Besides Amazon itself, Chinese sellers assembled a dominant force on Amazon’s online marketplace. For years, sellers based in China have fueled a disproportionate share of Amazon’s third-party marketplace growth. Nevertheless, it was a win-win situation when looking back - Amazon provided entries to multiple global markets and solutions, while sellers in China offered quality goods and bargains. It was also an excellent example of how China and the US joined up in a cross-border retail industry to benefit every party on the chain.

For many Chinese merchants, the Seattle e-commerce giant is the one platform to rule them all. Also, it was the most cost-effective platform to test the water. The success stories of Anker and many other brands had encouraged them to renovate from the basic OEM business to owning a brand and to impress customers directly.

There was a honeymoon, but it was time to move on after the situation went down the spiral.

Avast and belay

It began in 2021 when around 50,000 shops owned by Chinese sellers - no matter big or small - have been banned for violations of rules and cannot react to what Amazon alleged as fake reviews and scams. 

According to a report released by the Shenzhen Cross-Border E-commerce Association, the ban on tens of thousands of seller accounts has resulted in the loss of more than 100 billion yuan ($15.4 billion) for the industry.

“We were in panic at first, because we had no idea what had happened.” Qi Wang, a Shenzhen-based Amazon seller of home theater speaker stands, told PingWest.

“Most of us thought it was sabotage from Amazon because of the undergoing political situation. We did nothing wrong,” Wang added, “but everyday news swirled within WeChat groups that another big seller was delisted without explanation, naturally they were all afraid of being the next one.”

Although Amazon explained later that the recent clampdown was nothing new but a continuous action for years to tackle fake reviews and fraud, it is still in question how a good intention ended up in global class action lawsuits and even rumors of suicidal cases, especially in this year. 

At this moment, Wang has switched his overseas business mostly to eBay, and he also tried to explore new business opportunities at home court Taobao.

The fortune cookies

Like Wang, many Chinese sellers bare basic English skills and sell domestic goods to foreign countries. In the beginning, foreign trade or wai mao was a specialty or a skill that required specific criteria and even certificates. 

However, as the Chinese e-commerce scene becomes crowded and fierce, more and more business people who have only domestic e-commerce experiences put their hopes on the less competitive markets and platforms such as Amazon and Alibaba. The way they run business with foreign customers was no different from how they deal with the locals.

In China, the trick of slipping a piece of paper into the package to encourage buyers to leave positive feedback and rate five stars is widespread and not taken for granted. When you connect it with culture, it’s very similar to what a fortune cookie does for you - it contains a fortune, but it’s also not a big deal. The fortune notes can be found everywhere - a Taobao parcel, a waimai package, or even a birthday cake box. But almost nobody will have a second thought that it has something to do with a bribe or scam. 

As Amazon and other overseas e-commerce platforms host large quantities of sellers based in China, is it also their obligation to understand the local culture and use soft measures to fill up the gap of misunderstanding? 

Weigh anchor

Against all odds, Chinese cross-border brands have also begun to find new ships, and some of them are sailing even further.

According to Marketplace Pulse, Chinese sellers make up 38% of the top brands on Amazon, down from a peak of 42% in 2020 and 40% at the beginning of 2021. The reasons behind the drop can be various, partially because of Amazon’s action. Also, it seems that Chinese sellers have become less reliant on Amazon.

The DTC (direct-to-customer) model began to draw people’s attention when Shanghai-based fast-fashion e-commerce company Shein went buzzing this year. Founded in 2008, the startup had been low-profile for years until it ​​overtook Amazon to become the most downloaded shopping app on iOS and Android in the US and 53 other countries.

Shein’s popularity and media exposure had raised the awareness of the market, investors, and the general public just in time when Amazon removed many of its top sellers in China - including Aukey, Mpow, and RavPower - for violating its policies around reviews. Sellers who were once concerned about Amazon Marketplace found a way out.

Shenzhen Cross-Border E-Commerce Association, a trade body representing more than 2,600 cross-border sellers in the city, has encouraged Chinese sellers to become less reliant on Amazon. For example, the group set up a fund of $309k for sellers who need help setting up a website on Shopify, a famous e-commerce website building and operation tool.

“It’s about time. The development of cross-border e-commerce has been booming in the past ten years, which has activated the whole supply chain.” Chris Chen, the founder, and CEO of Chinese digital marketing agency Sevens, told PingWest, “Shein and Anker all demonstrated how well and how far the DTC model can reach, and Amazon’s posture has further enhanced the urgency of everyone who wants to build their own brand.”

Li Xingqian, director-general of the foreign trade department in the ministry, said at a news briefing in July that a growing number of Chinese businesses have sought to establish their e-commerce websites to increase their independence.

The ministry estimates that Chinese businesses have established about 200,000 independent e-commerce websites. Compared with third-party platforms, such websites can cut the cost of operations and maintenance by 30 percent and enable sellers to conduct more targeted sales and promotions, he said.

Like Shein, OnePlus, and many other successful DTC sellers in China, DTC means starting their channel and utilizing social platforms such as Twitter, Facebook, TikTok, YouTube, and Instagram.

But for branding itself, acquiring new users is just the first step. It also means to change sellers' mindset who only have a quick and eager pursuit of short-term returns on traffic thinking to do well.

“You can’t apply one rule to all markets, and marketing isn’t just about posting pictures of your products,” said Dean Guo, Global Brand Manager of Breo.

Founded in 2000, the Shenzhen-based Breo offers motorized massagers of body, eye, head & hand worldwide. The work-from-home option amid the pandemic had boosted Breo’s business. According to Dean, Breo’s independent site was live in 2019. During the pandemic, there was a significant increase in desktop traffic and a decrease in mobile, which indicated that it attracted people who feel sore when they are at work.

“So we modified the desktop version of our website, adding interactive information on the front page and user experiences so that customers can understand more intuitively what the product can bring, and how to use the product,”  Dean said. “and it worked. Foreign people do not have much concept of massage, nor do they have a natural trust with Chinese medicine like we do, they do prefer to be clearly informed in a straightforward way.”

The rise of DTC means shifting the focus from competitive prices to the customer experience. Goods on platforms often lack delivering branding messages. “In the long run, the biggest disadvantage of Chinese brands is localization. At present, most Chinese merchants are not doing well enough in terms of user experience.” Chris Chen explained to PingWest.

“If you stick to saving costs and still ship your products from China. It will take 2-3 weeks for customers to wait. How can you tell them your goods are worth the wait? And will your China-based customer service provide the same experience with local brands?” He added.

Alex Yan, CMO of Narwal Robotics which sells premium robot vacuum and mop, had a similar opinion about DTC. In China, Narwal only offers one product at present, with a price tag of 4,000 yuan. After it had become a domestic hit in 2019, the Shenzhen-based startup entered the North American market in 2020 to compete with big local players such as iRobot and SharkNinja. In the eyes of Alex, he thought Narwal could learn a lot from its American competitors.

“We sell, and also we learn,” he said to PingWest in another interview, “the Chinese brands will stand out someday, and to stay in an unfamiliar market, you need to learn from their experiences.”

Shiver me timbers

The DTC model has been booming across the Pacific for some time. DTC e-commerce sales in the US reached $111.5 billion in 2020 and were projected to surpass $129 billion this year, according to data aggregated and presented by Statista.

2 out of every 5 Americans have made purchases directly from a brand or a manufacturer, bypassing popular marketplaces like Walmart or Amazon in the process. Diffusion, a brand PR firm, said that DTC shopping would grow 20% over the next five years.

Venture capital firms are ​injecting cash into the sector, noticing the growth potential of DTC brands amid a societal takeover by the digitally-native Gen-Z. Between 2015 and 2019, nearly 60% of the investment, $3.3 billion, flowed into DTC brands in the US. Multiple DTC brands have gone or are considering going public in recent years. As backers, eyewear start-up Warby Parker, which counts Tiger Global, General Catalyst, Baillie Gifford, etc., made its stock market debut in September via a direct listing on the NYSE. In August, Shoemaker Allbirds submitted an S-1 filing with the SEC, with an expected valuation of roughly $2 billion.

The change in shopping behavior also creates considerable opportunities for Chinese cross-border sellers to further tap the world's largest consumer market.   

Through offering competitive products and introducing traffics from Google paid search, Cupshe, a Nanjing-headquartered brand, has expanded its brand presence among American consumers, becoming the most downloaded shopping app specialized in swimwear and the only such app among the top 500 most downloaded Shopping apps in the US. The company has long maintained a presence on Amazon and now says that its website generates about 70% of the sale. It drove $150 million in revenue in 2020 and is on track to win $250 million this year.

At the same time, for Chinese sellers, Amazon, the Seattle-based e-commerce giant, is a potential threat, as it sometimes cannibalizes its third-party sellers by copying best-performing products, often third-party, across many popular categories. (Notably, this practice is not limited to Chinese sellers. A recent report by Reuters said that Amazon exploited internal data from its Indian website to copy products sold by other companies and manipulated sales to improve the ranking of the similar ones made by itself.)

Wang Gang, a Ningbo-based merchant who has been selling household products to global customers on Amazon for eight years, told PingWest that Chinese sellers are beginning to realize the importance of diversifying sales channels and establishing their brands, considering that Amazon is not only speeding up its crackdown on them but also has become a hidden competitor for them.

Also, the seller said that selling price-oriented products on Amazon in the early days was profitable because their costs were relatively low, and the competition was not so fierce. However, things are getting harder in recent years as the costs keep rising and sellers keep flocking into the marketplace, and Amazon is also tightening the ropes with rules enforcement.

"People in this industry are feeling insecure, even if we comply with the platform's rules carefully. Therefore, we believe it's the right time for us to diversify our sales channels," Wang said, adding that selling through the DTC model boosted profits.

As the exclusive agent of e-commerce website building platform BigCommerce in China, SILK has witnessed the trend of Chinese sellers switching to open their own websites. As early as 2019, Xu Donghang, CEO of the agency, told the press that about 95% of those who came to his company for consultation are previously third-party sellers on large e-commerce platforms, as well as traditional exporters.

Alongside international e-commerce website builders like Shopify, BigCommerce, Wix.com, local startups including Shopyy, SHOPLINE, and Ueeshop are flocking into the promising sector. According to statistics, there are 477 website-building tools accessible in China right now.

Citing data, Southern Metropolis Daily said that from January to May 2021, a total of more than 20 cross-border e-commerce platforms and service providers had received money from investors, with a total financing amount of more than 10 billion yuan ($1.56 billion).

Supply chains all rise

With the rise of booming cross-border e-commerce, the supply chain has also received benefits. 

A small cube-like device that can charge smartphones and iPads faster than conventional charging bricks became an instant hit among gadget lovers worldwide, as significant smartphone makers stopped providing chargers with their products, citing eco-friendly ideas. 

Shenzhen-based Anker, widely regarded as a leading charging technology developer, is one of the companies taking this opportunity with GaN, or Gallium Nitride. This new semiconductor material generates less heat and is considered more efficient than silicon. 

Apple, Samsung, and various top smartphone brands left the market when they announced that their latest phones would not come with chargers. They further irritated some customers when they began selling chargers with fast charging capabilities at highly inflated prices. Anker filled that gap by introducing GaN chargers that retained Apple iPhone chargers’ size but doubled the power output at 20W and a lower price. 

Anker, once also an OEM for major consumer brands, could sell its products under its brand and build a name worldwide through a direct-to-consumer approach that utilizes the brand's marketing and sales channels. It is widely regarded as one of the best brands for charging products. A report by Future Market Insights (FMI) suggested that the global GaN charger market, of which Anker is one of the leaders, is expected to surpass $694.4 million in valuation in 2021.

From a small object to a big market, the Chinese cross-border commerce has given the whole supply chain necessary leverage and global customers a refreshing new experience on electronic gadgets and other products. Goods travel from China to various destinations via e-commerce platforms as well as independent sites. Despite being a best seller in Amazon’s gadget category,  Anker is one of the earliest Chinese brands to own and operate its official e-commerce website. Watching Anker take off, many cross-border merchants now realize the importance of branding. The big platforms were once the way to sell, but nowadays, DTC sites are the way to impress, influence, and sell.

In China, the trend of cross-border commerce has seen constant growth despite the Covid-19. More than 600,000 registered companies are doing related businesses in the year 2020. And the infrastructure is expanding, too. According to data revealed by the Department of Commerce, 2100 overseas warehouses have been built as of early 2021, which has a total of 12 million square meters of storage space.

Full throttle

During the pandemic, supply networks have endured great stress, as the biggest challenge for cross-border e-commerce businesses in China and the rest of the world was shipping. However, advanced technology used by Chinese e-commerce and logistic giants proved to have alleviated that stress greatly.

Cainiao Network, Alibaba's logistics arm, is an example of 224 dispatch destinations and more than 20 core cities. It offers a ten-day delivery service at $5 in major European countries, helping many Chinese merchants find new opportunities in previously unfamiliar markets.

In manufacturing and commerce hotspots like Yiwu, Shenzhen, and Quanzhou, where most apparel, accessories, and gadgets worldwide come from, Cainiao offers door-to-door pickup services free of charge for small and medium-sized exporters. On the backend, Merchants can check visualized parcel details at any moment throughout the transportation process using a tracking system provided by Cainiao.

In addition, Cainiao launched Intelligent Combined Order, an AI-driven service that groups up small-batch orders from individual exporters to be shipped globally using machine learning technologies, so smaller exporters can rest easier knowing their products are being shipped at reduced cost and faster speed. Algorithms behind the service calculate the most efficient and reasonably priced transport route and container space using around 200 rules and factors, including parcel weight, local policy, warehouse capacity, delivery time, shipping time, etc. But on the merchant's side, it only takes an instant to place an order, as the rest would all be in Cainiao's hands.

Given the size of its merchandise and its usual orders being ignorable compared to larger-sized commodities, securing cost-effective global transportation was once a significant headache for Wang Shunli, head of operations at Qiaoqiao Crystal, a Zhejiang-based seller of glass and plastic beads. Shipping cost often surpasses the price of the beads themselves, so to cut down shipping, Wang would have to tell customers to wait around 50 to 60 days. Now, with the help of Cainiao, orders from Spain or France can be fulfilled within ten days. Wang told PingWest that thanks to Cainiao, his products can now be priced more competitively and shipped faster, resulting in a 35% increase in sales during a previous shopping season and a fourfold increase in business even during the pandemic.

In the new round of globalization, the US is not necessarily the rule maker and the trade center. The US companies are not necessarily the gods who control the destiny of all sellers and buyers. As a sole e-commerce type, the Amazon model is going down, and this is just the beginning of the deeper integration of China into the global economy. Globalized trade will never stop, nor do the Chinese sellers. For China, the window to the outside world will only be opening wider.

Zhifang Ma also contributed to this article.