Amazon’s upcoming Low-Cost Store, a Temu-killer?

Amazon is quietly testing a low-cost storefront designed to compete with budget-friendly platforms like Temu. Here’s a quick rundown of what we know so far about this initiative and its impact on Amazon sellers.

What is the Amazon Low-Cost Store?

Amazon's new low-cost store offers invite-only access to select sellers, with products fulfilled from a dedicated Amazon warehouse in Dongguan, China. Unlike standard Amazon listings, these products will only be accessible through a specialized storefront within the Amazon app, providing a unique, low-cost shopping experience separate from the main Amazon catalog.

Who Can Join and What Are the Eligibility Criteria?

This program is exclusive and invitation-based. Sellers must meet specific eligibility criteria, though it's unclear if participation is limited to Chinese sellers or includes U.S. sellers with Chinese manufacturing. Products must be listed under the brand name “Generic” and comply with strict criteria on weight, dimensions, and product type.

Here is a detailed breakdown of the eligibility criteria:

• Fulfillment Location: All orders are fulfilled from Amazon's warehouse in Dongguan, China, with no option for seller fulfillment. This setup allows Amazon to control logistics and reduce costs.

• Brand Name Requirement: All items must be listed under the brand name “Generic.” Sellers cannot use their own brand names, which positions this store as a generic, low-cost marketplace without branded competition.

• Product Restrictions:

  • Weight and Dimensions: Eligible items must not exceed 1 lb in weight or 14 x 8 x 5 inches in size. These restrictions likely help Amazon manage logistics and reduce shipping costs.

  • Product Type: Items cannot contain batteries, be ingestible (e.g., food), be intended for skin application (e.g., lotions), or require cross-border compliance documentation (e.g., baby, children's, or pet products). These limitations reduce the complexity of compliance for international shipping.

• Maximum Price Limits: Amazon has capped the price points based on product type, with specific limits for nearly 700 types of products. Here are a few examples:

  • Clothing: Maximum $14 (e.g., shorts)

  • Personal Care: Maximum $12 (e.g., hair trimmers)

  • Jewelry: Maximum $10 (e.g., necklaces)

  • Miscellaneous Accessories: Maximum $8 (e.g., calculators), $7 (e.g., toothbrush holders)

  • The highest allowable price for any product category in this store is $20. Listings above these prices will be deactivated to maintain the budget-friendly premise.

• Listing Creation: Sellers can only create listings using the spreadsheet upload tool. The standard List Your Products tool and Listing API are not supported, meaning sellers have limited flexibility in managing these listings.

How much does it cost for sellers?

Fulfillment fees in this program start at $0.50 for lightweight items, increasing with product type and weight, plus a $0.40 monthly storage fee per cubic foot. Apparel has higher fees, and items over 4 ounces incur additional charges. Returned items aren’t eligible for resale and are instead liquidated or donated.

These fees are significantly lower than standard FBA rates, but the tradeoff is a slower delivery time of 1-2 weeks compared to the usual 1-3 days. For participating sellers, the key question will be: what’s the profit margin after factoring in this new price and cost structure?

What’s the impact on 3P Sellers?

The new Amazon store focused on low-cost generic goods poses both risks and opportunities for 3P sellers:

Risks:

• Heightened competition on sub-$20 products as Amazon handles inventory/fulfillment

• Potential loss of visibility for branded 3P listings in affected categories

Opportunities:

• Shift product portfolio toward higher-margin, specialized items

• Differentiate through stronger branding, quality, and customer service

The key is to pivot away from commodity low-cost goods and double down on your unique value proposition as a 3P seller. This will be crucial to stand out and thrive as the Amazon marketplace grows more competitive.