Amazon prepares to go head to head with Shein ahead of its IPO

Amazon.com, Inc. is set to reduce fees for merchants selling apparel priced less than 20 US dollars as it prepares for a price war with Chinese fast-fashion giant Shein.

Earlier this week Amazon announced plans to cut merchant fees on apparel-related products priced under 15 US dollars to 5 percent from January 2024. Fees on apparel priced between 15 and 20 US dollars will be reduced to 10 percent, a significant decline from the previous commission of 17 percent on both categories.

Amazon's decision to lower its referral fees for sellers is an uncommon move, highlighting a strategic shift with no other similar reductions announced. A likely attempt to attract more merchants within the budget-value apparel sector, the announcement comes not long after reports of Shein filing for an IPO in the United States emerged.

“This will make Amazon way more competitive in the low-price apparel category because a dollar or two can make a big difference,” said Lucas Barnes, a former Amazon executive who founded PNW Web Marketing, a consulting firm to Bloomberg. “Amazon wants to let Shein spend all of its money offering discounts without losing too many Amazon Prime shoppers to the 9 US dollar hoodie.”

Amazon has reigned supreme within the US e-commerce landscape over the last two decades. This year, the online giant claimed the top spot among retailers in the US, securing more than a third of every dollar spent online (37.6 percent share of the market). This places it significantly ahead of its closest rival, Walmart Inc., by a factor of six (6.4 percent share of the market share), as reported by Insider Intelligence.

However, emerging challenges are now on the horizon for Amazon, with increasing competition from Shein and Temu.

Since its inception in 2012, Shein has revolutionized the fast fashion industry with its unprecedented approach. Offering clothing at unbeatably low prices and at an astonishingly rapid pace, Shein introduces as many as 10,000 new products daily on its website.

Leading the fast-fashion segment, Shein commands a staggering 50 percent of the segment sales - surpassing giants like H&M and Zara combined - and boasts a valuation of 66 billion US dollars. With Shein planning to hold an initial public offering in 2024 and Chinese shopping app Temu gaining more market share following its launch in the US last year, Amazon seems to be taking steps to safeguard its position as best as it can.