The recent Amazon Haul launch debuts a new service offering affordable products, most priced below $20 and many under $10. It is designed to attract and hold onto price-conscious consumers – especially next gens. The new platform is a strategic move to capture the ultra-budget segment of the U.S. market and counterbalance the dominance of fast-growing Chinese ecommerce marketplace competitors like SHEIN and Temu. Haul is also expanding Amazon’s ecosystem to stop the attrition of its customers seeking those low-cost offerings.
Amazon may face backlash from traditional sellers on its marketplace who could view Haul as undercutting their prices. Maintaining quality standards while keeping prices low could also prove challenging, especially with increased scrutiny of low-cost goods in terms of durability and ethical production. The optics of Haul being a Temu wannabe could compromise Amazon’s reputation.
Competitive Advantage
Amazon’s introduction of Haul directly targets companies like SHEIN and Temu, which have captured a significant share of the U.S. consumer market. SHEIN’s focus on affordable fashion and Temu’s range of discounted products have appealed especially to younger and budget-sensitive consumers. These companies leverage inexpensive production and logistics based in China to keep costs low, primarily shipping products directly to U.S. consumers. Their relationships in the U.S. have also begun to expand beyond DTC, including partnerships with brick-and-mortar retailers such as Forever21.
Haul can leverage the well-established Amazon brand as a competitive advantage. U.S. customers trust Amazon for customer service, speed of delivery and quality assurance. This leverage applies to customers as well as courting manufacturers to prioritize distribution on Haul versus other marketplaces. Haul offers a familiar, streamlined experience through the Amazon Shopping app, where users can browse Haul products and complete transactions with Amazon’s well-known guarantee and reliability. However, the challenge for Amazon is its higher operational costs, infrastructure and brand expectations, as well as its expectation to meet higher standards than emerging platforms like Temu.
The De Minimis Factor
Chinese ecommerce platforms have thrived in the U.S. market largely due to the de minimis import policy that allows imports under $800 to enter the U.S. without customs duties or taxes. It is highly cost-effective for Chinese sellers to ship products directly to American consumers, and for SHEIN, this policy has been a vital factor in maintaining ultra-low pricing and rapid growth in the U.S. market. By avoiding customs duties, these companies can price products lower than many U.S.-based sellers, putting significant price pressure on American businesses.
While the de minimis policy benefits consumers with lower prices, it also raises concerns about unfair competition and the potential impact on American manufacturers and small businesses. As more purchases shift toward Chinese platforms, local companies struggle to compete with prices made possible by policy loopholes. Additionally, there are environmental concerns due to the increase in overseas shipments with an associated carbon footprint and the waste generated by inexpensive, disposable items.
In September, the Biden administration proposed changes to the de minimis threshold to address concerns about the effects of the policy on domestic businesses and the U.S. economy. These changes include lowering the import value threshold for tax exemption or limiting the frequency of exemptions for individuals. If enacted before the end of this term, these adjustments could impact Chinese marketplaces’ ability to operate in the U.S. with the same competitive edge. For Amazon, such changes would help level the playing field, as Amazon already incurs higher costs associated with shipping, logistics, and compliance. Changes are estimated to take place before the new administration takes office.
However, changes to the de minimis policy may not entirely mitigate the cost advantage Chinese companies have due to their low production costs. If the policy changes are enacted, companies like SHEIN and Temu may adjust by increasing prices marginally, but they are likely to remain more competitive in comparison to U.S.-based sellers. Amazon Haul could benefit from regulatory changes by bringing Amazon closer in cost structure to its Chinese competitors, but the extent of this impact remains to be seen.
Tariffs and Amazon Haul
Tariffs rank as perhaps the most significant factor in determining competitive differentials for online marketplaces. By imposing tariffs on imported goods, the U.S. government can influence the cost structure of products shipped from overseas, often making them more expensive for consumers. It has been even more impactful in the low-cost retail space where margins remain slender and the price sensitivity high. With the incoming new administration, Trump has proposed 10 percent tariffs on all U.S. imports, a 25 percent tariff on imports from Mexico, and most dramatically, a 60 percent tariff on all Chinese manufactured goods. These proposed tariff increases would substantially affect a platform like Amazon Haul, which relies on imported products from China to allow ultra-low pricing for customers. Gradual tariffs, especially those on goods originating from China, will raise Amazon’s operational costs and make it hard to compete head-on with Chinese-based marketplaces such as SHEIN and Temu, which depend on very low-cost imports. By increasing tariffs, the U.S. aims to encourage domestic production and reduce dependency on foreign goods, but these shifts could also force Amazon and other retailers to adjust its sourcing strategies and potentially pass the added costs onto consumers. This also ignores potential retaliatory measures from other nations.
Haul’s Disruption
Amazon Haul’s entry into the ultra-low-cost market has several advantages, including existing customer loyalty and retention, Amazon’s well-known cannibalization, margin compression, product curation, brand expansion, and its scale to capture market share from Chinese ecommerce platforms. Amazon is no fool; it has a long history of disrupting and disintermediating competitors. Haul is no different by encroaching on SHEIN and Temu.
As Haul grows, Amazon will no doubt follow its algorithmic playbook increasing the assortment and creating exclusive partnerships with manufacturers that align with their standards and values. Haul can further disrupt dollar store brick-and-mortar retailers that are struggling, including losing customers to Walmart and store closures.
That said, Amazon may face backlash from traditional sellers on its marketplace who could view Haul as undercutting their prices. Maintaining quality standards while keeping prices low could also prove challenging, especially with increased scrutiny of low-cost goods in terms of durability and ethical production. The optics of Haul being a Temu wannabe could compromise Amazon’s reputation. If Amazon fails to manage the operational complexities and expenses associated with ultra-low pricing, the platform could risk diluting its brand built on trust and reliability.
Strategic Advantages
Amazon Haul has several strategic moves to strengthen its competitive positioning and differentiate itself from Chinese-based competitors. Here are three key advantages:
1. Expand the Supplier Base Beyond China
By sourcing from regions outside of China, Haul can provide greater assortment, quality, and diversification. For instance, expanding into Southeast Asian, Latin American, or Eastern European markets could introduce products from new suppliers, tapping into regions with similar cost advantages without exclusive reliance on China. This strategy also addresses consumer concerns about dependency on China and allows Amazon to diversify its supplier network. This tactic differentiates itself from the Chinese-focused competitors. Reducing reliance on China will help to mitigate the effects from expected tariffs, although the costs on imports overall are expected to rise.
2. Focus on Transparency and Ethical Standards
As concerns about labor practices and the environmental impacts of Chinese-made products grow, Amazon Haul can set itself apart by highlighting ethically sourced and eco-friendly products. While SHEIN and Temu offer lower prices, they have faced criticism for a lack of transparency around their supply chains. If Amazon Haul prioritizes ethical sourcing and sustainable practices, it will attract conscious consumers who seek affordability without compromising on values.
3. Optimize Returns and Customer Service
Haul has the Amazon machine behind it with superior return policies and trusted customer service. Amazon’s A-to-Z Guarantee offers a more reliable and consumer-friendly approach to returns building loyalty among budget-conscious consumers who are typically underserved in this segment. Although SHEIN has established a partnership with Forever21, this is not a widespread solution compared to Amazon’s extensive network of partnerships including Kohl’s, Staples, UPS, and more.
Haul’s Future
The “if you can’t beat them, join them” approach may ultimately be shortsighted. Not only does it come at a cost by devaluing and cannibalizing Amazon’s current pricing, but it is also launching at a time of great uncertainty. What will happen with de minimis? What tariffs and other changes are going to come from the new administration that will shape retail? These questions will not be answered for several months. Meanwhile, Amazon can opportunistically capture some of the holiday sales, yet at such ultra-low-price points, this is unlikely to make a significant impact to its financials. Will Amazon be renting a U-Haul in the next few months to take Haul to the junkyard? My guess is yes.
