and everyone is looking for their own way to survive.

If you can't beat them, join them. Faced with the fierce offensive of Chinese cross-border e-commerce companies, Amazon chose to fight head-on. But in this battle, there is no absolute winner. Merchants are also looking for new ways out. Some are planning content marketing, some are incubating their own brands, and some are starting to explore independent sites and private domain traffic. The world of e-commerce is always full of variables.

For Chinese merchants, the launch of Amazon's low-price store means that the journey of low-price overseas expansion is no longer limited to Chinese e-commerce platforms. They have more choices, but also face more challenges. On this global stage, every step needs to be taken with caution.

In the global e-commerce arena, the competition for every inch of land is particularly fierce. Now, the US e-commerce giant Amazon has launched a new section, "Low Price Store", which has undoubtedly added a strong stroke to this war without gunpowder. This new section focuses on providing low-priced fashion and daily necessities, and allows Chinese sellers to ship directly to American consumers. The strategic intentions and market impact behind it are worth our careful consideration.

Amazon unveiled its "low-price store" that focuses on selling unbranded goods, mainly in the fashion, home and daily necessities categories, with prices below $20. This news, like a stone thrown into a calm lake, instantly caused ripples in the e-commerce circle.

Amazon responded that they have been exploring with their seller partners to provide customers with richer, more favorable and more convenient services. This statement is both an explanation of the new plan and an expectation for the future.

In terms of product selection, the "low-price store" has very strict requirements. In addition to the price being less than $20, the product must weigh less than 1 pound, be within 1485 inches in size, and not be spreadable or edible. These meticulous regulations are undoubtedly a test of the seller's product selection ability.

In terms of logistics, Amazon has made a bold attempt. They plan to ship products directly from China to the United States, with the goal of delivering them within 9-11 days. This change will undoubtedly save costs for Chinese sellers, and also provide them with an opportunity to test product sales through small batch production.

According to the exposed seller documents, the "low-price store" project is expected to open for registration this summer and start accepting goods in the fall. The new version is very likely to be officially launched during this year's Black Friday shopping festival. This schedule undoubtedly makes many sellers both excited and nervous.

Currently, the "low-price store" project is still an invitation-based investment promotion method, and it is expected to send invitations to qualified sellers in the next 2-3 months. This mysterious veil has made many sellers both look forward to and speculate.

The news of Amazon's "low-price store" has attracted widespread attention in the business circle. The industry generally believes that this is Amazon's direct response to the competition from emerging e-commerce platforms, especially facing opponents that have rapidly risen with low-price strategies, such as Chinese cross-border e-commerce companies. Some invited sellers expressed their expectation to try it out, believing that this is an opportunity for factory-type sellers; but some sellers said that it is not advisable to be overly optimistic, as they may fall into deep "involution".

Analyzing the details of the plan, it is not difficult to find that it has many similarities with the full-hosting model that was once popular in the cross-border circle. Both are committed to reducing the burden on sellers in logistics and operations, allowing sellers to focus more on product development and supply. By centrally managing and optimizing logistics processes, both help reduce sellers' operating costs and thus provide more competitive prices.

Chinese cross-border e-commerce companies, pioneers of the full-hosting model, have platforms that are responsible for the main store operations, warehousing, distribution, after-sales service, etc., while merchants only need to provide goods, and the pricing power is in the hands of the platform. This, to a certain extent, eliminates the problems of merchants sending empty packages, false shipments, and goods that do not match the pictures, and improves the buyer experience. However, the merchants' voice is weakened, especially the lack of pricing power, which is often criticized by sellers. Chinese cross-border e-commerce companies often require suppliers to provide ultra-low prices, and only the supplier with the lowest bid can win the order.

In contrast, Amazon's "low-price store" has made more concessions in terms of seller autonomy. Sellers retain the right to select products, set prices, and participate in activities, while the right to advertise and promote belongs to Amazon. This arrangement undoubtedly provides sellers with greater autonomy.

Dai Xuefei, Amazon's global vice president and executive president of Amazon Global Selling Asia Pacific, expressed her views on the full-hosting model in an interview at the end of last year. She said that the innovation of new e-commerce models, including the full-hosting model, provides companies with more ways and options to conduct cross-border e-commerce. However, for Amazon, its philosophy is to cultivate the company's own internal capabilities. She emphasized that Amazon hopes that sellers have innovative products instead of competing on price; hope that they will build global brands and expand to various sites around the world; and hope that they have a long-term belief. Although these requirements may be relatively high for companies in the short term, they are the path they must take to achieve sustainable development.

Amazon's data shows that during the Black Friday and Cyber ​​Monday holiday shopping event last year, more than 20% of Chinese brand sellers saw their product sales on Amazon's mature sites increase by more than 50% year-on-year, and more than 15% of Chinese brand sellers saw their product sales on Amazon's mature sites increase by more than 100% year-on-year. This data undoubtedly proves Amazon's success in cultivating brand sellers.

However, some industry insiders believe that the "low-price store" initiative clearly separates low-price products from branded products. While responding to the low-price competition in the market, Amazon also retains its own platform branding and innovation path. This strategy undoubtedly provides Amazon with more flexibility in the fierce market competition.

Right now, Amazon's main appeal is to attract and retain more Chinese sellers. For many years, Chinese merchants have been a considerable group in the Amazon market. Amazon's data shows that from October 1, 2022 to September 30, 2023, the number of Chinese sellers with Amazon sales exceeding US$1 million increased by more than 25% year-on-year. The number of Chinese sellers with sales exceeding US$10 million increased by nearly 30% year-on-year. This data undoubtedly proves the important position of Chinese sellers in the Amazon market.

However, as competition becomes increasingly fierce, Amazon is also trying to attract Chinese sellers again. For example, in December last year, Amazon's Asia-Pacific Innovation Center for Global Selling was established in Shenzhen, and Amazon's overall supply chain solution was officially opened to Chinese sellers. This series of measures undoubtedly adds more chips to Amazon's layout in the Chinese market.

Zhang Zhouping, chief researcher of Bense Think Tank, said that in the current context of global consumption downgrade, Amazon's launch of the low-price store also caters to the background of the times. Low-priced, cost-effective products are very popular in the global consumer market, and Amazon also wants to take advantage of this to gain more incremental market share. This view undoubtedly provides more annotations for the launch of the "low-price store".

In the market competition where major cross-border e-commerce platforms have launched full-hosting and semi-hosting, the hosting model can effectively drive the development of cross-border e-commerce for traditional industrial and trade enterprises, industrial belts and other enterprises. In particular, platforms such as Pinduoduo have achieved very good results and provided a good foundation for China's new quality productivity. These groups are also the main body of cross-border e-commerce in the future. Amazon is also paying attention to the integrated development of "cross-border e-commerce + industrial belt". In 2023, Amazon Global Store launched the "Ten Measures for the Start of Industrial Belts" support plan to help industrial belt enterprises transform into cross-border e-commerce. In the past three months, Amazon Global Store has visited characteristic industrial belts and cross-border e-commerce parks in 10 provinces and cities, including Guangdong, Zhejiang, Fujian, Jiangsu, and Shandong. This series of measures has undoubtedly added more possibilities for Amazon's layout in the field of cross-border e-commerce.

Amazon said that compared with 2023, factory-type enterprises' enthusiasm for participating in activities has increased significantly this year, and cross-border e-commerce exports are becoming a new track for manufacturing companies to seek business growth. This trend undoubtedly provides more room for imagination for the future development of "low-price stores".

Conclusion

Every move made by Amazon affects the pulse of global e-commerce. Can "low-price stores" become its new winning strategy this time? The e-commerce world is in turmoil again. Amazon is facing the emerging forces with "low-price stores". Can Chinese sellers ride the wave?

In this e-commerce revolution, every step of Amazon is particularly critical. The launch of the "low-price store" is undoubtedly an important attempt in the context of the new era. Its success or failure will directly affect the future pattern of Amazon in the global e-commerce field. We will wait and see how it writes a new chapter in this fierce market competition.