Are Chinese sellers no longer Amazon’s “darlings”?

As the leading e-commerce platform in the US market, Amazon has been the preferred platform for Chinese sellers to go overseas in recent years, relying on its market share, comprehensive services and solutions. The low-priced products provided by Chinese sellers are also one of the sources of Amazon's competitiveness. However, with the changes in the market environment, the status of Chinese sellers on Amazon is changing.

Chinese sellers fall out of favor on Amazon

According to Marketplace Pulse, a research firm , the number of U.S. sellers this month accounted for 55% of the most popular Amazon brands in the United States, compared with 48% in November 2020. Although the growth rate is slower, this trend suggests some important changes in the Amazon platform.

This change is largely related to Chinese sellers, who used to be important players in Amazon's third-party market. In the past, the number of Chinese sellers accounted for nearly half of Amazon's top brands. For example, the peak data in 2020 was 42%, but it fell to 38% in September last year . A key reason for this change is that Amazon cracked down on accounts that fake reviews. Among them, many Chinese stores that sell well were affected.

However, the most recent wave of account suspensions occurred before July last year , and after the great turmoil, the trend of Chinese sellers and American sellers growing and shrinking continues. According to Jason Lee, co-founder of Amazon M&A consulting firm FBA Flipper, Chinese sellers have less and less influence on the Amazon platform, and there are many macroeconomic forces at work behind it .

"2016 was the heyday for Chinese sellers," Jason Lee said. As the influence of the Amazon platform grew, Chinese sellers began to flock to Amazon, providing cheap and popular goods for the platform and consumers. However, starting in 2018, as Amazon's rules became stricter, the situation began to change.

Amazon has launched a wave of crackdowns on paid reviews and other violations that exploit Amazon's algorithms every once in a while. "Under this severe crackdown, the situation has become more difficult for (Chinese sellers)," said Jason Lee.

Especially in the past year, some major changes have made the overall environment of the industry more turbulent. On the one hand, Amazon has been cracking down on fake reviews more and more. More importantly, due to the increase in coronavirus cases, major cities and ports such as Shanghai and South China have been blocked, and the production and logistics of more Chinese companies have been affected.

In addition, as inflation rises, retail growth has stagnated - making it difficult for small online sellers to grow; "Customers are spending less and less on retail and their spending power is declining," said Jason Lee.

In addition, as Jason Lee explained, for most Chinese sellers, "their competitive advantage is price." But now Chinese sellers are facing rising costs: in addition to the increase in labor costs, more companies are bearing the brunt of tariffs. Ocean freight rates have also been high for more than a year.

As costs rise across the board, it’s becoming more difficult for sellers to be profitable, which makes being an Amazon seller “no longer a viable business model.”

However, some experts believe that the growth of American sellers is not so obvious. David Bryant, co-founder of Ecomcrew, a consulting firm that focuses on Amazon , believes that another reason for the recent growth of American sellers is that a large number of new sellers are entering the platform as American sellers . "A group of Chinese sellers have opened American limited liability companies," he said.

Bryant noticed that some Chinese brands changed their descriptions and changed their company location to the United States. He was referring to Anker, one of the top sellers on Amazon. Although Anker Innovations is listed on the Shenzhen Stock Exchange, the seller information of Anker's store shows that its company address is in Rancho Cucamonga, California.

Bryant believes that as these brands expand their business and scale, some international brands have decided to establish branches for their US market operations in order to better integrate into the local market.

Even so, the bottom line is that Amazon's third-party market has shifted. "When the epidemic broke out, a large number of new sellers poured into the Amazon platform," Jason Lee said. "But now, a large number of sellers have been eliminated." The elimination of some companies that took advantage of the situation is not necessarily a bad thing for the entire industry.

So far, Amazon is still the first choice for most Chinese sellers to go global, but a series of changes in the past two years have also increased sellers' risk awareness and have begun to pay attention to other platforms. Some sellers with capital and strength have begun to work hard on independent sites.

Shopify is growing rapidly, with GMV second only to Amazon

Among independent website building platforms, Shopify is one of the most popular platforms. In recent years, Shopify has developed rapidly.

According to statistics, there are 1.75 million merchants using the Shopify platform for sales in 175 countries and regions around the world. Since 2016, the number of Shopify merchants has increased 4.66 times . Since 2019, the Shopify platform has added 680,000 merchants. Among them, about half ( 874,500) of the merchants are located in the United States. The number of sellers from Asia Pacific, Australia and China exceeds 260,000, accounting for about 15%.

Number of Shopify sellers from 2012 to 2020

According to data from consulting firm Backlinko, the number of websites and domain names registered through Shopify has reached 3.76 million, of which nearly 70% are registered in the United States, followed by the United Kingdom and Australia.

Shopify facilitated $119.58 billion worth of transactions in 2020 , an increase of more than 95% year-on-year . As of June 2021, Shopify's gross merchandise volume ( GMV ) has reached $79.5 billion. The GMV of the Shopify platform has increased by $12.1 billion (40%) in the past year.

Calculated by GMV , Shopify's online stores in the United States account for 8.6% of all e-commerce sales in the United States , second only to Amazon and surpassing Walmart ( 5.8% ) and eBay ( 4.9% ) .

In 2020 , a total of 457 million people purchased goods from Shopify stores , and the number of shoppers increased more than 8 times in five years . In the past year, the number of shoppers who placed orders with Shopify merchants increased by 52.33%.

Shopify generated $988.6 million in revenue in the first quarter of 2021 and $1.11 billion in revenue in the second quarter, with revenue in the first half of 2021 up 57% from the same period last year . In addition, the second quarter of 2021 was also the first time that Shopify achieved quarterly revenue of more than $1 billion . From 2016 to 2020, Shopify's annual revenue increased 6.5 times.

Currently, there are 7,000 apps available for download in Shopify 's app store , covering 12 different categories. Since 2019 alone , the Shopify app market has added 3,300 new apps.

The rapid development of platforms other than Amazon may also explain the decrease in the proportion of Amazon Chinese sellers from another perspective: sellers’ choices of e-commerce platforms are increasing.

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