I’ve been watching the challenges grow in the US e-commerce arena for a while. From the emergence of Temu and AliExpress to Amazon fee increases, life is definitely harder than it used to be for most. I saw a couple of months ago in the news where China had relaxed some of its cross border rules but didn’t think much about it. Today I received the following email from Steven Selikoff, a respected China sourcing guru. I don’t know how accurate all of the info is, but it’s certainly worth noting. FYI, I redacted some of his marketing message.
I’m interested in hearing from others here who are more dialed in on this subject.
TLDR; If you’re anywhere in the e-commerce space and don’t have a distinct value skew you better be getting one. The Chinese are coming after the market hard and a value proposition alone will no longer keep you afloat.
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I’m interested in hearing from others here who are more dialed in on this subject.
TLDR; If you’re anywhere in the e-commerce space and don’t have a distinct value skew you better be getting one. The Chinese are coming after the market hard and a value proposition alone will no longer keep you afloat.
================
| The most important email that you will read about ecommerce this year. This is a long email, but that’s okay. People who treat this as a business will read all the way through, and those who treat FBA as a side gig will stop reading now. Are you an e-commerce seller? Are you an FBA seller? Your world is about to change for the worse. Most people do not know why, or what to do about it. But I do. Partly from being in the right place at the right time, and partly by having the respect and connections that allowed me to have direct 1:1conversations with some industry leaders. I’ll summarize it here. Also, I am putting out a series of videos on YouTube and will probably do a webinar too. WHAT DO YOU NEED TO KNOW? |
| There is much MORE than just the leak about Amazon selling direct discounts from Chinese factories. (And, the recently leaked information is wrong anyway.) Many people heard the news that Amazon will start a discount section selling direct from Chinese Factories. The story leaked in July. However, I have known about this since February. I have been developing strategies since February. In my FB group you’ll see a post where I talk about meeting two Amazon employees in Shanghai in February, on their way to talk to factories. In March I confirmed what Amazon was planning, and I was shocked to learn what Temu, Shein, TikTok Shop and others were planning too. There is much more going on than anyone knows. In May I had lunch with the head of Amazon Business Development in China and learned more. This is the scary part. It involves shipping. I had agreed not to disclose what I had found out, but the leak nullified that. I am going to share a lot of what I know right here, in this email. If you are selling products in Gift, Home, Pets, Décor, Toys, Kitchenware, Office, and Apparel, then your factories can, and will, compete directly against you in the Factory Direct division, and their prices will be the same prices they charge you, or lower This is what the leaked story got wrong. 1) Some of the products in the Amazon Discount program will ultimately be distributed from within the United States. Shoppers will eventually have 2-day delivery options. You have not heard that from anyone else before, but I am telling you this now. 2) More alternatives to Temu, Shein, and Amazon are coming online (some are already in beta). The new alternatives are also planning to include some shipping from within the United States. (Temu is already testing this.) You have not heard that from anyone else before, but I am telling you this now. 3) Walmart is actively recruiting Chinese factories to sell directly to US consumers. I have seen the presentation myself. They are offering financial incentives, discounts, and support to help them succeed. Walmart will no longer be a safe space to escape to if you face Chinese competition on Amazon. You have not heard that from anyone else before, but I am telling you this now. 4) The Chinese government is involved, and is encouraging, these moves. You have not heard that from anyone else before, but I am telling you this now. Some people are saying that the launch of the Amazon Factory Discount section is the Titanic of FBA. They may be right, but they are missing the real threat. It’s worse than the Titanic. There is a huge iceberg coming right at you and you better start changing your direction soon. |
| The Chinese government is getting into e-commerce The Chinese economy has taken a hit. One of the pillars of their economic recovery is “cross-border e-commerce.” I have seen gurus use this terminology without even understanding what it means. China already has a robust e-commerce sector domestically. You can order a product online and have it delivered hours later. They do e-commerce much better than Western countries. But that’s not the same as cross-border e-commerce. Cross-border e-commerce is a specific initiative aimed at Chinese factories and suppliers selling directly to Western consumers, (particularly Americans). Chinese factories are facing a downturn, and the Chinese government sees great potential in cross-border ecommerce. They’ve seen the success of Temu and Shein and they know the model works. Therefore, the government is doing whatever they can to 1) encourage factories and suppliers to start selling directly to US consumers, and 2) to encourage more cross-border e-commerce platforms to open in the US. This will increase the number of opportunities for customers to shop off Amazon, and also increase the number of channels available to Chinese factories to sell directly to consumers. Cross-border e-commerce is economic war, and every new factory-to-consumer platform is a new battlefield. |
| It involves more than just Amazon Here are platforms that Chinese factories can use to sell direct to US consumers 1. Amazon.com 2. Amazon Factory Direct Discount section 3. Walmart.com 4. Temu 5. Shein 6. Ali Express 7. TikTok Shop 8. (massive e-commerce platform) - confirmed to me by execs and factories 9. (massive e-commerce platform) - confirmed to me by factories You already know that 60% of 3P Sellers on Amazon are Chinese. I have personally seen Walmart recruit Chinese factories. Temu and Shein are well established. Ali Express is redesigning their front end to be more friendly to US consumers. TikTok shop expects to sell over $1 Billion dollars in retail goods directly to US consumers within two years. And there are more very big ecommerce platforms about to be announced. I want to be 100% clear. In the next twelve months you will see an invasion of platforms for Chinese factories to sell to US and western customers. It is already starting. They have tools just like Helium10 and better. The factories will sell the same types of product you are. Don’t be blind to what is happening. |
| WHAT DOES THIS MEAN TO YOU? Amazon market share will shrink. Currently ecommerce is approximately 15% of the US retail market. The new direct channels to Chinese factories will not significantly increase the total percentage of e-commerce in retail. Therefore all of these new platforms will fight for market share within that 15%. Most of that market share will come from Amazon. It currently has around 5% but it is the most vulnerable. In other words, if all your eggs are in the Amazon basket, then get ready for that basket to shrink. Price will be the main driver of e-commerce purchase behavior. Low prices are king. Right now, online consumers spend 27%more time seeking a lower price than pre-covid. That demonstrates a determination to find lower prices. When they search Amazon’s main site, that determination will translate into consumers first searching the Amazon Discount site, and then leaving Amazon to check their second and third favorite sites as well. These will be among the new cross-border e-commerce sites. We already see this buying behavior today with shoppers leaving Amazon to search on Temu. A few 3P sellers may get onto those platforms, but most sellers won’t have an opportunity. Face it, you are competing with a Chinese government initiative, and they want the new platforms to be as Chinese as possible. |
| WHAT CAN YOU DO? Win at marketing For a while still, customers will still start their search on Amazon. Make sure that your marketing is spot on. You want them to see your listing and buy from you without going to any other sites. You will get one bite of the apple. Once they see your factories selling the same product for less, they will buy it elsewhere. Protect your IP Patent if you can. Be aware that most products that are found through tools such as H10 are not novel nd non-obvious. ‘Me-too’ copycat products cannot be patented. Therefore, get familiar with IP protection strategies that go beyond patents. Sell to physical stores. I have been talking about this for years. People still buy almost 9 out of 10 items in stores. Don’t ignore this sales channel. Don’t be afraid to approach stores. It’s actually easier to sell than Amazon, and when you do it right, the stores become clients. It’s not a one-time transactional sale like on Amazon. They will buy from you again and again. |
| Differentiate, Differentiate, Differentiate. Make your products unique, designed intelligently, and with customer appeal. Think beyond just looking at customer complaints for inspiration. Everyone else is doing the same thing, and even a quick look at Rufus will tell you that other people see the same information that you do. THINK DIFFERENT. (If you haven’t heard my stories from my time at Microsoft with great advice on this, then be sure to come to any of my in-person meetups or presentations.) Want to be a little more scared? I have seen demonstrations of Chinese product research tools that identify products, and also use AI to recommend differentiation, and provide mock images and listings. These tools however, do not understand what drives western appeal in products. They can suggest modifications based on review data and other analysis, but they cannot be creative and they cannot draw upon western cultural experiences to make decisions. You can, and you should. Know your customer. Listen to your customer. Thank you, Paul Baron, for this. You have the ability to learn from your customers that Chinese companies do not have. Leverage it. Make changes and modifications that YOUR customers want. Listen to them. You have this advantage. |
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