Source: Blog – Alliance for American Manufacturing
Amazon Prime packages being delivered in New York City. Photo by Beata Zawrzel/NurPhoto via Getty Images
Amazon, already awash with cheap imported items, is said to be copying the business model made popular by sites like Shein and Temu — and made possible thanks to a trade loophole.
Looks like Amazon is getting into the bargain basement business.
The online retail behemoth, already known for offering an array of imported items at cheap prices, is reportedly planning to unveil a new storefront filled with ultra-cheap items with the goal of competing with rivals like Temu and Shein. According to a scoop from The Information, the new site will set price caps for hundreds of items.
Here’s Gizmodo with the details:
Some price caps include $8 for jewelry, $9 for bedding, $13 for guitars, and $20 for sofas. Amazon doesn’t operate on a price cap system for its primary marketplace, so this is an entirely new approach it’ll be experimenting with on the new store. The products will be shipped from a fulfillment center in Guangdong, China.
Reportedly, the shipping timelines will be around nine to 11 days, and sellers will be charged between $1.77 and $2.05 for shipping a four to eight ounce item from the center. The Information compares these figures to the $2.67 to $4.16 fee that sellers pay for shipping items of the same weight from local warehouses under Fulfillment by Amazon.
Amazon’s new planned storefront, which is said to be called The Low-Cost Store, is perhaps a sign the retailer is feeling the pinch from Chinese companies like Temu, which sell incredibly cheap, possibly toxic items and ship them directly to consumers. Temu and Shein have managed to capture significant market share in the online retail space over the past few years with this business model.
But both companies also have been exploiting U.S. trade law to dominate the online retail space, and not enough has been done to stop them.
A loophole in trade law called “de minimis” allows imported packages valued under $800 to enter the United States duty-free, which means that Temu and Shein are able to bypass tariffs and trade inspections when they send their ultra-cheap items directly to customers. A 2023 report from the Select Committee on the Chinese Communist Party (CCP) found that the two companies send 600,000 packages duty-free to the U.S. every day (a figure that likely only has increased).
American manufacturers have been hit especially hard because of the de minimis loophole. According to the National Council of Textile Organizations (NCTO), 19 textile plants closed over the past year. For those of us who care about how things are made — and for the people making them — the fact that Amazon is now moving into the business model perfected by Temu and Shein is a bad sign of where things are heading.
As Fast Company put it, “no sofa should cost $20.”
There are obvious sustainability issues with such cheap products. Twenty bucks for a couch means that furniture, something that once lasted for generations, becomes disposable. And to make and sell something for that cheap, whether it is a piece furniture or a simple T-shirt, means that forced labor is likely involved:
“When we see a price like [a $20 sofa], it’s a red flag that maybe there’s some part of the supply chain for that product where we need to do further investigation,” says Shawn Bhimani, an assistant professor in supply chain and information management at Northeastern University. “Is it the material that is basically rock-bottom price and is that potentially because it’s coming from a place where that material can’t be sold anywhere else because of the risk of forced labor?”
Right now, Bhimani says, most Chinese cotton comes from a region where Uyghur people are forced to work. It’s illegal to import into the U.S., but some companies try to find ways around that. “What we track is how some of that material that ends up in products like sofas might be going through these back channels or other ways of reaching the supply chain that it makes it harder to trace,” he explains.
Closing the de minimis loophole is perhaps the most effective step in addressing these unfair practices, with Fast Company noting that if “customs laws or tariffs change, it’s possible that Amazon might decide not to move forward with the rumored store.”
The Biden administration recently announced that it will take action to reduce de minimis import volumes, a good step forward in addressing the loophole. While the specifics of the White House’s action are still being worked out, it’s believed that both Temu and Shein are likely to be able to weather whatever happens.
That means .ore robust Congressional action will likely be needed to effectively close the loophole for good, including via legislation like the Import Security and Fairness Act and the Fighting Illicit Goods, Helping Trustworthy Importers, and Netting Gains (FIGHTING) for America Act.
And until policymakers step in, it is almost certain that the retail race to the bottom will continue.
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