Is Amazon Gearing Up for a Fashion Showdown? Drastic Fee Cuts Signal a New Retail Battlefront

Amazon.com Inc AMZN is significantly lowering fees for sellers of low-priced clothing, marking a competitive move against Chinese fast-fashion company Shein. 

Previous reports indicated Shein's shift from selling its branded apparel to becoming a marketplace platform. 

Shein launched its marketplace in Mexico, Brazil, and the U.S., with plans to expand into Europe.

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Reportedly, Shein has confidentially planned to go public in the U.S. The fashion platform will likely go public at a valuation of up to $90 billion.

Starting in January, Amazon will charge only 5% for clothing under $15 and 10% for items priced between $15 and $20, a steep drop from the previous 17% rate. 

This reduction in referral fees, uncommon for Amazon, is targeted at attracting sellers in the budget clothing segment, directly challenging Shein's success with its inexpensive apparel, Bloomberg reports.

Lucas Barnes, a former Amazon executive and founder of PNW Web Marketing, notes that this strategy makes Amazon more competitive in the low-price apparel market, countering Shein's discounts and retaining Amazon Prime customers.

Amazon dominates U.S. e-commerce but faces emerging challenges from companies with Chinese connections, including the rapidly growing Shein, Temu, and TikTok's U.S. shopping platform. 

Shein is preparing for a 2024 IPO, and TikTok launched a U.S. shop earlier this year.

Amazon's focus on budget clothing comes amidst its struggles in the apparel sector, highlighted by the recent closure of its Amazon-style clothing stores in California and Ohio, which opened only in 2022. 

The company announced its decision to reduce seller fees in a blog post without specific reasons for targeting only lower-priced items in the apparel category.

Recently, e-commerce juggernaut Alibaba Group Holding Limited BABA lost the mantle of a most valuable e-commerce company to its 8-year-old rival PDD Holdings Inc PDD. PDD partly owes its success to the shopping app Temu. 

Price Action: AMZN shares closed higher by 1.41% at $146.88 on Tuesday.