Amazon (AMZN) is stepping up its game big time to compete with one of its top rivals.
The online retail giant already has a strong customer base, and it recently reported an 11% year-over-year increase in net sales during the third quarter of 2024. However, many shoppers across the country are seeking lower prices, and they are flocking to online Chinese marketplace Temu to find them.
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According to a recent survey from Omnisend, 57% of American consumers shop at Temu, which sells a wide range of products usually priced between $1 and $50. Also, 58% of those consumers said that its lower prices was one of the main qualities that attracted them to the platform.
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Overall, American consumers in the survey rated Temu 7 out of 10 stars, compared to the 8.4 out of 10 stars they gave Amazon, which shows that Temu has grown to become a major competitor.
Amazon competes with Temu with new service
While Amazon is still a leading marketplace in online retail, it has rolled out a new service to compete with Temu. The retailer has just unveiled Amazon Haul, which is a new section on the company’s website that offers items such as “fashion, home, lifestyle, electronics, etc.,” that are priced at $20 or less, according to a new press release.
Amazon says that the “majority” of these items will be priced at $10 and under, with some selling for as low as $1. Customers will also be able to enjoy discounts on their entire orders.
“Customers can enjoy even more savings when they add more items to a single order, with 5% off orders $50 and over, and 10% off orders $75 or more,” said Amazon in the press release.
Some examples of these unusually cheap items include an iPhone 16 case for $1.79 and an elegant necklace, bracelet, and earring set for $2.99.
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Delivery times for Amazon Haul orders will range between one to two weeks, and orders that are $25 or more qualify for free shipping. Customers will also be able to return purchases over $3 for free within 15 days after receiving the order.
“Finding great products at very low prices is important to customers, and we continue to explore ways that we can work with our selling partners so they can offer products at ultra-low prices,” said Dharmesh Mehta, vice president of Worldwide Selling Partner Services at Amazon, in the press release.
Temu faces major lawsuit while its sales slow down
The unveiling of Amazon Haul comes after Temu was hit with a lawsuit from Arkansas Attorney General Tim Griffin in June for allegedly selling items at low prices in order to secretly gain sensitive information from its customers and sharing it with the Chinese government.
“Temu is not an online marketplace like Amazon or Walmart,” said Griffin in a press release in June. “It is a data-theft business that sells goods online as a means to an end.”
Related: Temu lawsuit says low prices on app covers its harmful intentions
He accused the company of gaining control of users’ devices through its app where it can “read a user's private messages, change the phone's settings, and track notifications,” according to the lawsuit. He also claimed that the app can secretly gain access to a user's camera, specific location and other applications.
In a statement to TheStreet in June, a spokesperson for Temu said that the allegations in the lawsuit are “totally unfounded” and “based on misinformation.”
A few months after the lawsuit was filed, PDD, which owns Temu, reported lower-than-expected revenue in its second-quarter earnings report for 2024. The company revealed it earned 97.1 billion yuan ($13.6 billion) in revenue during the quarter, which is less than the 100 billion yuan analysts previously estimated.
During a post-results briefing in August, PDD Co-founder Chen Lei warned analysts that revenue will continue to shrink as Temu faces more competition from rivals such as TikTok Shop and Shein, according to a report from Bloomberg.
“Competition is here to stay and is expected to intensify in our industry,” said Chen at the briefing. “High revenue growth is not sustainable, and a downward trend in profitability is inevitable.”
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