Intensifying Logistics: The Competition Between Amazon, Temu and SHEIN Intensifies Again | Focus Analysis

Written by Hu Yiting

Edited by Yuan Silai

Using its own advantages, Amazon once again confronts rivals such as Temu and SHEIN.

Recently, Amazon announced that it will launch a new end-to-end supply chain service in October, initially open to all US sellers, and it is expected to expand globally by the end of the year.

This service further strengthens the managed logistics aspect. Sellers only need to input product information and pickup locations, and Amazon will be responsible for carrier pickup, inventory consolidation, strategic replenishment, and distributing products to the distribution center closest to the customer.

In addition, this service also offers sellers a comprehensive rate discount for warehousing and distribution in the United States (AWD), including a 25% discount on AWD warehousing fees and a 15% discount on AWD transportation and processing costs.

This indicates that while Temu and SHEIN are busy breaking through the bottleneck of small package shipping, Amazon will once again strengthen its own barriers with the help of logistics.

Increasing investment in logistics is Amazon's long-term strategy. On December 12 last year, Amazon had already announced the launch of the Amazon Supply Chain Overall Solution (Supply Chain by Amazon), where sellers retain the autonomy of product selection, pricing, and gameplay, while Amazon is responsible for its logistics and distribution.

Among them, the Multi-Channel Fulfillment (MCF) service section has also been upgraded and accelerated in September this year. With Amazon's increasingly perfect logistics warehouse and distribution layout in the United States, the achievable standard (Standard) and expedited (Expedited) delivery times have been shortened by 1 - 2 days, while the rates remain unchanged.

Behind the improved timeliness is a significant investment. This year, Amazon announced that its new distribution center built in New Mexico, the United States, has been completed and put into use. It took two and a half years to finally complete the center, costing more than 300 million US dollars. Outside the United States, Amazon also announced an additional investment of 10 billion euros in Germany to further expand the coverage of its logistics network and cloud infrastructure.

During Amazon's strengthening of logistics, Temu and SHEIN have shifted their focus to the semi-managed model for continuous growth. After attracting sellers with warehousing and distribution resources to join, these two rising stars may further threaten Amazon's dominant position, and the market pattern has already changed.

Consolidating Advantages

With the continuous growth of the cross-border e-commerce volume, sellers and consumers have a strong demand for faster and more stable logistics services, and the fierce competition among platforms has also focused on this. Logistics has always been Amazon's strength, and it is currently using this to deepen its moat.

At present, the cross-border e-commerce has entered the trillion-dollar scale. In China alone, data released by the Ministry of Commerce in June this year shows that the scale of China's cross-border e-commerce trade has increased by more than 10 times in the past five years, and the relevant entities have exceeded 120,000.

The demand for logistics services from merchants is far beyond the early stage. Based on this, since Amazon launched the FBA warehousing service in 2007, it has been continuously expanding the warehousing area for more than ten years. Currently, the FBA warehouse has reached tens of millions of square meters and is spread all over the world.

In addition to expanding the warehouse, Amazon has also invested heavily in improving efficiency. Taking its core market, the United States, as an example, Amazon has carried out multiple logistics reforms.

In May last year, Amazon stated publicly that it had comprehensively reformed its logistics network to shorten the transportation distance of goods in the United States. Instead of the previous national distribution model, it divided the United States into 8 regions for independent operation to reduce the cost of cross-regional delivery. Amazon said that about 76% of customer purchases in 2023 came from distribution facilities in their region, compared to only 62% the previous year.

In addition, Amazon's demand for logistics timeliness is almost all-round. Inside the warehouse, in order to improve management efficiency, it launched a new Sequoia ("Redwood") system last year to integrate multiple robots to complete the process of transferring inventory into turnover boxes. This update enables it to reduce the delivery time by up to 25% and improve the inventory management efficiency by up to 75%.

Judging from the results, this series of logistics reform measures have already appeared in last year's Prime Big Deal Days event. Amazon pointed out in its financial report that US Prime members purchased more than 25 million items on the day or the next day of the event, and hundreds of thousands of items were delivered within four hours after purchase. This also broke the previous record and became the fastest delivery speed in Amazon's 29-year history.

In addition to coordinating with sales, the logistics sector can also provide Amazon with hundreds of billions of dollars in income to complete the e-commerce ecosystem. In the list of the top 100 logistics companies in North America in 2024 published by Transport Topics, a third-party logistics transportation industry publication, Amazon ranked first with a gap of 140.053 billion US dollars, which is equivalent to its overall revenue in the first quarter.

It can be seen that the acceleration of logistics and warehousing construction not only increases the stickiness of sellers but also has become an important business sector for Amazon's revenue. When facing the strong attack of new rivals, continuing logistics reform is an important strategy.

Upgraded Competition

After opening the global e-commerce market with low prices, this year, platforms such as Temu and SHEIN are no longer satisfied with the white-label business. While recruiting sellers with stronger brand power and local stocking capabilities, a new round of competition with Amazon has also begun.

Relying on the fully managed model to quickly cover the market, Temu has opened more than 70 sites worldwide in two years, catching up with Amazon.

Data from SensorTower shows that in the ranking of global shopping APP downloads in 2023, SHEIN and Temu ranked the top two, with download volumes increasing by 56% and 861% respectively year-on-year; while Amazon ranked behind, with a year-on-year download volume decrease of 22%.

While experiencing growth setbacks, Amazon also faces more intense competition from new platforms for sellers, and a new battle under the semi-managed model has already been launched.

In the first half of this year, platforms such as Temu, SHEIN, and AliExpress officially launched the semi-managed model and carried out vigorous investment promotion in China. Among them, Temu and SHEIN have a strong demand for medium and large-sized goods, emphasizing the sellers' self-delivery and local fulfillment capabilities. As an attraction, Temu waives the entry commission and provides natural traffic. Up to now, both Temu and SHEIN have rapidly rolled out the semi-managed business in the US and European markets.

Brand sellers who were originally more cautious about Temu are also gradually testing the water with its semi-managed model. According to the Temu semi-managed investment promotion team, brands such as Huawei, Lenovo, Li-Ning, and Yonex have already settled in, selling products in categories such as 3C electronics, outdoor, and pet supplies. Previously, most of them were core sellers of Amazon, and under the recruitment of new platforms, they tend to diversify sales channels.

In addition to competing for sellers, the competition between new and old platforms in logistics fulfillment is also unfolding. Previously, the free standard delivery time of Temu generally required 8 - 12 days; under the semi-managed model, it requires overseas-stocked sellers to fulfill the order within 7 working days, and a fine of 5 US dollars will be imposed for each order that exceeds the time limit.

Although the strict fine mechanism is criticized by many practitioners, it will undoubtedly screen out a group of more powerful sellers for Temu and improve the delivery timeliness of its multiple categories.

And this will form a new competition for Amazon in both sellers and users. With tens of millions of square meters of warehousing configuration and regional distribution, it took Amazon many years of investment to achieve same-day or next-day delivery during major promotions in the United States. Currently, new platforms such as Temu are using third-party logistics and warehousing facilities to try to narrow the gap with Amazon with a significant price advantage.

In the future, the competition among e-commerce platforms may become more intense, and the competition in multiple dimensions such as product quality, global fulfillment, and after-sales capabilities remains to be unfolded.