Faced with the crazy low-priced traffic war of new Chinese cross-border e-commerce forces such as Temu, SHEIN, and TikTok Shop, even if Amazon firmly holds the iron throne of cross-border e-commerce, it has still launched a defense.
On December 12, 2023, the Amazon Global Store Cross border Summit was held in Shenzhen, where Amazon announced its five major business strategic priorities for 2024 in China. Among them, in terms of strengthening global supply chain solutions, Amazon has announced the official opening of the overall supply chain solution to Chinese sellers.
The overall supply chain solution integrates multiple Amazon products such as Amazon Global Logistics and Amazon Warehouse Distribution Network, helping sellers deliver their products directly from manufacturers to customers around the world in a one-stop shop. In the seller community, this solution is known as "logistics full custody", and it is difficult not to associate it with the "full custody model" that has been popular on Chinese cross-border platforms such as Temu for a year.
On December 5th, Amazon just announced a significant reduction in commission for clothing products with lower prices on the platform. Among them, the commission rate for clothing products priced below $15 has decreased to 5%, and the commission rate for clothing products priced between $15 and $20 has decreased to 10%. Previously, the commission rate for both types of products was 17%. The clothing category is exactly the category that SHEIN excels in, while Amazon is relatively weak.
According to data from e-commerce research firm Adobe Analytics, on the Black Friday of this year, the total online consumption in the US market reached a new high of $9.8 billion, equivalent to approximately RMB 70 billion, an increase of 7.5% compared to the same period last year in 2022. However, as new forces launch a series of low price discount wars, orders and traffic are diverted, Amazon has found it difficult to enjoy the cake with peace of mind as in the past.
To consolidate its territory, Amazon needs to work harder than in the past to attract and maintain sellers and consumers.
Four Little Dragons Crazy on Amazon
The impact of platforms such as Temu has further erupted in the recent "Black Friday".
According to Amazon's global store opening data, during the event period from November 17th to 27th, global consumers purchased over 1 billion items on the Amazon store. Compared to the same period last year, over 20% of Chinese brand sellers saw a year-on-year increase of over 50% in product sales on mature Amazon sites; More than 15% of Chinese brand sellers have seen a year-on-year increase of over 100% in product sales on mature Amazon sites.
But for most non top brand sellers, the traffic on the Amazon platform has significantly declined.
"Compared to last year, this year's' Black Five 'has adopted the same operational strategy, resulting in approximately one-third less traffic and orders. Previously, on the day of the' Black Five 'promotion, if the operation was good, the order volume could reach 3000 in 12 hours, but it was a bit difficult to sell 2000 orders this year." Han Wei, who works as an Amazon operator at a cross-border e-commerce company in Shenzhen, told Time Weekly on December 14th.
The flute also has the same feeling. The company that Di Di works for mainly focuses on the Amazon US site. According to her observation, these two days of "Black Five Net One" are still the best selling days in the activity cycle this year, but the increase in company product sales is not as significant as last year. "Despite having a higher category ranking than last year, the daily sales of the same product in December decreased by about 20% year-on-year," she told Time Weekly.
Changes in the macro market environment and sluggish consumer spending are certainly the reasons that affect traffic, but the phenomenon of Amazon traffic being divided by platforms such as Temu is more obvious.
This year's "Black Friday", China's cross-border new forces are particularly eye-catching. On the premise that the "Black Friday" promotion time in Amazon's US and Europe regions has increased by one week compared to previous years, the promotion cycle of AliExpress and SHEIN's US site is maintained at 10-14 days, while the promotion cycle of Temu and TikTok Shop starts from the end of October. Among them, Temu and SHEIN offer a maximum discount of 90%, and TikTok Shop in the United States also offers a maximum promotional discount of 50%.
According to the "Black Five" promotion report released by TikTok Shop, during the event period, the overall payment GMV of TikTok Shop's cross-border e-commerce in the US region increased by more than 215% month on month; As of the end of "Black Friday", the overall payment GMV growth of TikTok Shop's cross-border e-commerce market in the UK has reached 191%.
According to SimilarWeb data, against the backdrop of a 12% decline in online traffic during the "Black Friday" period in the UK market, Temu achieved a growth of over 74150%, compared to a 1% decline in Amazon traffic.
Everyone is in full custody mode
Low price is the fulcrum for Temu to leverage traffic, and the important support for ensuring the long-term operation of the low price strategy is the fully managed model.
In September 2022, Temu was the first to launch a fully hosted model, and since then, platforms such as AliExpress, SHEIN, and TikTok Shop have followed suit.
In the fully hosted mode, merchants become suppliers to the platform, and only need to send products with sufficient price advantages to the platform warehouse. In addition, a series of links such as store operation, product pricing, quality inspection, pre-sales, fulfillment, warehousing, distribution, and after-sales are considered the most important barriers to cross-border e-commerce, all of which are the responsibility of the platform.
As a result, the platform that holds the greatest say is able to screen out the lowest priced products and sell them overseas. Combined with high-profile marketing, Temu's traffic and sales continue to grow.
According to data.ai data, in the first three quarters of this year, Temu surpassed Amazon to become the highest downloaded application in the United States. According to a report by 36Kr, Temu's GMV in the third quarter of this year has exceeded $5 billion, far exceeding its performance of $3 billion in the first half of the year.
According to mobile analytics company GWS, from April to July 2023, Amazon's number of US users sharply decreased, from 54 million daily active users to 46 million daily active users. By contrast, Temu has added nearly 10 million new users since the beginning of this year.
Chinese cross-border platforms, whose traffic pool is rapidly expanding, are also starting to compete with Amazon for seller and user resources in low-priced categories such as clothing, home furnishings, beauty products, toys, etc.
The average order value of Didi Company's products ranges from $10 to $40, and this year it has started to expand its presence on platforms such as Temu and TikTok Shop. "Compared to Amazon, these platforms are basically foolproof operations, and interns can be fully responsible for them," she told Time Weekly. In addition, the attractiveness of the above platforms lies in small profits and high sales, eliminating the need to invest in advertising expenses and other aspects; At the same time, because the products of Di Di Company do not have the same model on the market, they will not be subject to too strong price pressure from the platform.
The new platform has a significant impact on Amazon's sales diversion. According to Didi, this month, a product of the company was taken down by Temu for rectification for a few days. During the period of removal, the sales of the same product on the company's Amazon showed a significant increase. However, when the product resumed listing on Temu, its sales in Amazon stores returned to their previous levels.
Under the attraction of a large number of users, even though Han Wei's company sells smart home products with high unit price and certain R&D thresholds, they have begun to try new platforms. "In recent months, the company has sent several colleagues to test Temu and TikTok shops, mainly to test styles and clear inventory," Han Wei told Time Weekly reporters.
Amazon Meets Cross border New Forces
Despite its grandeur, Chinese players still have a long way to go to shake Amazon's throne.
Amazon's third quarter financial report shows that its revenue increased by 13% year-on-year to $143.083 billion; Net profit increased by over 243% year-on-year, reaching 9.879 billion US dollars. Among them, the e-commerce business increased by 6% year-on-year to $57.267 billion. By contrast, Temu is expected to complete $14 billion in GMV this year. According to third-party data analysis platform EchoTik, the GMV of TikTok Shop in the US reached $480 million in November. There is still a significant gap between the GMV of the above two platforms and Amazon.
In terms of market value, as of December 16th, Amazon's market value has exceeded $1.5 trillion, while Pinduoduo, which has just surpassed Alibaba's market value, is less than $200 billion; SHEIN, which has been rumored to be listed, has a valuation of less than $100 billion.
Overall, Amazon still has a strong brand, service, and traffic foundation, and for brand sellers who want to sell their products at a premium, this platform is still an irreplaceable sales platform.
"Recently, we have launched about 10 products on Temu. Based on the platform's final quotation, we only have one product that won't lose money. Ultimately, platforms like Temu are still focusing on low-priced products with low entry barriers, only suitable for sellers to enter." On December 15th, Eric, Amazon's promotion manager, who specializes in 3C electronic products and has an average order price of tens or even hundreds of dollars, analyzed to Time Weekly reporters.
But as new forces gather like catfish, in order to consolidate their position, Amazon also begins to improve website expansion, investment promotion, seller training, logistics services, and other aspects.
At the cross-border summit, the Amazon Brazil site was officially opened to Chinese sellers. As one of the fastest-growing e-commerce regions in the world, Brazil has become a blue ocean for platforms such as Temu, SHEIN, and Shopee to compete for layout.
To strengthen its coverage of domestic sellers, Amazon also announced at the summit the establishment of four regional centers in East China, South China, West China, and North China, and the addition of a new Central China regional center. On August 8th, Amazon's global store opening in China released the "Ten Supports for Industrial Belt Setting Sail" plan, gradually sinking the main investment battlefield from traditional foreign trade cities such as Shenzhen, Ningbo, and Guangzhou, targeting 50 industrial belts in ten provinces and cities including Guangdong, Fujian, and Shandong.
The supply chain solution has also been launched by Amazon as a high-profile solution to help sellers solve international first mile logistics, warehouse entry management, and destination country inventory health issues.
However, in terms of supply chain solutions, their current benefits for existing sellers on the platform are still relatively limited. This plan only integrates existing services such as Amazon Global Logistics, Amazon Warehouse Distribution Network, Amazon Logistics, and Amazon Multi Channel Delivery. For most Amazon sellers, the price of the service is the biggest pain point.
"Most Amazon sellers will still choose to use freight forwarders to solve their first mile logistics problems in the short term. After all, freight forwarders have many choices in terms of channels and prices. Choosing Amazon's supply chain solution not only won't be cheaper, but it will also be more troublesome." Han Wei analyzed to Time Weekly reporters.
"The innovation of new e-commerce models, including the full custody model, provides enterprises with more ways and choices to carry out cross-border e-commerce, which is an active exploration and practice of China's cross-border e-commerce industry in the high-speed development process. However, for Amazon, our philosophy is to cultivate internal capabilities of the enterprise." At the Double 12 Summit, Amazon's Global Vice President "Amazon's global store opening in the Asia Pacific region, CEO Dai Dafei, told media outlets including Time Weekly reporters.".
"Perhaps the path we need to take is a bit more difficult. We hope that sellers have innovative products instead of competing based on price. We hope that they can build a global brand, expand to various sites around the world, and have a belief in long-term sustainability. These may be high demands for companies in the short term, but they are the path they must take to achieve sustainable development." Dai Jianfei further added.
However, as the trend of consumer downgrading continues, it is still unknown whether the branding route is unbreakable in the face of low price strategies.
(According to the interviewee's request, Han Wei, Di Di, and Eric in the text are all pseudonyms.)