Two weeks before Black Friday Amazon has quietly added a new section to the top of its mobile app. This is an area called Haul, available exclusively on mobile devices and offering products at very low prices, mostly shipped directly from China.
Haul is Amazon's response to the growing popularity of applications such as PDD holdings“Ago and fast fashion retailer Shein. Amazon told CNBC that Haul has seen millions of unique customer visits since it launched in November.
Like AgoHaul offers bargain items such as $9.98 sneakers, $5.99 kitchenware and $2.99 phone cases. Unlike Temu, Haul limits the price each offer $20. It offers free shipping on orders over $25, with increasing discounts the higher your cart value. This encourages shoppers to purchase several items at once, hence the name Haul.
“One of the really interesting things that Amazon did was to completely separate this site from the main Amazon site,” said Neil Saunders, managing director of GlobalData Retail. “There is a logic to this: They don't want consumers to switch to lower-priced goods.”
The trade-off for lower prices is slower shipping speeds. Instead of the one- or two-day shipping typically available to Prime members, Haul shipments take one to two weeks to arrive. Although Amazon has been courting Chinese sellers for years, it usually acts as an intermediary, stocking goods in advance from American warehouses. This increases shipping speeds as well as costs for Amazon, which are passed on to the consumer in the product price.
Haul and Temu keep prices low by relying on their existing network of China-based resellers who import low-cost individual products into the U.S. under de minimis provision. Although this customs exemption stands renewed federal controlcurrently allows importers to avoid paying duties and taxes on goods worth less than $800.
This leads to longer shipping times but lower prices. It's a trade-off that many Americans apparently accept, given Temu's explosive growth since its U.S. launch in September 2022. It's currently most downloaded free app IN AppleApp Store two years in a row.
“It's not just about fighting Temu,” Saunders said. “It's also about looking at opportunities in the lower-priced end of the market, which has grown very rapidly over the last few years across the retail spectrum.”
Other low-cost e-commerce sites filled with Chinese goods have seen explosive growth in recent years, including: Alibaba and newcomer TikTok Shop, which sellers willingly visit the site despite a potential ban.
All this success came despite public outcry against the business model's environmental impact and labor practices by Shein and other companies that have been reported to violate human rights. Shein did not respond to CNBC's request for comment.
In 2023, the House of Representatives report discovered that some of the items on Temu came from the Xinjiang region of China, where forced labor has led to accusations of genocide against the Uyghur people. In a statement, Temu told CNBC that it is “committed to ethical, humane and lawful business practices” and that its “business partners and third-party merchants must adhere to strict labor, safety and environmental standards.”
Amazon is there too during the investigation by the federal government due to high injury rates in its warehouses, although Amazon called the report that fundamentally defective. Additionally, a federal ruling in July it was determined that Amazon could be held liable for recalling defective goods.
None of this stopped the sales numbers from breaking records.
“Consumers don't put their money where their mouth is. They say they don't like the consequences of cheap products, but they still buy them en masse,” Saunders said.
Although Haul is only in beta, demand seems to outstrip supply. Haul sold out some items during its 50% off Black Friday sale. Amazon told CNBC it will expand its offerings to hundreds of thousands of items in dozens of categories in the coming weeks.
What does the future hold for Amazon Haul? Can upcoming political difficulties hinder the development of the budget e-commerce space? Watch the video above to learn more.