Can Amazon China steal cross border e-commerce businesses from Taobao?

By Eva Wang

Right now Taobao is the dominating force within China’s e-commerce market. The online juggernaut is currently first in business innovation, as the company continues to show the world that it can adapt to emerging trends.

At the moment Western companies are under-performing in China due primarily to three reasons that include complicated government policies, lack of localization and massive competition from Chinese companies.

Within the areas of computer processing companies such as Intel and Microsoft remain the prominent leaders. And although Microsoft suffers from piracy issues, their market share remains unchallenged. Amazon has remained a fierce competitor with Taobao and even as the Chinese company has moved forward over the past few years.

Other international e-commerce platforms like Ebay, Wish and Lazada, have starting opening up to Chinese sellers, as they are learning that China is a large country filled with many business opportunities and online profit potential.

For Chinese sellers new to Amazon, they only need to find a product, then source, and launch it. Which is an easy process for goods made in China.

Four years ago when Amazon launched its global seller project, a large number of Chinese sellers began to explore avenues of cross border e-commerce business, seizing upon the potential for large profits in this burgeoning market. So far, there are more than 1,000,000 online stores in China. Store inventory consists of more than 90 of products made in the country. As a result China has shown overwhelming interest in these foreign e-commerce platforms. The businesses are now recruiting across the country, and also in Canada, France, Germany and other foreign markets.

The flipside to all of this is that the country is currently witnessing the demise of OEM retailers, such as Shenzhen Huaqiang north, because many sellers have realized they must transition to the new OEM model in order to develop brands. Overseas cross border e-commerce platforms have now given them a chance to place their products in front of global consumers.

Chinese newspaper Southern Weekly interviewed a man in Shenzhen invested $3,000 (USD) in his own Amazon platform and opened an online shop in the US last year. His business revenue has reached $2 million (USD) with a gross margin of roughly 20%. He said that the Amazon China platform is related to details, product design, and a higher degree of customer service.

By the end of August and early September of this year, thousands of unqualified stores were forced to shutter due to new quality regulations and standards. There are also more stringent supervisory and audit controls in place and it is even harder to apply for a new store license on the platform.

Competing within the Amazon marketplace can be daunting for sellers who want to jump into the game, especially new Chinese sellers. It’s an intense competitive landscape that is known for its constant price-cutting nature. But it still provides an incredible opportunity for Chinese retailers to increase their market reach, which is an improvement on business visibility that cannot be achieved by using a simple webstore.

Starting e-commerce endeavors are no longer complicated processes due to the global market changes that have occurred. For Chinese sellers on Amazon, products made in China and fast shipping tools make it easier for them to operate their businesses.

The current end result is that this new emerging business platform is both an opportunity and a challenge for Mainland Chinese sellers.

(Top photo from Baidu Images)

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