Behind Amazon's quiet launch of Haul, which competes with Temu in ultra-low-price items from China

Two weeks before Black Friday, Amazon quietly added a new section to the top of its mobile app. Called Haul, it's a mobile-only area for ultra-low-price items, primarily shipped directly from China.  

Haul is Amazon's answer to the booming popularity of apps such as PDD Holdings' Temu and fast-fashion retailer Shein. Amazon told CNBC that Haul has had millions of unique customer visits since it launched in November. 

Like Temu, Haul offers items at bargain prices, such as sneakers for $9.98, kitchenware for $5.99 and phone cases for $2.99. Unlike Temu, Haul caps the price of each offering at $20. It offers free shipping on orders over $25 and increasingly steep discounts the higher the value of the cart. This encourages shoppers to buy several items at a time, hence the name Haul. 

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

The trade-off for the cheaper prices comes in slower shipping speeds. Instead of the one- or two-day shipping typically available for Prime members, items on Haul take one to two weeks to arrive. 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, as well as costs for Amazon, which get passed on to the consumer in the price of the item.  

Haul and Temu keep prices down by relying on their existing network of China-based sellers to import cheap individual items into the U.S. under the de minimis provision. Although this customs exemption is facing renewed federal scrutiny, it currently allows importers to avoid paying duties and taxes for items valued under $800. 

This leads to longer shipping times but lower prices. It's a trade-off many Americans are seemingly OK with, given the explosive growth of Temu since its U.S. launch in September 2022. It's now the most downloaded free app in Apple's app store two years running. 

"It's not just about combating Temu," said Saunders. "It's also about looking at the opportunity in that lower-price part of the market, which has been very fast-growing across the whole retail spectrum over the past couple of years." 

Other low-cost e-commerce sites filled with Chinese goods have seen explosive growth in recent years, including Alibaba and newcomer TikTok Shop, which sellers are flocking to despite a potential ban.  

All this success has happened despite public outcry against the business model's environmental effects and labor practices by Shein and other companies that reportedly violate human rights. Shein didn't respond to CNBC's request for comment.

In 2023, a House of Representatives report found some items on Temu were coming from the Xinjiang region of China, where forced labor has led to accusations of genocide against the Uyghur people. In a statement, Temu told CNBC that it "is committed to upholding ethical, humane, and lawful business practices" and that its "business partners and third-party merchants must comply with strict standards regarding labor, safety, and environmental protection."    

Amazon is also under investigation by the federal government for high injury rates in its warehouses, although Amazon called the report fundamentally flawed. Additionally, a federal ruling in July determined Amazon can be held responsible for recalls of defective goods.

None of this has stopped sales numbers from breaking records. 

"Consumers don't put their money where their mouth is. They say they don't like the consequences of cheap products, but yet they still go and buy them in their droves," Saunders said. 

While Haul is only in beta version, demand appears to be outstripping supply. During a 50% off Black Friday sale, Haul sold out of some items. Amazon told CNBC it's expanding its selection to hundreds of thousands of items across dozens of categories in the coming weeks. 

What does the future hold for Amazon Haul? Could impending political headwinds stymie growth in the budget e-commerce space? Watch the video above to learn more.