Speaker 1: This time of year, you might be spending more time than usual perusing Amazon, Black Friday, Cyber Monday deals. And wait, what's this section called, Haul?

Speaker 2: Amazon is hoping to win over Shein and Timu shoppers with a new discount web store where every item is less than 20 bucks.

Speaker 1: Two weeks before Black Friday, Amazon quietly launched a beta version of its bargain e-commerce page, Haul.

Speaker 3: There are a lot of consumers who don't even know that Haul exists. It's not very well advertised by Amazon.

Speaker 1: With the launch, Amazon officially waded into a retail segment that's seen explosive growth over the past year, ultra low-priced e-commerce.

Speaker 4: It is responding to a competitive threat in the marketplace. If you're an executive at Amazon, you're sitting in your office and you're looking across at more than $50 billion in sales that's going to Timu, Shein, TikTok shops.

Speaker 3: I think Timu is very satisfied with the growth of their business. I think that they see enormous success and they still see a lot of runway in the U.S. And I think actually, in a way, they'll see Amazon's reaction as flattery.

Speaker 1: Discount online marketplace Timu launched in the U.S. in September 2022, and it's owned by PDD Holdings, a Nasdaq-listed company that also owns Chinese e-commerce giant Pinduoduo. Timu now dominates on iOS, taking the top spot as the most downloaded free app in the Apple App Store for the second year in a row. And in just two years, it's become the second most visited e-commerce website in the world, after Amazon.

Speaker 5: The Timu effect to different degrees. Some say that it could be the Amazon killer.

Speaker 1: So now Amazon has Haul, a separate mobile-only section of its shopping app where most items are under $10. Returns are free, but only for items over $3. And you pay $3.99 for shipping on orders under $25.

Speaker 6: Will it impact the growth of Timu and Shein? Very hard to imagine how that's the case.

Speaker 1: So does Haul signal ultra-cheap e-commerce will be a significant part of Amazon's business model moving forward? And what does it mean for Timu and the future of American shopping? Consumer appetite for ultra-bargain online shopping is high, with Haul selling out of some items during its Black Friday sale, offering 50% off products. Yes, 50% off already-bargain basement prices, meaning shoppers were nabbing some items for under a dollar.

Speaker 3: It's not just about combating Timu, it's also about looking at the opportunity in that lower-priced part of the market, which has been very fast-growing across the whole retail spectrum over the past couple of years.

Speaker 1: Amazon told CNBC Haul has seen millions of unique customer visits since launching in November, and it plans to expand its selection to hundreds of thousands of items across dozens of categories over the coming weeks. So how is Haul different from the usual Amazon marketplace? Click into Haul's beta page and you're going to have a very different experience than on the usual Amazon site. Scroll bars, animated emojis, $2.99 jewelry, $9.98 sneakers, $2.99 home goods, 65% off everything, a pulsing heart by bestsellers, a rocket ship warning you this one is selling fast, a whole section called Crazy Low with item after item labeled with a burning flame.

Speaker 4: One of the things I admire about Amazon is they're not afraid to test things, and they have launched a lot of various tests to get better at capturing attention.

Speaker 3: So by putting all of the low-priced products in one place, Amazon is creating a site that just screams value for money. It screams low prices.

Speaker 1: Unlike on Timu, Amazon says nothing on Haul costs more than $20.

Speaker 3: One of the really interesting things that Amazon did is to make this completely separate from the main Amazon site. Now, there's a logic in doing that. They don't want consumers to trade down to lower-priced goods.

Speaker 1: What you won't see is the Prime logo, at least not yet. Instead of one- or two-day shipping, items take one to two weeks to arrive. That's because most of these goods are coming straight from China. And while Amazon has been courting Chinese sellers for years, it usually acts as the middleman, stocking items at U.S. warehouses in advance. That boosts shipping speeds, but also costs for Amazon, which get passed on to the consumer in the price of the item.

Speaker 6: Nothing Amazon is selling on Amazon Haul it's not been selling for years already. And that's perhaps the most surprising to even most consumers, is that the fact that these goods are so cheap is not because they are different goods.

Speaker 1: According to one report, 71 percent of products on Amazon already originate in China, which gave Amazon a head start with Haul, because instead of courting new sellers, it can simply filter items above $20 from out of its existing inventory of

Speaker 6: low-priced goods. Everything is made in China or many things are made in China, but we pretend that's not the case. There's no made-in-America filter on Amazon, perhaps because most consumers wouldn't care.

Speaker 1: And that low price point encourages shoppers to buy several items at a time, hence the name Haul.

Speaker 3: What works on the Amazon main site may not be appropriate for Haul and some of those lower prices.

Speaker 1: And Amazon Haul also comes with its own platform policies, separate from Amazon. All orders over $25 get free shipping, discount offers for adding multiple items to carts, and anything under $3 is not eligible for returns, a complex process that can cost Amazon billions and land a lot of items in landfills each year.

Speaker 4: One of the fun, either intentional or accidental benefits of these really inexpensive direct-to-consumer offerings from China is they do tend to have way lower returns.

Speaker 1: But how is all of this possible? How can one single item travel across an ocean and be sold for less than another one sitting in a warehouse 30 minutes away? One of the biggest factors in the price point of imported goods has to do with something called the de minimis provision.

Speaker 6: Anything under $800 that comes into U.S. doesn't flow through customs, goes directly to customers, and thus doesn't pay the customs tax. That effectively allows these goods to be cheaper.

Speaker 1: Taking advantage of this provision is nothing new. It's been critical to the success of that rapidly growing Amazon competitor, Temu.

Speaker 4: Temu and Xi'an were really born by saying, hey, instead of sending a container with 40,000 items on a boat, I'm going to put each item in an individual envelope and send it via an airplane to a consumer in the U.S. Each of those envelopes will cost less than $800, and therefore I won't have to pay duties and taxes. So I'll pay more in freight, airplane versus boat, but I'll pay less in duties and taxes. And so that insight created this industry.

Speaker 1: Temu hit the public mainstream in 2023, just a few months after it launched, with an advertising debut on one of the biggest stages in the world, the Super Bowl, a $14 million investment that saw app downloads jump 45 percent overnight.

Speaker 3: Temu's had phenomenal growth in the past two years within the U.S. It's really become much more of an established part of people's shopping habits.

Speaker 1: But Temu's first two years have been filled with controversy and legal problems, leading to questions about its future in the U.S. In 2023, a House of Representatives report found some items on Temu were coming from the Shenzhen region of China, where forced labor has led to accusations of genocide against the Uyghur people. In a statement, Temu told CNBC it is committed to upholding ethical, humane and lawful business practices, and its business partners and third-party merchants must comply with strict standards regarding labor, safety and environmental protection. Alibaba, newcomer TikTok shop and fast fashion brand Shein have also seen big success selling low-cost goods online in the U.S., despite public outcry against waste and labor practices. At Amazon, a federal investigation found that obsession with speed creates uniquely dangerous warehouses, although Amazon called the report fundamentally flawed. Yet sales on Amazon continue to break records.

Speaker 3: If you ask them in a survey and say, is it wrong that labor's not paid a lot? Is it wrong that corners get cut in supply chains? Most people will answer in the affirmative. The next minute, they'll be on Shein or Temu buying all of these products. So the consumers don't put their money where their mouth is.

Speaker 1: Indeed, Temu is full speed ahead despite federal scrutiny, expanding its network of U.S. sellers in 2024, adding a local warehouse filter earlier this year for U.S.-based inventory, allowing for bigger items like furniture and delivery as fast as one business day, all nudging it an awful lot closer to Amazon's model.

Speaker 4: Now, when you go shopping on Temu or Shein, you will notice a significant amount of goods that you can get delivered in one or two days. And that's because those goods are coming from a U.S. warehouse. So the more they offer that kind of service, the more they're directly competing with Amazon's existing sellers.

Speaker 1: But for shoppers, the actual buying experience may lead to picking one app over the other. So we decided to try them both. So nine days ago, I bought this $10 windproof umbrella on Amazon Haul and these $20 rain boots on Temu. They both came direct from China and they both arrived today. I decided to also try Temu's option to filter for items from a local warehouse. So this umbrella from Temu came from Houston in just five days. Despite the same shipping times, the shopping experiences were vastly different. Ordering on Amazon Haul felt well like ordering on Amazon. It was easy to see seller details and estimated shipping times, and the payment process was quick and simple. No way to filter search results and not too many flashy deals thrown my way, but also not a lot to choose from. There was just one short page of options when I searched for windproof umbrella. On Temu, the options were seemingly endless for umbrellas and boots. And so were the deals and offers, which had me feeling like I was stuck in a casino or a scam. At one point, I thought I won free items and added them to my cart. But by the time I escaped the other games, my free goods were nowhere to be seen. The details about sellers and shipping times were also a bit buried, and the payment process required some extra steps that had me wondering where my data may end up. As for the quality, I actually ordered a similar pair of boots off of a random drop shipper in 2021 on Instagram, and they were terrible. They were the wrong size. These boots from Temu are much higher quality. They fit and they arrived about six weeks faster. And the umbrella off of Amazon also seems really solid. I'm left feeling like I got good items, especially for the price point. But now these signature cheap prices may be at risk. Incoming President Trump has pledged to increase tariffs on Chinese imports, a cost that could be passed on to consumers with rising prices. There's also been renewed federal scrutiny around the de minimis provision.

Speaker 4: If the U.S. government ends the de minimis provision, arguably that would make it real hard for a new competitor to come into the market and compete. But Xi'an and Temu have already gone big enough that they absolutely would still stay competitive and it would just shift their costs.

Speaker 3: But how would that impact HAL? Perhaps that's one of the reasons why they've done this in a very cautious way, because a lot of things are up in the air in terms of global trade and in terms of being able to ship things into the U.S. without attracting custom scrutiny. If HAL disappeared tomorrow, I don't think Amazon would lose much sleep about it. But Temu's whole business model is potentially at risk here.

Speaker 1: Although this is likely one reason Temu has been ramping up its network of U.S. sellers. But all these cheap goods bring up another risk. Who is liable should something go wrong? For years, Amazon's maintained in multiple lawsuits that it's only the conduit between buyers and sellers and therefore not liable for products sold by third parties. But in a landmark ruling in July, federal regulators determined Amazon can indeed be held responsible for recalls of defective goods. And then there's the threat of new competition. TikTok Shop expects to see $17.5 billion in sales just this year. With more than 120 million users in the U.S., that's a lot of eyeballs spending an average of just under an hour on the platform daily. Sellers are flocking to the site, despite a looming ban on the Chinese-owned company.

Speaker 4: Shein became the fastest growing retailer in the history of the United States in like 2021. And then Temu launched and Temu surpassed them in every way. And then TikTok Shops launched in late 2023 and they surpassed both of those companies. And they're now the fastest growing retailer in the history of mankind.

Speaker 1: At least for now, the budget e-commerce space is robust and new enough to handle competitors of all kinds.

Speaker 3: Both Amazon and Temu have different strengths as well as different weaknesses. So they both serve slightly different needs, even if it's to the same customer.