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Amazon Updates You Need to Know This Week
This week’s Amazon news roundup brings you key updates on competition, legal developments, and new tools for sellers. Here’s what you need to know:
- Amazon vs. Temu: Amazon influences Chinese sellers to stop listing cheaper prices on rival Temu.
- Legal News: Amazon faces a lawsuit from a US retail liquidation firm over alleged overcharges for bulk warehouse purchases, highlighting complexities in its wholesale operations.
We’re bringing you what you need to stay informed, stay competitive and make the most of Amazon’s evolving seller tools and marketplace dynamics.
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Amazon vs Temu: A Tale of Price Wars, Competition, and Strategic Shifts
The US ecommerce industry is shifting rapidly, with Amazon and Temu locked in a heated battle for market share. This rivalry highlights how sellers and consumers alike are navigating a changing digital marketplace. Below, we break down the latest developments and their implications.
Amazon’s Price Policy Sparks Tensions with Chinese Sellers
According to some sellers, Amazon has reportedly urged Chinese cross-border merchants to avoid listing their products at lower prices on rival platform Temu. This request comes as Temu gains traction in the US by offering bargain prices.
According to the South China Morning Post, sellers who violate Amazon’s competitive pricing expectations risk losing eligibility for the coveted Featured Offer (Buy Box), a key driver of sales.
Some brands have already faced repercussions, being kicked out of the Featured Offer program and even, like electronics brand, Anker, deciding to remove their products from Temu’s US marketplace altogether.
Amazon Incentives to Compete with Temu
Recent reports from The Information, shared via a screenshot posted on X by Sean Frank, top Amazon seller and Ridge CEO, reveal that Amazon has taken additional steps to curb merchant activity on Temu.
Amazon reps have allegedly been offering incentives such as free advertising and reduced commissions to popular China-based sellers who agree to stop selling on Temu. Managers at two large China-based merchants confirmed these offers.
Sean Frank, who spends over $5 million annually on Amazon ads, commented, “I spend at least 5m a year on Amazon ads. Why don’t they offer me free advertising to not start selling on Temu?” This comment reflects growing frustrations among established sellers who feel overlooked in Amazon’s bid to stifle competition.
Temu’s Meteoric Rise and Impact on Amazon
Temu’s success is impossible to ignore. Named Apple’s most downloaded free app in the US for 2024, the platform has become a major competitor by leveraging:
- Low Prices: Temu app frequently undercuts Amazon, with examples like the Anker Prime 250W Charger listed at $136 on Temu versus $169 on Amazon, as observed one month ago by Jason Goldberg, Chief Commerce Strategy Officer at Publicis.
- Fulfillment Strengths: Temu now ships a portion of its catalog from US-based fulfillment centers, offering fast delivery times comparable to Amazon Prime.
- User Engagement: Gamification and social proof drive consumer loyalty, a strategy Amazon’s Haul app has yet to replicate effectively.
Amazon’s Response: Introducing Haul
In an apparent countermeasure, Amazon launched Haul, a shopping app section focused on low-cost items under $20. While Haul signals Amazon’s willingness to innovate, it faces challenges in competing with Temu’s agility.
Amazon Haul Store Current Limitations
- Limited social engagement tools reduce consumer stickiness compared to Temu.
- Haul relies on products shipped from China, raising potential vulnerabilities if US de minimis tariff exemptions change.
What This Means for Sellers and Consumers
The Amazon-Temu rivalry is reshaping ecommerce strategies:
For Sellers
- Pricing parity across platforms is critical to avoid penalties like Buy Box suppression.
- Diversifying sales channels can mitigate the risks of dependency on a single platform.
For Consumers
- Increased competition means better prices and more choices, but also raises concerns about product authenticity and quality on newer platforms.
Actionable Strategies for Sellers
- Monitor Pricing Across Platforms: Use tools to ensure your listings on Temu, Amazon, and other marketplaces comply with competitive pricing policies.
- Leverage Amazon Tools: Stay compliant and competitive by utilizing features like Amazon’s pricing tools and tracking performance metrics.
- Experiment with Marketing: Engage consumers through loyalty programs, social proof, or gamification to compete with platforms like Temu.
- Plan for Fulfillment Flexibility: Explore multi-channel fulfillment solutions to optimize shipping speed and reliability across platforms.
Amazon’s Liquidation Practices Under Scrutiny
Amazon faces legal challenges from Xcess Ltd, an Ohio-based retail liquidation firm, over alleged pricing irregularities and business practice violations. This lawsuit sheds light on the intricate relationship between major ecommerce platforms, liquidators, and the broader retail ecosystem.
Background of the Dispute
The controversy stems from Amazon’s liquidation program, which manages unsold inventory across its fulfillment network. What began as a partnership between Amazon and Xcess in 2016 grew significantly, encompassing 60 fulfillment centers by 2022. This expansion represented a huge portion of Amazon’s liquidation operations, making any systemic issues particularly impactful.
Key Issues Identified
1. Price Inflation Concerns
The lawsuit reveals a troubling pattern of price manipulation affecting the entire resale chain. Sellers allegedly exploited the system by dramatically inflating prices – for example, listing basic smartphone cases at hundreds of dollars and simple solar eclipse glasses at $40. When these items entered the liquidation stream, these inflated prices were passed on to liquidators like Xcess.
2. System Complexity and Oversight Challenges
The scale of Amazon's liquidation program created significant operational challenges:
- Invoices contained millions of line items, making price verification extremely difficult.
- Despite Amazon's acknowledgment of pricing irregularities and offering a credit system, identifying overcharges proved nearly impossible.
- The sheer volume of transactions made effective oversight challenging for all parties involved.
3. Quality Control and Safety Issues
The lawsuit highlights serious concerns about product management:
- Expired products were allegedly included in liquidation packages.
- Recalled items were found in bulk sales.
- These issues created potential safety risks for consumers and additional liability for resellers.
For sellers and customers, this situation presents several important considerations that warrant attention:
Pricing Ecosystem Concerns
The lawsuit reveals how some sellers potentially gamed the system:
- Artificial price inflation became a strategy, knowing costs would be absorbed in bulk purchases.
- The complexity of the pricing system made detection of such practices difficult.
- This affected the entire value chain, from liquidators to end consumers.
Quality Control Implications
The situation exposed gaps in Amazon's quality control processes:
- Insufficient screening of expired products.
- Inadequate tracking of recalled items.
- Limited oversight of seller pricing practices.
Actionable Strategies for Sellers
- Maintain transparent and consistent pricing strategies. Avoid artificial price inflation, as this may attract increased scrutiny and potentially affect your account standing.
- Keep records of your pricing decisions, ensuring they align with market conditions and actual costs.
- Regularly audit your inventory to prevent expired or recall-affected products from entering the liquidation stream.
This situation continues to evolve, and its resolution may reshape how ecommerce companies handle their liquidation practices in the future. The outcome could lead to more transparent pricing mechanisms and improved quality control measures that may ultimately benefit all parties involved.
New Amazon Seller Tools This Week
- Voice of the Customer dashboard upgrades: Sellers can now access Return Rate and Star Rating metrics on the dashboard, enabling proactive monitoring and resolution of customer feedback issues.
- Prime-exclusive discounts consolidated: Amazon is integrating Prime-exclusive discounts into the Price Discounts tool, streamlining promotion management. The standalone Prime Exclusive Discounts tool will be retired on January 7, 2025.
- New AI-powered Image Generator: Amazon has launched a free tool that allows brands to create custom, professional-quality product images quickly and easily, improving their branding and listings.
Leveraging Amazon Seller Updates for Success
As Amazon competes with Temu’s lower prices while dealing with internal challenges, sellers need to be smarter than ever about how they run their businesses. Success in this environment requires a sophisticated approach that balances platform compliance, pricing strategy, and inventory management.
Consider implementing these comprehensive strategies:
- Develop a Multi-Channel Pricing Intelligence System: Create a system for monitoring your prices across all platforms where you sell. This isn’t just about compliance with Amazon’s pricing policies – it’s about understanding your true profit margins and competitive position in each marketplace.
- Build Platform-Specific Value Propositions: With Temu competing primarily on price, consider how you can differentiate your offerings on Amazon.com (and Haul) through premium packaging and presentation, enhanced product education and support, bundling strategies that create unique value, and superior post-purchase customer service.
- Optimize Your Inventory Health: Rather than risking expensive liquidation scenarios, focus on preventing excess inventory through SoStocked’s data-driven forecasting. This means going beyond basic reorder points to incorporate seasonal trends analysis, sales velocity tracking, and regular audit of slow-moving inventory.
- Strengthen Your Quality Control Processes: In light of the liquidation lawsuit revelations, implement rigorous quality control measures, such as establishing clear protocols for handling returns and damaged goods, developing relationships with reliable liquidation partners when needed, and regularly auditing your inventory for expiration dates and recall notices.
While these market shifts may seem daunting, they may actually present an opportunity. The sellers who succeed will be those who take the time to understand these changes and build their business for long-term success rather than quick wins.
For nearly four years, we’ve kept sellers informed with our Amazon Sellers Newsletter, publishing over 200 issues packed with policy changes, announcements, and community events. Subscribe or share with your team to get these insights delivered weekly.
