Global e-commerce giant Amazon is experiencing a battle for Chinese sellers.
At the Amazon Global Store Cross Border Summit held from December 9th to 12th, Dai Hongfei, Vice President of Amazon Global and Executive President of Amazon Global Store Asia Pacific, revealed that in the past year, the number of goods sold by Chinese sellers through Amazon's global sites has increased by over 20% year-on-year; In the past two years, the number of Chinese sellers with sales exceeding $10 million on Amazon's global sites has increased by nearly 60%.
More than a decade ago, Amazon began recruiting Chinese sellers to join, and since then, Chinese sellers have continued to grow.
According to data from Marketplace Pulse, Chinese sellers will contribute nearly half of Amazon's third-party e-commerce GMV in 2023. This year marks the tenth consecutive year that Amazon has held a cross-border summit in China, with over 15000 participants, surpassing the scale of previous summits. Many cross-border sellers and logistics partners also attended.
Over the past decade, China's cross-border e-commerce has evolved beyond the extensive growth of simply pursuing sales. The paths of compliance, refinement, and branding have changed the cross-border ecosystem. At the same time, unstoppable local e-commerce platforms have emerged, sharing cross-border business with Amazon. Eric Broussard, Global Vice President of Amazon, also stated that there have been many changes in global e-commerce sales over the past decade, including the relationship between Amazon and its partners such as sellers.
Surrounding the trend of low prices, "Big Brother" is facing head-on. Amazon is becoming increasingly different, "said Luo Jun, a Ningbo merchant specializing in furniture categories such as sofas, to Time Finance.
Counter Temu, Amazon launches low-priced stores
Low prices are penetrating Amazon.
In June of this year, Amazon announced its plan for a "low-priced store" at a closed door meeting held in China, which mainly sells white label fashion, home, and daily necessities under $20; In November, Amazon's "low-priced store" Amazon Haul was officially launched.
This move is seen by the outside world as a counterattack against Chinese e-commerce platforms such as Temu and Shein. In mid-2023, Amazon also removed Temu from the platform's price comparison system on the grounds of "low product prices".
But facing the trend of global consumer differentiation and the rapidly expanding Four Little Dragons of going global, Amazon had to face the challenge. During the 2024 Q2 earnings call, Amazon CFO Olsavsky stated that Amazon's revenue growth in North America was slightly lower than internal expectations, mainly due to consumers' tendency to purchase "more economical" goods.
The 'low price' strategy validated by Temu is powerful and cannot be underestimated. According to Marketplace Pulse data, on the second day of Black Friday this year, the number of best-selling products on Amazon Haul reached 2700, with some products even sold out.
However, low prices and whitelisting seem to contradict Amazon's consistent advocacy for seller branding.
At this summit, Eric, the Global Vice President of Amazon, mentioned that in the past, Amazon has learned that customers are willing to wait longer for better prices for certain products, so they have created channels with lower cost structures. Dai Hongfei responded that branding and cost-effectiveness are not in conflict. There are both high priced and low priced brands, depending on the seller's positioning of their own brand.
According to Time Finance, the final online "Amazon Haul" super value purchase products are priced at $20 or below, with the vast majority of products priced below $10, and some products even as low as $1, covering categories such as fashion apparel, home furnishings, electronics, etc; At the same time, free shipping is available for purchases over $25.
However, due to different logistics delivery methods, the usual delivery time for products ordered on Haul is 1-2 weeks, while the fastest delivery speed on Amazon's main site is only 1-2 days.
The relevant person in charge of Amazon stated that Haul's products are shipped from China, and a distribution center close to the buyer's warehouse has been set up in Dongguan. That is, sellers only need to ship to Amazon's warehouse in China, and subsequent delivery will be fulfilled by Amazon. This is similar to the "fully managed" model previously advocated by platforms such as Temu.
However, Luo Jun told Time Finance that due to only a few merchants being invited, the current number of sellers stationed in Haul is not large, with only a few hundred people. Amazon responded that Haul is currently only available in the United States, and the first batch of invited sellers are mainly aimed at existing Amazon sellers, who have cost advantages, price advantages, and meet category requirements, and can deliver goods to the operation center in Dongguan.
Make every effort to compete for Chinese sellers
Although Amazon has not directly responded to the association between launching low-priced stores and competitors, the outside world can still feel Amazon's competition for Chinese small and medium-sized merchants.
In the past, many Amazon merchants generally believed that 70% relied on products and 30% relied on operations on Amazon. Compared to others, the hosting model represented by the Four Little Dragons of Going Global provides merchants with a relatively low threshold and worry free choice. Dai Hongfei also bluntly stated at last year's summit, "Perhaps the path we need to take is a bit difficult, and it may require high demands for enterprises in the short term, but it is the path they must take to achieve sustainable development
But now that competitors are surrounding and the cake is being divided, Amazon may need to find a new team of sellers to cope with the changing market.
An Amazon executive mentioned at the meeting that the launch of Haul can bring profit growth to Amazon, enabling it to provide attractive product options for the rapidly growing low-priced niche market. According to third-party data, the market is expected to reach hundreds of millions of dollars in the coming years.
Dai Hongfei pointed out to media including Time Finance that Amazon's global store opening team has been in China for ten years and has encountered many small and medium-sized factories. They have very good price and cost advantages, but they may not be able to innovate products and build brands on the first day. There are some sellers who focus on low unit prices and can enter the (cross-border e-commerce) market by leveraging their price advantages, and then gradually grow into brand sellers
Besides developing new merchants, retaining existing old sellers is also crucial.
Since 2023, Amazon has spared no effort to bring Chinese sellers closer by reducing commissions, opening up supply chain services, and accelerating localization services. Amid complaints from sellers about declining traffic, Amazon also partnered with TikTok in July this year. TikTok users can receive Amazon product placement ads in short videos and complete purchases without the need for redirection.
At this summit, Amazon released more than 30 new measures in one go, including the official launch of Amazon's supply chain intelligent hosting service. Sellers only need to provide product details and pick-up locations, and Amazon is responsible for completing pick-up, inventory integration, cross-border transportation, warehousing, replenishment, and last mile delivery.
Amazon has also opened up its "moat" - warehousing and logistics network - to other sales channels for sellers. A senior Amazon operator once pointed out to Time Finance that many Amazon sellers now use Temu as a multi-channel distribution and destocking platform. According to a survey conducted by Jungle Scout in 2023, 60% of Amazon sellers/brands sell through at least one other channel.
Peng Jiaqi, Vice President of Amazon China, pointed out that when Amazon's sellers enter the stage of multi-channel development, Amazon will maintain an open attitude, allowing supply chain capabilities to support sellers and achieve broader win-win situations.
Obviously, Amazon hopes to use its supply chain service advantages to achieve deeper bundling with sellers. However, the effectiveness of the opening up of these warehousing and logistics services is still unknown. Li Hua, who has been operating on Amazon for many years, said that although Amazon has introduced third-party partners for the first leg, his company already has long-term stable cooperative freight forwarders, and logistics colleagues have found through comparison that the original freight forwarding channel has more favorable prices and more flexible cooperation.
Rising costs make sellers' year after year sad '
Amazon is busy dealing with changes in the external environment, and sellers' feelings are difficult to be optimistic.
In the recent "Black Friday" promotion, many sellers had almost identical feelings: declining traffic, short peak periods, and price competition. A seller selling clothing on Amazon said that this year, all products in the Black Friday store have been discounted, and some categories have registered for "flash sale" promotions, but sales have only slightly increased compared to usual. The advertising expenses have doubled, and including discounts and flash sales costs, profits have actually shrunk compared to usual
It is becoming increasingly difficult to achieve sales and profits, which is the real situation for many sellers who have experienced cross-border dividends. Li Hua works for a cross-border e-commerce company in Shenzhen, mainly selling smart homes on Amazon. As novice sellers and foreign trade factory owners with supply capabilities accelerate their entry, Li Hua clearly feels that competition is constantly intensifying. "Since 2021, it has been difficult every year," he said
In 2021, Amazon initiated account suspension measures for some sellers who engaged in illegal review manipulation, causing a great sensation in the industry. Li Hua said that since then, many companies that used to take shortcuts by brushing orders have had to change their models, and they have also pushed the industry to roll up products, prices, and advertisements. For example, taking the CPC (Cost Per Click) of a single click traffic as an example, bidding is getting higher and higher. "Previously, the CPC for a keyword was $1, but now it has slowly increased to $1.5 or $2," Li Hua said
Not only advertising costs, but also the storage, logistics, and return costs for sellers on Amazon have been increasing over the past year.
Taking the most controversial warehousing configuration service fee as an example, Li Hua stated that this is the most impactful expense this year, and when converted to finished products, the cost of each standard piece of product will increase by 0.5-1 US dollars. Luo Jun also mentioned that due to the increase in warehouse configuration fees, the cost of just one sofa product with 500 pieces in stock has increased by more than $9000 in a year.
The inventory configuration service fee is the cost incurred by Amazon to assist sellers in transferring inventory to operational centers closer to consumers. In 2024, Amazon will redesign the last mile logistics network in the United States, dividing regions, optimizing inventory management, and reducing delivery distances. Therefore, in the first half of this year, Amazon achieved same day and next day delivery for 5 billion products worldwide, further improving delivery efficiency.
But it also directly pushed up the storage fees of the seller's front-end. Peng Jiaqi explained that for Amazon, the primary goal is to help sellers increase sales and find more business breakthroughs, such as exploring new product options, finding new customer groups, improving delivery efficiency, and so on.
However, Peng Jiaqi also stated that the purpose of Amazon's global store opening in 2025 in terms of expenses is to simplify and reduce seller costs. In 2025, we will not add any new expense items, and the vast majority of expenses will remain unchanged or decrease. For example, Amazon will reduce the FBA (logistics service) fees for large items. In the case of single point of entry for large items, the average inventory configuration rate will be reduced by $0.58 per item.
In addition, in response to the complexity of Amazon store operations, Peng Jiaqi hopes that sellers can use Amazon AI tools to provide positive support for business operations and reduce operational difficulties. At this summit, a large part of Amazon's 2025 initiatives is AI empowerment tools, including opening up the seller assistant Amelia for testing to some Chinese sellers in the near future; The upcoming launch of A+content creation features and more.
According to Time Finance, these AI tools are all open to sellers for free. Some sellers are looking forward to emerging AI tools. However, Li Hua believes that there are more boutique operations on Amazon, and he is concerned that the operational quality of these intelligent AI tools is far from sufficient.
In 2025, cross-border e-commerce sellers may still face challenges. Li Hua said that his peers around him are also trying to optimize and transform their product lines or operational models. "After all, Amazon is still the world's largest e-commerce platform, and it is difficult to bypass this platform to do big business." However, he also observed that people will gradually try other platforms to increase sales channels.
(Interviewees Li Hua and Luo Jun use pseudonyms)