Smart Warehouse: Amazon’s response to Temu and Shein

Amazon’s position in online retail is coming under increasing pressure from Chinese platforms such as Shein and Temu, partly because some of their products are shipped directly from China and can therefore often be sold at lower prices. Stricter customs rules in the US gave Amazon a brief window of relief. Temu and Shein, however, responded by expanding their warehouse infrastructure in the United States, which not only helps them work around some customs-related hurdles but also enables faster delivery times. As the South China Morning Post reports, Amazon is now pushing back with a new logistics model designed to make selling and shipping through Amazon far more attractive for Chinese businesses.

To that end, the company has opened its first Smart Warehouse in Shenzhen. The facility is meant to give Chinese retailers access to an integrated supply chain that extends all the way to Amazon’s US warehouse network. The aim is to simplify the sales process and reduce costs for merchants using Amazon. The new Global Warehousing & Distribution Centre takes over several steps that sellers previously had to handle on their own. These include storing goods in China, preparing and processing customs paperwork, shipping products to the US and forwarding them to Amazon fulfillment centers there.

According to Amazon, the model can reduce storage costs by up to 45% compared with relying entirely on warehousing in the US. Combined with Amazon Global Logistics, restocking shipments to the American market are also expected to arrive up to seven days faster. Whether Amazon can actually deliver on those promises should become clear soon enough. According to the South China Morning Post, the facility in Shenzhen is not expected to remain the company’s only Smart Warehouse. Amazon is reportedly planning further expansion into the Yangtze River Delta and is also considering Europe and Japan over the longer term.

If the model proves successful, it could alter the balance of power in online retail. Instead of competing primarily on price, companies may increasingly be forced to compete on control of the supply chain. In that scenario, Amazon would be offering Chinese retailers an alternative to Temu and Shein – one that still allows them to manufacture cheaply while also benefiting from Amazon’s infrastructure and reach. Temu and Shein, in turn, would likely accelerate the expansion of their own warehouse and shipping networks to avoid losing their advantage in price and delivery speed.