On November 5, Amazon.com Inc. made an important move by cutting fees for merchants selling clothing priced below $20, signaling its readiness to compete on price with Chinese fast-fashion Shein.
With this announcement, Amazon revealed plans to lower its sales commission on clothing below $15 to 5% beginning in January. Additionally, the commission on clothing from $15 to $20 will be reduced to 10%. Previously, both categories were subject to a 17% commission.
It is unusual for the company to lower referral fees for merchants on its online platform, and no other similar changes were mentioned. The decision is a clear indication of Amazon’s intent to attract merchants offering affordable clothing.
According to Insider Intelligence, the company dominates the U.S. e-commerce market, capturing more than $1 of every $3 spent online. This is about six times the size of Amazon’s closest online competitor, Walmart Inc.
Amazon is highly dominant in such apparel e-commerce market, however, the company has faced new challenges from Chinese companies in recent years.
One such company is Shein, which is planning an initial public offering in 2024. The company has seen rapid growth in the sale of very low-priced apparel and is currently valued at up to $90 billion.
Shein has also previously indicated that it is moving away from selling as just an apparel brand to a marketplace platform. Reportedly, the company plans to roll out marketplaces in Mexico, Brazil, and the U.S., and is also looking to expand into the European market.
Also, a shopping app TEMU launched in the U.S. last year, offers significant discounts on a wide range of products. In addition, social media app TikTok, owned by Beijing-based ByteDance Ltd. has also entered the U.S. market with its store on the app, underscoring the influence of platforms originating from China.
As a result of these factors, Amazon is seeking to strengthen its position to take on price competition from Shien and other competitors. The company’s reduced sales commissions are expected to attract merchants who offer affordable clothing and maintain or expand its influence in that market.
It remains to be seen how Amazon will respond to market trends and how it will proceed in the fierce race against competitors.