Amazon plans $20 sofa price cap in aggressive move to challenge Temu

Back in July, we reported on Amazon’s plans to take on emerging e-commerce giants like Temu and Shein. Fast forward four months later, and it looks like the retail giant is getting ready to launch a new low-price storefront to directly compete with these budget platforms.

According to The Information, Amazon has set price caps for its upcoming low-price section as part of an aggressive strategy to challenge low-cost e-commerce players. Internal messages from Amazon to merchants, viewed by The Information, reveal strict limits on what merchants can charge: $8 for jewelry, $9 for bedding sets, $13 for guitars, and $20 for sofas.

“As Amazon prepares to launch a new low-price storefront to combat Temu, it’s imposing severe price caps on what merchants can charge for their wares on the outlet, including an $8 limit for jewelry, $9 for bedding sets, $13 for guitars and $20 for sofas,” The Information reported, citing Amazon’s messages to merchants.

These caps are designed to ensure Amazon remains competitive with the bargain-basement prices on Temu, the two-year-old site owned by PDD Holdings. Temu’s rapid success has forced Amazon to rethink its e-commerce approach, marking a significant shift for the company, which hasn’t historically enforced rigid price limits for sellers.

This new strategy comes as Amazon faces growing competition from apps like Temu, which topped the U.S. download charts in 2023. Traditionally, Amazon has focused on fast delivery through its U.S.-based warehouse network, but the new storefront will adopt a different approach. By incorporating direct shipping from China, Amazon aims to better compete with discount platforms like Temu and Shein, both known for offering ultra-low prices on fashion and household goods.

In July, The Information reported that Amazon introduced this initiative during a private meeting with Chinese sellers, where it outlined plans to stock affordable items like phone cases, massage tools, and clothing. The section is expected to go live this fall, with delivery times ranging from 9 to 11 days—much longer than Amazon’s usual fast shipping options.

According to slides shared during the meeting, the new marketplace will feature unbranded fashion, home goods, and everyday necessities. Amazon began signing up merchants this summer, with plans to start accepting inventory in the fall.

CNBC also confirmed that Chinese suppliers will ship directly to U.S. customers, foregoing Amazon’s traditional next-day delivery model. Instead, customers can expect shipping times of 9 to 11 days.

An Amazon spokesperson commented, “We are always exploring new ways to work with our selling partners to provide customers with more selection, lower prices, and greater convenience.”

Temu’s Rapid Growth

Temu, which entered the U.S. market in September 2022, quickly became a major player. In 2023, it was the most downloaded app in the U.S., amassing 103 million downloads—nearly double that of TikTok.

Headquartered in Boston, Temu has expanded into 22 countries, including key European markets such as France, Germany, and the UK. The app has also topped download charts in these regions, reflecting its growing global presence.

Temu is owned by Pinduoduo, a Chinese e-commerce company founded in 2015 by former Google employee Colin Huang. Often compared to a blend of “Costco and Disneyland,” Pinduoduo went public in 2018, raising around $24 billion and gaining backing from Tencent and Sequoia Capital.

With Amazon’s low-price section set to launch soon, the competition between the e-commerce giants is heating up, signaling a potential shift in the landscape as Amazon takes on its low-cost rivals.