548: Amazon Declares War On Temu And Screws All Amazon FBA Sellers

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You’re listening to the My Wife, Could Her Job podcast, the show where I cover all the latest strategies and current events related to e-commerce and online businesses. And today, I’m gonna talk about something that Amazon just announced that’s gonna have a rippling effect across the entire e-commerce industry and also cover what you must do right now to prepare. But before we begin, if you haven’t picked up my Wall Street Journal bestselling book, The Family First Entrepreneur yet, it’s actually available on Amazon at 38 % off right now. My book will teach you how to achieve financial freedom.

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by starting a business that doesn’t require you to work yourself to death. Plus, you can still grab my free bonus workshop on how to sell print on demand and how to make passive income with blogging, YouTube, and podcasting when you grab the book over at mywifequitterjob.com slash book. So go over to mywifequitterjob.com slash book, fill out the form, and I’ll send you the bonuses right away. Now onto the show.

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Welcome to the My Wife Could Her Job podcast. Now Amazon just announced they’re going to compete directly against Tmoo with a brand new low cost option of unbranded goods shipped direct from China and Amazon FBA sellers are going to be screwed. Basically, Amazon is going to offer the exact same service that Tmoo does, selling cheap, generic Chinese products that take about seven to 11 days to be delivered to the U.S. directly from China. So in this episode, I’m going to give you my take on exactly what is going on.

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the implications on the third party Amazon seller community and what you must do right now to prepare yourself as an e-commerce seller. But I’m just going to say this upfront right now, it is not looking good. But first off, what exactly is happening and what are the details of what’s going on? Well, for the past two decades, Amazon has focused on the speed of delivery. By selling cheap stuff that arrives quickly, Amazon has built the most expansive and optimized fulfillment network the United States has ever seen.

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capable of delivering almost any product imaginable to consumers within two days. There are roughly 180 million Americans who are Amazon Prime subscribers, which is at an all-time high as of this year. But recession is looming, and right now, Americans care more about saving money than the speed of delivery, and that’s where sites like Tmoo and Shien have been destroying Amazon’s market share. Now, in a prior video I posted on my YouTube channel, I reported that Amazon’s revenue from apparel is down 30 % year over year.

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and tens of millions of Americans have started shopping on Shien and Tmoo instead. If you’re not familiar with these two platforms, Tmoo and Shien are Chinese-owned e-commerce platforms that ship products directly from China with no middlemen. The shipping takes longer, but the prices are lower. For example, there’s this floor mat that, for example, there’s this floor mat on Tmoo that’s $1.06, but an identical floor mat on Amazon is being sold for $40.

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Now is getting a product in two days versus 11 days worth paying 40x for the product? Well, Americans are speaking with their wallets and saying no. They are willing to wait a week to get their stuff if they can save money. Now, Tmoo’s core strengths are household items and electronics, whereas Shien specializes in women’s clothing and accessories. And together, these two Chinese companies are decimating Amazon’s sales. But last week, Amazon declared war on these two Chinese platforms

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by opening a new online store for low-cost products shipped directly from China. And according to their announcement, the rollout is going to occur in stages. To start, Amazon’s going to first focus on unbranded clothing and household items priced less than $20 and weighing less than a pound. And as we speak, Amazon is rounding up and encouraging Chinese factories to sign up for this program where Amazon will ship the orders from China directly and arrive in 9 to 11 days.

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And compared to one to two day prime shipping, nine to 11 days feels like forever. But like I said already, Americans are speaking with their wallets and care less about the delivery speed. And according to Satista, Timo was the most downloaded e-commerce app in 2023, surpassing Amazon with over 120 million downloads. Meanwhile, according to GWS Magnify, Timo had 82.4 million active shoppers on its app in September of 2023.

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up from only 4.6 million the prior year. And by comparison, eBay drew only 40 million online shoppers that month, which is about half of Tmoo, while Tmoo ran neck and neck with Walmart, which had 85.5 million online users. And while Amazon was still number one, with 142 million monthly users in September, Tmoo already has more than half of Amazon’s traffic after just two years. But here’s where the story gets worse. Once Amazon starts selling cheap,

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unbranded stuff direct from Chinese sellers, it’s going to be hard for third-party sellers in the United States to compete. As of right now, Chinese sellers do not have to pay import duties or taxes on the products they sell direct from China due to the de minimis rule. This rule states that products can be imported into the US without paying taxes or tariffs as long as the package is worth less than $800. Second, selling direct allows Chinese factories to bypass the middleman altogether

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and shipped directly to consumers in the United States. When Tmoo first launched in 2022, only a handful of the same Chinese suppliers on Tmoo were selling on Amazon. However, as of this past December, there was roughly a 10 % overlap between Tmoo sellers and Amazon sellers. And thanks to this new Amazon program, it’s gonna be 50 % or more. Heck, Chinese sellers already make up over 50 % of the top sellers on Amazon, and who knows, it could reach 75 % or more.

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once all of them start shipping direct from China and not have to pay taxes. Right now, if you search for the same product on both Amazon and Tmoo, you’ll find that many of them are exactly the same, except Tmoo is many times cheaper. Now I already talked about the foam floor mat earlier, which was 40X cheaper. And recently I did a search for neck fans and I found a neck fan, two identical neck fans, that was $23 on Amazon, but only $6.95 on Tmoo.

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The products being sold on both platforms are the same. Why are Amazon’s prices higher? Well, it’s because all FBA sellers on Amazon have to pay referral fees, import fees, duties, tariffs, and Amazon’s hefty FBA fees. And just this year alone, Amazon introduced a slew of new fees and increased the rates of FBA. For example, Amazon now forces all sellers to pay an inbound placement fee. Basically, you must pay a fee between 21 cents to $6 per unit

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for Amazon to accept standard and large bulky products into their warehouse. Now this fee is supposed to reflect the cost of distributing inventory to multiple fulfillment centers, but whatever. In addition, they announced a low inventory fee. In the past, you only had to worry about having too much inventory in stock, but now you have to pay hefty fees if you have too little inventory as well. Now how do you avoid these fees? Well, you can pay for Amazon’s warehousing and logistics.

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This service allows you to waive your placement fees by holding your products in Amazon’s third party warehouse where they are drop shipped on demand directly to a fulfillment center. So basically, Amazon is forcing everyone to use their end to end logistics services now and the fees all add up to a lot of money. Now compared to a Chinese seller paying a couple bucks to have a product shipped direct from China with no taxes or fees, a third party Amazon seller importing from China and then selling on Amazon

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has no chance of matching pricing. And then finally, there’s the Amazon factor. Timo and Shien are hurting Amazon right now, so Amazon will be incentivized to show off these brand new cheap products to fight back. Can you imagine paying money to advertise your Amazon listing only for Amazon to display cheap unbranded Chinese products under your own product for one third the cost? This has already happened in the past with Amazon’s own branded products. Now the price difference is gonna be much more dramatic. Sure.

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Amazon has said that the new El Chippo mall will appear in its own section on the Amazon website. But do you really think that Amazon’s going to hide this section from regular Amazon buyer traffic? No way. Remember, Amazon makes money no matter what, whether the sale is coming from you or a Chinese seller shipping direct from China. Do you really think that these cheap Chinese products are not going to show up in regular Amazon search? Not a chance. So here’s what’s going to happen. A customer will do a search for your product.

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and find ridiculously cheap alternatives right next to your higher price listing. It is next to impossible to start a brand on Amazon, so your brand will be pretty much meaningless in the eyes of the consumer. And I hate to say it, but US-based Amazon FBA sellers are in trouble. On one hand, Amazon is charging three-piece sellers placement fees, referral fees, inventory fees, pick and pack fees, and here comes a Chinese seller who doesn’t have to pay for any of that stuff, and they have the pricing advantage.

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I really don’t see how this can possibly end well. The real question is, how can you fight back? Well, for many Amazon sellers, they’re going to have to rethink their entire product portfolio. If you’re selling generic stuff on Amazon right now, you’re in big trouble. Someone from China will undercut you in price and you will not be able to compete. Instead, you need to think about products that cannot be easily sold from a seller in China. For example, I have a student in my class that sells skincare products.

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Well, would you ever buy skincare products from a no-name company in China at one-tenth the cost? Skincare consumers will be less price conscious because who knows what chemicals are in the Chinese formulation. Now from my store over at Bulmabilindus.com, we’ve doubled down on personalization. Sure, Chinese sellers can copy every single product that I sell, but what they can’t do is easily personalize a custom product for the consumer in a timely manner. We provide custom embroidery, custom printing, custom pretty much everything.

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And admittedly, it is a pain in the butt. But what’s a pain in the butt for you is a moat for your business. Another thing to consider is that Amazon is only doing this for low end products for now. And I’ve said this time and time again on many of my podcast episodes. If you sell online, you want to target the high end customer. You want your products to be premium so you can make more money per sale, which makes everything else easier. You make more money, customer service is easier, and advertising is more profitable.

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I purchased handkerchiefs from many competing sellers on Tmoo and their quality is atrocious. So am I worried that someone will buy these cheap hankies for a wedding? Highly unlikely and they don’t provide monogramming either. Finally, in order to succeed, you’re going to have to learn how to build a brand. Now technically, the definition of brand is just a name that identifies your goods or services. But slapping your brand on a product is meaningless. You have to create content to build an audience around your brand and unfortunately,

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That’s not something you can really do on Amazon. You need to have your own website. The best way to build a brand is by triggering the emotions of your customers. If there’s one thing that I’ve learned from selling online for the past 18 years, it’s that people buy based on feelings and not logic. Price isn’t everything. Emotions are everything. Let’s take Dr. Squatch. This company sells soap for men, which is a commodity product. And on Tmoo, you can actually buy 50 bars of soap for 79 cents.

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But Dr. Squatch charges eight bucks for a single bar of soap. And how is this possible? Well, it’s because Dr. Squatch has mastered the art of emotional marketing. If you look at a short clip of any of their commercials, Dr. Squatch doesn’t sell soap. They’re really selling sexual companionship. Another one of my favorite brands is True Classic Tees. This company literally sells plain colored t-shirts for 30 bucks a piece. And on Tmoo, you can literally buy eight shirts for $13.49.

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But if you watch any true classic tees commercial, you’ll immediately understand why they are a nine figure company today. As a guy, I want to look buff and hide my Buddha belly, so I’ll happily shot 30 bucks for what I perceive is a higher end shirt. The key to succeeding in e-commerce is marketing and branding. And guess what? These are by far the worst attributes of selling on Amazon. You can’t really build a brand on Amazon. You can’t really market effectively on Amazon, so your options on Amazon are limited.

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On Amazon, it’s all about price, and with these new Chinese sellers selling direct on Amazon, you’re just not going to be price competitive. The only real way to succeed in e-commerce today is to own your own web presence and create content to build your brand. Your goal should also be to sell in as many different marketplaces as possible to diversify your sales. Well, now that you understand what’s going on with Amazon, I filmed a number of videos on my YouTube channel that outline exactly what I would do today if I were to start all over again.

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and you can find those in the show notes. Hope you enjoyed this episode. Now I didn’t mean to come across as so negative, but this can’t be good for Amazon FBA sellers. For more information and resources, go over to mywifequitterjob.com slash episode 548. And if you’re interested in starting your own e-commerce store, head on over to mywifequitterjob.com and sign up for my free six day mini course. Just type in your email and I’ll send you the course out away. Thanks for listening.