Amazon still cannot resist the erosion of SHEIN and Temu.
Recently, according to the Economic Times of India, Amazon will launch a low-cost vertical website called Bazaar in India. It mainly sells fashion and lifestyle products such as low-priced white label clothing, watches, shoes, jewelry, and suitcases, with a price of less than 600 rupees (about 7.24 US dollars). It has started accepting sellers to join.
Previously, Amazon seemed to have little association with low prices, with brand and service as the main selling points. This attempt in the Indian market is not only based on the local situation in India, but also related to changes in global consumption trends.
In recent years, India's economy has grown rapidly, and the Indian National Bureau of Statistics predicted in January of this year that India's real GDP will grow by 7.3% in the 2023-24 fiscal year. In terms of population, according to data from the International Monetary Fund, India's total population has reached 1.42 billion in 2022, making it one of the countries with the largest population in the world. In addition, there is a significant wealth gap in the local area, with a large number of low-income groups and a large scale of the sinking market.
With the rise of SHEIN and Temu, low-priced and cost-effective products have attracted hundreds of millions of consumers worldwide. Faced with the strong attack of new platforms, Amazon also needs to enter the low-priced market to exchange space for growth. India, which has a large population and suffered setbacks in SHEIN, and Temu has not yet set foot in it, can be considered a good experimental field.
Starting from India
Amazon's attempt at the low price market began in India and may be mixed.
The abundance of low-priced consumers in India and the increasingly evident consumer tendencies are both favorable factors for Amazon to choose here. According to BainCompany's 2023 report on the Indian e-commerce market, over 70% of online shoppers in India currently come from the middle and low-income groups in second - and third tier cities, who are enthusiastic about shopping on low-priced e-commerce platforms. From 2020 to 2022, the share of such platforms in the overall e-commerce market increased fivefold.
In addition, the main category of low-priced vertical website Bazaar, fast fashion clothing, is expected to grow at a rate of 30% -35% between 2022 and 2027. Amazon is taking on this dividend with a low price strategy.
In recent years, Amazon has also been continuously expanding into India. Last June, Amazon CEO Andy Jassy announced an additional investment of $15 billion in India. Overall, Amazon's total investment in India in 2023 reached $26 billion.
In the same year, Amazon also launched a lower priced membership subscription service called "Prime Lite" on its Indian website. This service is only charged annually, with an annual fee of 500 rupees lower than that of regular Prime members. It allows consumers to enjoy "free two-day delivery" and "free delivery service with no minimum order threshold.".
This year, Amazon still maintains a spending spree. It has invested 8.3 billion rupees (approximately 100 million US dollars) into its Indian subsidiary Amazon Seller Services, which will be used for logistics network construction, attracting sellers, and other purposes.
These measures all indicate that Amazon, which has been in India for 9 years, is continuously increasing its attention to this country. When the volume of the low-priced market continues to emerge, it is only a matter of time before Amazon sinks.
But the investment scale of Amazon also reveals the overall growth status of the Indian e-commerce market and the difficulty of penetrating into the local market.
The BainCompany report also pointed out that currently, e-commerce sales in India only account for 5% -6% of total retail sales, compared to the 23% -24% in the United States. There is still a lot of room for exploration in the Indian e-commerce market.
In addition, imperfect logistics infrastructure has also hindered the rapid growth of e-commerce business. According to foreign media reports, the starting point of infrastructure development in India is relatively low, and it has been facing the problem of insufficient investment for decades, plagued by old railways, poor quality roads, and unstable electricity supply. Amit Shah, the Minister of the Interior of the Indian Federation, stated in 2023 that logistics costs in India account for 13% of the country's gross domestic product, while the global average is only 8%.
Even though the Indian government has invested a lot of resources in logistics infrastructure in recent years, such projects are complex and time-consuming, making it difficult to improve logistics efficiency and costs in the short term.
In the populous and underdeveloped Indian market, Amazon also faces competition with local e-commerce platforms. These include the local e-commerce platform Flipkart, Tata Group, Reliance Group, Meesho, Nykaa and other emerging platforms supported by Wal Mart.
Flipkart and Meesho have already established themselves in the low-priced market, with a strong presence. Flipkart's social e-commerce platform Shopsy has a large number of products priced below 200 or 300 rupees. In the first quarter of last year, the number of SKUs, users, and sellers all increased threefold, and the app download volume exceeded 175 million times.
Meesho is known as the "Indian version of Pinduoduo" and currently relies mainly on white label products, low prices, and zero commission models, targeting second and third tier cities in India. According to Data.ai data, the platform's cumulative downloads on Google Play and iOS App Store exceeded 500 million times in June last year. Due to only taking 6 years, it has become one of the fastest-growing shopping applications in the world and also the first profitable e-commerce platform in India.
Even after 9 years in India, Amazon has not yet achieved profitability, indicating the complexity of the Indian market. With the help of Bazaar sinking into the low price market, Amazon can no longer only serve the middle and high-income groups, but also truly penetrate into this land where Asia's richest people and slums coexist.
A counterattack test
When Amazon and low prices appear simultaneously, the market speculates that it will compete head-on with Temu and SHEIN.
Temu and SHEIN both use Amazon's headquarters in the United States as their first overseas destination, and have seen rapid growth in recent years. The Data.ai report shows that in October last year, Amazon's global user base increased by 4% year-on-year, while Temu and SHEIN's user base surged to 2.6 times. From the perspective of the proportion of US users worldwide, Temu accounts for 41% and SHEIN accounts for 18%, both exceeding Amazon's 15%.
Both rely on goods with sufficiently low prices to conquer cities and territories. SHEIN started with women's clothing and was highly sought after with clothing sold for less than $10 and shoes sold for less than $20. Temu is even more impressive. According to a data from Zhejiang Securities, Temu's prices in certain categories can reach 53% -80% of SHEIN's.
At present, both Temu and SHEIN have over 100 million users in the United States, catering to markets such as Amazon clothing.
Previously, the commission for clothing was lowered, and now the launch of Bazaar's low-priced website in India, attempting to attract white label sellers, indicates that Amazon will no longer sit idly by.
India is the best choice.
Here, Amazon has been settling for 9 years. Manish Tiwary, the regional manager of its consumer business in India, revealed at the end of last year that the current total number of sellers on Amazon India has exceeded 1.4 million, with 300000 new sellers added. 60% of new sellers and 80% of new users come from second - and third tier cities.
At present, Amazon has laid out approximately 1.22 million cubic meters of storage infrastructure in 15 states in India, and a large amount of funds will also be used to improve logistics delivery services.
In addition, in the Indian market with a high degree of government intervention, Amazon has considerable experience in handling government relations. Previously, it had reached cooperation agreements with government departments such as the General Administration of Foreign Trade (DGFT) of India to jointly promote the e-commerce exports of local small and medium-sized enterprises.
In 2020, the Indian government banned 59 applications, including SHEIN and TikTok. SHEIN was forced to withdraw from the Indian market as a result, and it was not until last year that it was allowed to enter again through cooperation with Reliance Group.
As of August last year, Temu mainly covered the Japanese and Korean markets in the Asian region, and had not yet set up an Indian site. It can be seen that Amazon will not face significant impacts from SHEIN and Temu in India.
Combining its own brand strength with continuously investing heavily in logistics and delivery services, Amazon will penetrate the Indian market. At the same time, with the help of its sinking practice in India, Amazon may be able to explore a suitable low-priced model for itself, and compete head-on with SHEIN and Temu in other global markets, expanding new growth space for itself.
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