What: Amazon is setting ultra-low price caps for a new storefront to compete with discount retailers like Temu and Shein.

Why it is important: This strategic move by Amazon signals a shift in its approach to pricing and competition, aiming to capture market share from popular discount platforms by offering significantly lower prices.

Amazon is reportedly implementing strict price caps on products for a new low-cost storefront as it seeks to compete with discount rivals such as Temu and Shein. Amazon is limiting prices on various items, including jewellery at $8, guitars at $13, and sofas at $20. This initiative marks a significant shift in Amazon's strategy, as the company has traditionally not imposed such stringent pricing limits on sellers. The new storefront will ship orders directly from a facility in Guangdong, China, allowing Amazon to offer lower fulfilment fees for sellers.

This move is part of Amazon's broader effort to tackle competition from discount sites that have gained popularity due to their low prices. By setting these price caps, Amazon aims to attract cost-conscious consumers and increase its market share in the discount retail sector.

The introduction of these price limits comes amid signs of slowing retail sales growth for Amazon. In the second quarter, online store sales rose by only 5%, down from a 7% increase in the first quarter. This new pricing strategy could help Amazon revitalise its sales performance by appealing to budget-minded shoppers.

Amazon has yet to comment on these reports, but the implementation of such price caps could have significant implications for its business model and competitive positioning in the e-commerce industry.

Amazon to set ultra-low prices to compete with Temu