Case Study Merchant Perspectives: Amazon Sellers Selling on Temu
Why a Texas Toy Merchant Chose Temu Over Amazon
In a recent interview with Bloomberg, Texas-based toy merchant Molson Hart shared his insights on shifting from Amazon to the rising e-commerce platform, Temu. As the founder of Viahart, a company specializing in plush toys and other products, Hart has navigated a tough year marked by declining sales, rising costs, and shrinking profit margins.
Why the Move to Temu?
For over a decade, Hart relied heavily on Amazon, with nearly 98% of his revenue coming from the platform at one point. But in August, he made his first sale on Temu, a China-based platform expanding its footprint in the U.S. Despite facing criticism for its potential impact on local industries, Hart sees Temu as a valuable alternative.
“I understand the government's concerns, but we need other options,” said Hart, who previously testified before the House Small Business Committee about Amazon's dominance.
Sales and Profit Margins: A Game Changer
Hart's transition to Temu has already shown promise. For instance, during October 2024 , his best-selling plush black cat toy sold for $18 on Amazon, yielding about $7 in profit. On Temu, the same toy sold for $14, but Hart earned over $8 per sale. While Temu's extended shipping times—up to five business days—contrast with Amazon's faster delivery, the lower fees make it more profitable for sellers.
“Even though prices are higher on Amazon, we make more money on Temu,” Hart explained.
In just three months, Temu outperformed Hart's sales on platforms like Walmart, eBay, Target, and even his company's website. Initially exclusive to select U.S. businesses, Temu opened its platform to all U.S. sellers in November following an application and review process. A company spokesperson confirmed they have been “flooded” with applications.
Temu's Competitive Edge
Temu offers an enticing alternative for U.S. sellers. Hart, who imports goods from China, Indonesia, and Vietnam, pays U.S. tariffs when his shipments arrive. While Temu doesn't exempt him from these fees, its lower costs help level the playing field against Amazon's tight margins.
“Temu is a strong competitor to Amazon,” Hart said, noting how it provides American businesses a much-needed alternative in the e-commerce landscape.
Amazon Responds
Amazon spokeswoman Maria Boschetti highlighted that the platform allows independent sellers to set their own prices and offers tools to help them remain competitive. Amazon charges a 15% fee or less in most categories, which covers these resources.
A Bright Spot for Sellers
As the holiday season approaches, Hart is optimistic about his partnership with Temu. The platform's lower fees and increasing reach could signal a shift for small businesses looking to diversify their sales channels.
Here are four key pain points experienced by the seller in this case:
High Dependency on Amazon: The seller was overly reliant on Amazon for revenue, with 98% of sales coming from the platform at one point, leaving the business vulnerable to platform-specific policies and market shifts.
Rising Costs and Reduced Profit Margins: Increased operational costs, including tariffs and fees, coupled with intense competition, led to shrinking profit margins, making it harder to sustain the business.
Limited Sales Recovery Post-Decline: Despite years of success, the seller faced a sharp decline in sales across the industry and struggled to recover, particularly in a challenging economic environment.
Lack of Competitive Alternatives: The absence of viable e-commerce platforms to compete with Amazon left the seller with limited options to diversify sales channels and reduce operational risks.
Understanding the Competitive Landscape
The Rise of TEMU
TEMU quickly gained traction in the U.S. market by offering low-priced items and a user-friendly shopping experience. Unlike Amazon, TEMU appeals to price-sensitive, bargain-seeking consumers. Hart's experience illustrates this shift; he found that selling on TEMU allowed him to retain a larger profit margin compared to Amazon, despite the lower retail price.This indicates that TEMU is not just an alternative but a viable competitor that can reshape market dynamics. Amazon sellers must face the reality of the rise of TEMU, embrace the change and challenge.
Amazon's Fee Structure
Amazon's fee structure can be burdensome for sellers, often comprising around 15% in commissions along with additional costs related to fulfillment and advertising. For many sellers, these fees significantly eat into profit margins, especially in a climate where operational costs are rising. Hart's decision to diversify his sales channels reflects a growing sentiment among sellers who feel squeezed by these high costs.
Strategic Responses for Established Sellers
Embracing Multi-Channel Selling
One of the most effective strategies for established sellers is to adopt a multi-channel approach. By diversifying sales across multiple platforms—including TEMU, eBay, Walmart, and others—sellers can mitigate risks associated with over-reliance on any single platform. This strategy not only helps stabilize revenue streams but also allows sellers to tap into different customer bases and market segments.
Optimizing Pricing Strategies
In light of TEMU’s competitive pricing model, established sellers should reevaluate their pricing strategies across platforms. Hart’s experience shows that even with lower prices on TEMU, he could achieve higher profitability due to reduced fees. Sellers should conduct thorough market research to understand price elasticity and consumer behavior on different platforms, enabling them to set competitive prices while maintaining healthy margins.
Enhancing Brand Value
As competition intensifies, building a strong brand becomes increasingly important. Established sellers should focus on creating a unique brand identity that resonates with consumers. This can be achieved through storytelling, quality assurance, and exceptional customer service. By fostering brand loyalty, sellers can differentiate themselves from competitors like TEMU that primarily compete on price.
Leveraging Digital Marketing and Social Media
Utilizing digital marketing strategies is crucial for enhancing visibility and attracting customers beyond traditional marketplaces. Sellers should invest in social media marketing, influencer partnerships, and content marketing to engage with potential customers directly. By showcasing product benefits and building community engagement online, sellers can drive traffic to their listings on multiple platforms.
Monitoring Market Dynamics
Competitive Analysis
Staying informed about competitors is essential for adapting strategies effectively. Sellers should regularly analyze competitors’ pricing strategies, promotional activities, and customer feedback. This intelligence allows them to anticipate market trends and adjust their offerings accordingly.
Adapting to Consumer Preferences
Consumer preferences are continually evolving, especially in response to economic conditions and shopping habits. Sellers must remain agile by monitoring these shifts and adapting their product lines accordingly. For instance, during peak shopping seasons or economic downturns, introducing limited-time offers or value packs can attract budget-conscious consumers.
In conclusion, established Amazon sellers must strategically navigate the challenges posed by emerging platforms like TEMU while optimizing their operations on existing marketplaces. By embracing multi-channel selling, optimizing pricing strategies, enhancing brand value, leveraging digital marketing, and closely monitoring market dynamics, sellers can position themselves for sustained success in an increasingly competitive e-commerce landscape. The ability to adapt quickly and effectively will be crucial as the retail environment continues to evolve. This version provides a deeper analysis of the situation faced by established Amazon sellers while incorporating strategic insights relevant to navigating the competitive landscape introduced by TEMU.
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