The growing pains and lessons for Chinese cross-broader sellers- PingWest

The growing pains and lessons for Chinese cross-broader sellers- PingWest

The growing pains and lessons for Chinese cross-broader sellers

Wang Boyuan

posted on August 3, 2021 0:01 pm

A hard year for the Chinese cross-border sellers.

Although China has quickly recovered from the pandemic, the Chinese cross-broader merchants are still in the struggle. For them, the pain mainly comes from major e-commerce platforms such as Amazon and Wish.

PingWest has reported in June that the online dollar store Wish has lost many sellers from China, because of the platform’s poor management during the pandemic.

With the pandemic outbreak, Wish becomes less favorable for the bargain-hunters as shipping costs have skyrocketed. On the other hand, when shipping time became unpredictable as the pandemic evolved, the US-based e-commerce platform admitted that delivery time hit the lowest level in history. However, the company did nothing but fined Chinese sellers for every order that couldn't beat the delivery deadline.

The "unreasonable penalties" caused many Chinese merchants to withdraw from the platform and focus on other platforms. Nonetheless, they didn't realize that another wave of the crackdown was on.

On Amazon, the world's top e-marketplace, an intense crackdown has been in progress for months against Chinese companies, including some brands which own some bestselling power banks and chargers of the site.

Since June, the US company has banned several top Chinese merchants from its platforms for alleged paid reviews. The list includes some big names, such as Aukey and Youkeshu, whose sales on the platform exceed $1 billion.

In a filing issued to Shenzhen Stock Exchange, Tiza Information Industry Corporation, the parent company of Youkeshu, one of the largest Chinese retailers on Amazon, reported having 340 stores closed and have 130 million yuan ($20 million) in funds frozen amid the crackdown. It also warned its investors that the company's total revenue expects to drop by 40%-60%.

On the domestic online marketplace Taobao and Tmall, it is common to add a slip of note in the parcel, asking the buyer to leave some good comments. Often the merchant would cash back the commenters for 5-10 yuan.

But the culture is different here in China: nowadays, people don't necessarily rely on the feedback from the item page to make purchase decisions. Many prosperous pre-sale marketing channels could influence buying behavior, such as live-streaming, short video ads, and influencer recommendations.

No one in China would think the note points to paid review in this environment, but rather the seller's cry for more engagement. Naturally, the cross-border sellers ignored the cultural gap. And such behavior became review abuse and other violations in the eyes of Amazon.

During the clampdown, more than 50,000 stores from the country were banned over practices such as commissioning fake reviews. Despite that China's cross-border sellers are taking a larger role on Amazon.

According to e-commerce data company Marketplace, 42 percent of the top sellers on Amazon were from China as of the end of 2020, whereas the figure was just 11 percent in 2016. Overall sales by Chinese merchants on the platform ranked second only to US sellers.

The national government has also been aware of the current issue. Li Xiangqi, director of the Foreign Trade Department at the Ministry of Commerce, said the cross-border e-commerce industry is "going through some growing pains" as a result of Amazon's decision, but he added that China would help its companies comply with international standards and protect their "legitimate rights and interests".

The storm was a wake-up call for all Chinese practitioners and companies on Amazon, warning them to assess their compliance. Meanwhile, it is also a wake-up call for Chinese businesses to explore other channels to avoid risks.

What damages most, is not that Amazon suspended the stores’ operations, but to hold the goods and capital of the merchant accounts. SCMP reported that a group of more than 20 mid-sized and large companies had explored the possibility of teaming up in a jointly filed lawsuit against the Seattle-based online retailer, but the plan was aborted last week after the sellers failed to reach an agreement about their strategy and demands.

The crackdown also becomes an opportunity for Amazon's competitors. Google China has opened a campaign called Project Sail (启航计划) to help cross-border merchants. The project is a series of workshops and seminars on on-site building, SEO, and so on, aiming to persuade sellers to start their independent shops.

Lazada, Alibaba's Southeast Asia e-commerce branch, has launched an AI-driven CPFR (Collaborative Planning, Forecasting, and Replenishment) system to help retailers quickly manage their stock in the warehouse. The program has also joined Alibaba's affiliations such as Cainiao, the logistics arm, and AliExpress to share the experience and technology they have accumulated throughout years of operations.

Nevertheless, with the tuition fee paid, the next episode of the Chinese cross-border retailers has just begun.

Photo by CHUTTERSNAP on Unsplash