Amazon is reportedly launching a low-price section on its platform. According to The Information, The platform is imposing severe price caps on what merchants can charge for their items. This update aims to challenge discount e-commerce platforms like Temu and Shein. 

Amazon’s new marketplace with hard price caps

Amazon is imposing price caps across hundreds of product categories within this new budget section. The new storefront sets prices on products like jewelry at $8, $13 for guitars, and $20 for sofas. It focuses on affordable fashion and lifestyle items sourced from Chinese sellers who will ship directly to U.S. customers.

In July, Amazon shared details of this plan with Chinese sellers, CNBC reports. It announced plans to create a section dedicated to affordable lifestyle and fashion items, many priced under $20. 

Traditionally, Amazon has focused on fast shipping from U.S-based warehouses, but this new section will use a different approach. The platform will allow sellers to ship items directly to U.S. consumers from a facility in Guangdong, China. Delivery times are expected to range from 9 to 11 days, longer than Amazon’s standard delivery speeds. Amazon will also charge sellers lower fulfillment fees to support this low-cost section. 

Why Amazon is targeting budget-conscious shoppers

The strategy seems to target platforms like Temu, owned by PDD Holdings, which has quickly captured a share of the U.S. market with ultra-low prices on various products.

Amazon’s shift comes amid slower growth in its online retail sector. The company saw a 5% increase in online sales in Q2. This was down from a 7% rise in Q1.

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