An essential ingredient to Amazon’s success is the explosion of companies in China selling products through the massive digital mall.
But since more than a year ago, Chinese companies have been steadily selling a smaller share of the things Americans buy on Amazon. Traders in the US are gaining ground.
Experts told me they had no satisfactory explanation for this shifting balance of Amazon sellers in the US and China. Nor could they say whether it was an eruption or a lasting reversal of what had been a long trend of growing market share for Chinese traders.
At this point, most shoppers wouldn’t notice that Chinese merchants are selling relatively less stuff on Amazon. And the change could be another example of unpredictable shifts in shopping due to the pandemic.
But Amazon’s aggressive effort to sue Chinese merchants over the past decade has brought about a profound and trendsetting change in online retail and the global economy. Once that phenomenon has lost its momentum, it’s worth looking at what it could mean for shoppers, international commerce and the millions of businesses that make their living selling on Amazon and elsewhere online.
I’ll take a step back to explain how Amazon works: The company operates part as a conventional store that sells products purchased from manufacturers and part eBay. More than half of the products sold on Amazon come from this eBay-like approach of independent companies listing their products alongside the ones Amazon sells. When we buy a kid’s play or phone charger on Amazon, there’s a good chance it actually comes from a Texas toy company or a major Chinese electronics conglomerate.
From about 2015, Amazon made it much easier for merchants in China to list products for sale. This has been copied by other retailers, including Walmart and the Chinese clothing company Shein, and it has changed the online shopping experience – both for the better and for the bad.
Chinese merchants are a source of Amazon’s power and one of the company’s biggest problems. They’re a major reason you can find almost any product on Amazon, and they’ve likely helped lower prices for shoppers. But Amazon’s critics also say the company hasn’t done enough to protect shoppers from dangerous or bad products and from manipulated customer reviews from Chinese sellers that may fall outside the purview of U.S. consumer protection laws.
In recent years, Chinese merchants sold a growing percentage of what Americans bought on Amazon, until there was a split of about 50-50 between sellers in the US and China. However, the percentage sold by Chinese merchants has fallen to about 42 percent in May from about 48 percent at the end of 2020, according to e-commerce research firm Marketplace Pulse.
US-based traders get a larger share of the sales instead. Domestic Amazon sellers also outsold Chinese merchants in Britain and Germany. (An Amazon spokesperson declined to comment on the changing mix of Chinese and domestic merchants.)
I asked Juozas Kaziukėnas, the founder of Marketplace Pulse, whether this shift in Chinese merchants was caused by temporary plant closures in China due to the pandemic and the increased cost and complexity of shipping products from Asia. He said probably not. Most US merchants also buy and ship from manufacturers in China or elsewhere in Asia.
Kaziukėnas said it’s difficult to know exactly what caused the change, but some merchants are frustrated by rising costs and Byzantine rules on Amazon. There are news reports from China of product sellers hoping to find websites other than Amazon to sell their goods to the world. However, these complaints about the disadvantages of selling on Amazon are by no means new and are often voiced by traders outside of China.
Yaniv Sarig, the chief executive of Aterian, a US-based merchant that sells products on Amazon, is one of the e-commerce experts who believe some Chinese companies have moved away from Amazon because they were shocked by the crackdown on Amazon. company last year on some merchants based in China, apparently for manipulating customer reviews.
The upheaval of Amazon’s marketplace could represent an opportunity for merchants in the US, including those like Molson Hart, the Texas toy seller I wrote about last year, who believes US laws and policies give an unfair advantage to online product sellers of China.
When I discovered that the sales mix of Chinese and domestic merchants has been shifting for a year now, I was left with burning questions: If the boom of product sellers from China was a profound change in online shopping, why did it seemingly not affect the shoppers when the trend reversed ?
I wondered if we’re overestimating the benefits of opening Amazon to millions of product sellers. Maybe it doesn’t really help anyone to have 20,000 blenders on one site.
Before we go…
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