Amazon cuts fees on low-cost apparel to compete with Shein and Temu

© Reuters.

SEATTLE – In a strategic move to maintain its dominance in the U.S. online retail market, Amazon (NASDAQ:) has announced a significant reduction in fees for apparel-related products priced under $20. Starting January next year, items under $15 will be subject to a mere 5% fee, while those priced between $15 and $20 will incur a 10% fee. This is a substantial drop from the former uniform fee of 17%.

Amazon’s decision comes as it faces increasing competition from fast fashion brands such as Shein and Temu, which has disrupted the industry with its agile business model. Shein adds up to thousands of new products daily and is preparing for an initial public offering (IPO) with a valuation aimed at $90 billion, following a private-market valuation of $66 billion last week. The brand has become particularly popular among Gen Z customers by producing limited batches of clothing based on real-time customer interactions, thus keeping inventory levels low and waste to a minimum.

However, Shein’s rapid growth has not been without controversy. Allegations of forced labor and environmental damage have cast a shadow over the company’s operations. An attempt to mitigate these concerns with an influencer trip showcasing factory conditions backfired, attracting criticism for both the influencers involved and Shein itself. Despite this, Shein maintains that it invests in factory workers’ well-being by providing educational opportunities and ensuring safe work environments. They also claim that their suppliers’ wages are competitive within their regions.

The fast fashion industry faces calls for regulation, and Shein’s head of strategic communications Peter Pernot-Day has suggested initiatives such as recycling campaigns similar to those for plastics. He advocates for public-private partnerships to fund developments in sustainable textiles and chemical recycling technologies.

With its substantial lead over competitors like Walmart (NYSE:), Amazon is positioning itself to navigate through the challenges posed by new entrants like Temu. The e-commerce giant’s latest fee reductions are part of a broader strategy to support merchants and stay ahead in the highly competitive online marketplace.

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