With profits down 80%, Amazon sellers start using Temu to test their products

Amazon sellers have found a new way to operate ...

As launching new products on Amazon becomes more and more expensive, some sellers have begun to try testing products on Temu, and they say that testing on Amazon is not as profitable as on Temu. Industry insiders have different opinions on this. Can testing products on Temu really work?

The use of Temu to test products also reflects a fact: Amazon sellers' profits are declining. Before the peak season, Amazon's price wars in many categories were fierce, and the prices of a large number of products dropped by half. Many sellers' orders did not decline, but their profits fell by 50% to 80%.

Testing products on Temu, this generation of Amazon sellers really knows how to play

Previously, many Amazon sellers found that their products were "copied" to Temu, and with the help of low prices, they sold hundreds or even more than 1,000 orders a day, which was better than their own sales on Amazon. Most of these products moved to Temu were priced much lower, but the prices of the products were the same as those on Amazon. Some sellers even found that the same products were sold at a higher price on Temu than on Amazon, and the sales volume was considerable.

Therefore, some Amazon sellers have found a new way of operation - testing products on Temu . The specific logic is: the cost of testing new products on Amazon is not low. After taking into account advertising fees and various other expenses, it is finally found that the profit is not as high as Temu. Some sellers are ready to place a sample order for their products. They will go to Temu first. If the product has a considerable number of orders, it proves that there is consumer demand, and then they will go to Amazon to sell it.

A seller’s new Halloween product was on sale on Temu for a week and sold more than 100 products. He thought he could skip the product testing and sell it directly on Amazon.

According to industry insiders, many Amazon sellers currently use Temu to test products, which is much faster than testing directly on Amazon. Some sellers in the same industry believe that this new operation idea is worth trying.

Amazon seller Li Mengtian believes that from the perspective of market research, this logic is correct. Currently, prices on Amazon are severely involuted, and the cost of launching new products is very high. Testing products on Temu can help us understand consumer demand to a certain extent and know which products are selling well.

However, if a product that has been successfully sold on Temu is put on the Amazon platform for sale, it will also require comprehensive costs such as advertising and promotion in the early stage. In addition, there is another limiting factor: the consumer groups of Temu and Amazon are different.

Wang Xiao, who is also an Amazon seller, does not agree with this approach. The main reasons are as follows:

First, the price ranges of many products on Amazon and Temu are different. If you can test a product on Temu, it will also be a relatively low-priced product on Amazon.

Second, even if it is a low-priced product, a “run” on Temu can reveal consumer demand, but your competitors also know about your product. Unless there is an updated and iterated second-generation product, it does not make much sense.

Third, many Amazon sellers no longer sell low-priced products.

Fourth, after Temu goes online, although Amazon sellers’ orders will be affected to a certain extent, many sellers are beginning to realize that they cannot rely solely on operations, but must rely on products. Sellers with better operations all have the basic belief that products are king.

"I heard that some of my peers are testing this strategy on Temu, but it is only suitable for sellers with supply chain advantages. Temu's profit is too low, and it means losing money to gain publicity. Compared with testing the model, clearing inventory on Temu is more appropriate." Amazon seller Lin Peng introduced.

While complaining about Temu's low profits, sellers are testing and selling products on Temu. This seemingly contradictory behavior actually reveals the hidden worries of cross-border people: as more people enter the market to compete for the cake, sellers' profits become lower and lower. Especially since Temu entered the US market with low prices, many Amazon sellers have felt the impact. In order to get more orders, the price war in multiple Amazon categories has intensified this year, which has once again reduced sellers' profits.

Profits fall 80%, Amazon sellers are in a price war

"The prices on Amazon are never the lowest, they can only be lower! Whether you engage in a price war or not, you will be involved in it!" lamented Amazon seller Li Dong.

Li Dong’s Amazon small category used to have 20-30 products . Now the top seller’s price has dropped from 19.99 to 11.99, while competitors are still selling at 9.99. Now 6 of the top 20 links are priced at around 11 yuan, which is half the price!

Just like Li Dong, several products in another category were sold at over 25.99 when they were put on the shelves. Two months later, new sellers slashed the prices drastically. Now they are sold at 16.99 and sellers have to post a 3-dollar coupon to place an order. The scariest thing is that there are factory entry coupons, which directly reduce the price of products sold at over 200 dollars to around 50 dollars.

The inevitable result of price involution is a sharp decline in profits. An old Amazon seller said that the number of orders in July increased by 45% compared with last year, but the profit this year fell by 80%. Sellers have a deep understanding of this situation. This year, many categories on Amazon have low prices involution. If you don’t join this queue, you will not get orders.

“The most effective strategy for selling on Amazon is: low price + maximum advertising budget. If you cannot get stable orders after a month, you can start considering clearing your stock. If your ranking is steadily improving, then consider boosting your ranking and controlling mid-term profits.” said an Amazon seller.

Obviously, in addition to low prices, another factor that affects the profits of Amazon sellers is advertising costs. Some of the sellers mentioned above who tested products on Temu also took into account the increase in Amazon advertising costs.

"As an Amazon seller who has only been a seller for a few years, I would guess that the advertising fees I have contributed should add up to at least seven or eight figures. The more sales I have, the more advertising fees I spend. Since it is difficult to increase sales and launch new products now, if you want to make more profit, you can actually squeeze out more profit from advertising and storage fees. Even if you squeeze out 2%, it's still a considerable amount," lamented an old seller.

Take the just-passed Prime Day as an example. The 2023 Prime Day set a record for the highest single-day sales in Amazon's history, but due to high advertising costs, the profit margins of participating sellers declined. According to Momentum Commerce, sellers spent 14% of their revenue on advertising. Insider Intellgence previously predicted that Amazon's advertising revenue in the United States will reach $34 billion this year.

In order to maintain profits, some sellers are trying to save advertising costs. Saving advertising costs means losing orders obtained through advertising, and most sellers think it is difficult to reduce advertising costs.

Li Mengtian said that once the off-season comes, Amazon sellers will be very busy. There is no way to make more profit. Fortunately, the exchange rate is too strong this year, so we can only use the exchange rate to hedge.

Advertising costs have soared, price wars are raging in multiple categories, and Amazon sellers' profits are being eroded. When the platform develops to a certain stage, uncompetitive products will definitely fall into the vortex of internal competition. Testing products through Temu is just an operational idea. Sellers should really believe that products are king.

(Li Mengtian, Wang Xiao, Lin Peng and Li Dong are pseudonyms in this article)

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