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Major eComm Players Making Big Changes to Take on Amazon

Update 12/12/2023: Amazon is opening an innovation hub in Shenzhen, China’s Silicon Valley, to help Chinese sellers reach global customers, and simultaneously thwart the rise of eComm challengers Temu, Shein, and TikTok Shop in the US.

Establishing a Foothold in China’s Silicon Valley as Rivals Gain Momentum

During the Amazon Global Selling Seller Conference held in Shenzhen on Tuesday, Amazon revealed the inauguration of its inaugural Asia-Pacific innovation center in Qianhai, marking a significant milestone as the company’s first-ever tech hub globally.

The center will serve as a hub for Amazon Global Selling’s industrial organizations, third-party service providers, supply chain experts, and suppliers to help sellers in the region “build brands, promote products and digitalize operations,” essentially taking aim at the third-party seller marketplace of Shein and Temu.

During the conference, AGS conducted a comprehensive review of the progress and accomplishments of Chinese sellers on Amazon over the past year. Additionally, it unveiled its strategic roadmap for 2024, comprising five key business strategies, along with the introduction of an array of new tools and enhancements to seller services.

As part of its expansion initiative, AGS announced the establishment of five regional centers strategically located in East China, South China, West China, North China, and Central China. 

Adding Brazil to its roster of destinations for Chinese sellers, Amazon intensifies its presence in Latin America, sparking heightened competition. Shein, a fast fashion giant, designated Brazil as its manufacturing and export hub for the region in April. Concurrently, Temu, an emerging online shopping platform under Pinduoduo, established its footprint in the country in June.

Amazon is also taking it a step further by making Supply Chain by Amazon, the company’s automated suite of supply chain solutions, accessible to Chinese sellers.

Fueling the Rise in Power of Chinese Amazon Sellers

These strategic moves align with Amazon’s recognition of the expanding potential within the “Made in China, sold on Amazon” market.

In the period leading up to the end of September, the eComm giant witnessed a surge of over 20% in the number of items sold by Chinese sellers, with a nearly 30% increase in the number of Chinese sellers achieving revenue of US$10 million.

Moreover, Marketplace Pulse reports that nearly 49% of the top Amazon sales are from China compared to 32% two years ago.

This influx of emerging Chinese sellers is steadily gaining traction as Chinese sellers have increased their market share of Amazon GMV by 8% over the last 5 years from 20.4% in 2019 to 28.4% in 2023.

Apart from the detrimental impact of increasing competition on US sellers, the growing presence of Chinese brands exacerbates the prevalence of counterfeit goods on the platform, and potentially, subject even more honest sellers to abusive practices by bad actors.
What’s even more concerning is that counterfeiting has the potential to erode buyer confidence in the marketplace’s product authenticity over time. Overall, this trend serves as a compelling wake-up call for American brands, urging them to proactively establish and maintain their presence on Amazon, increasing the necessity to scale faster and more efficiently.

Amazon is facing tougher competition from retail rival Walmart and the rapidly spreading popularity of Chinese online shopping apps Temu, TikTok and Shein.

Dubbed Amazon challengers, these companies have reportedly been accelerating their efforts to grow their ecommerce marketplace by providing third-party sellers with extensive resources to sell and deliver products to customers.

Walmart, for example, just reached 100,000 active sellers and continues to increase its market share by building automated small warehouses within its legacy stores, beefing up its advertising business, and announcing new pro-seller programs, just in time for the holidays. 

On August 30, America’s largest retailer hosted its first seller summit, unveiling marketplace expansion plans and an array of tools designed to streamline the selling experience for sellers on its platform. These include:

  • Extending the company’s marketplace presence to Chile, marking its first venture beyond the borders of North America. 
  • Adding more brand shops available on its website, offering sellers the opportunity to craft unique digital storefronts that showcase their standout products.
  • Waiving peak season storage fees for sellers who manage to store their holiday inventory in Walmart’s facilities before October 1st. 

Aside from revamping its fulfillment services, Walmart is also actively exploring metaverse opportunities that seamlessly bridge the gap between ecommerce and its physical stores.

To illustrate, customers now have the option to purchase identical items for their physical homes as they would for their virtual houses within the House Flip mobile game. In this game, players can engage in home renovations and virtual property sales. In addition, shoppers can acquire virtual clothing items inspired by Walmart’s fashion brand, Scoop, within Zepeto, a mobile virtual universe enabling players to craft and personalize their avatars. 

Sellers who see the benefit in these new initiatives would be smart enough to stock up more inventory within Walmart, which could then help the company to finally encroach upon terrain (logistics) once dominated by Amazon.

Increasing customer interest in Temu and Shein

Recent data from Consumer Edge (CE) shows a rising trend of shared customers between Amazon and these emerging Chinese online stores.

This growing interest coincides with Temu and Shein’s expansion in the US market, which began in 2022. The rapid growth can also be attributed to their “low prices, not fast shipping” offerings. The Wall Street Journal (WSJ) reports that inflation-fatigued American consumers are becoming more patient, willing to wait for their purchases if they offer significant savings. 

In fact, over the last three months, 5% of Amazon’s customer base ventured into Temu for a purchase, while 4% opted for Shein, according to CE. Interestingly, those who frequently shop on Amazon exhibited a greater inclination to explore these new entrants. This suggests that people with a penchant for online shopping are more likely to diversify their shopping experiences. In addition, more than 6% of consumers who engaged in over 20 transactions on Amazon in the past three months also chose to make purchases from Temu and Shein.

Shein’s recent efforts are aimed at fast-fashion customers, specifically Gen-Zs. The company just released new collections from its Designer Incubator program, which guides fashion designers through the end-to-end supply chain process, from product development to manufacturing to marketing to logistics.

The fast-fashion store also recently announced its partnership with Forever 21. Under the terms of the arrangement, Shein may eventually establish in-store boutiques within Forever 21 locations, while Forever 21’s clothing line could also become available for purchase on Shein’s online platform.

Meanwhile, Temu has reportedly muscled out Target and Shein in web traffic, but the company “has got a long way to go to catch up to Amazon,” as per Comscore, the eComm giant still holds the top stop by a wide margin, and might stay that way for a while.

Within Amazon’s leadership, discussions are ongoing about the possibility of enhancing the visibility and accessibility of bargain deals on the platform in response to the rapidly increasing customer interest in Temu and Shein.

TikTok braces for battle with Amazon and Walmart

The social media giant has officially entered the US eComm space in September of this year following the launch of its own marketplace platform, TikTok Shop

As part of its expansion strategy, the company introduces new site functionalities, including a dedicated shop section on the home screen, interactive live video shopping, affiliate programs tailored for content creators, and shoppable ads.

TikTok uses Shopify to offer eComm solutions to sellers and facilitates seamless integration with Feedonomics (listing management system) WooCommerce (eComm plugin for WordPress), Salesforce Commerce Cloud, BigCommerce, and Magento. 

When it comes to customer service, TikTok links up with Zendesk, Gorgias, and 1440. Additionally, for print-on-demand merchandise, it partners with Printful, Printify, and NovaTomato. And to gather reviews, TikTok collaborates with Yotpo. Lastly, TikTok ensures efficient shipping through WeeBee, Flowspace, and Easyship.

Based on internal documents reviewed by Bloomberg, the social commerce app is also reportedly strategizing to provide huge holiday season discounts that are set to kick off as early as October. The company hopes that these holiday deals “can attract consumers to its newly launched marketplace as it aims to compete with Amazon and Walmart.”

However, while TikTok may appear armed and ready for its eComm showdown with Amazon, its efforts to establish itself as a shopping hub are already facing difficulties that could hinder success.

Industry insiders told Fortune that the abundant number of inferior products on Tiktok Shop, coupled with the company’s stance on customer data handling, is causing potential partners (sellers, influencers, or marketers) to hesitate.

During Fortune’s initial exploration of the marketplace, the product assortment appears to be heavily leaning towards the lower price range, with the first seven items featured were made in China and priced below $20.

For marketers and influencers seeking to maintain a premium brand image and avoid associating with subpar products and counterfeits, this might serve as a deterrent. 

To address this issue, TikTok is “working on onboarding some really great (American) partners that they have shared. So I think we’ll continue to see [Shop] get better and better,” said Haley Galler, head of talent at Shine, an influencer management company.

TikTok’s “overly complex” onboarding process and inaccessible customer data are also turning off some brands.

In an interview with Fortune, Ann McFerran, CEO and founder of cosmetics company Glamnetic, said that TikTok refuses to give her shop access to customer data. 

“They’re going to start generating actual revenue and taking credit card information from all these users, [but] not sharing it with the actual brands,” McFerran said.

The absence of data access could pose major challenges for sellers looking to build relationships with their customers. Moreover, the collection of private information, such as credit card details and mailing addresses, by a China-owned company, might introduce additional complexities.

TikTok is already in the crosshairs of US lawmakers amid concerns that the China-owned app could potentially compromise the privacy of American users. However, the company has maintained that it does not share protected data of US users with the Chinese government.

Who should Amazon be most concerned about?

Walmart remains as the top eCommerce rival, with its fast-growing fulfillment network, expanding marketplace features, and booming ad business. The retailer is essentially taking a page out of Amazon’s playbook, but with seemingly more seller-friendly initiatives, i.e., waiving peak season storage fees.

TikTok is a noteworthy contender, especially due to its popularity among younger shoppers and live streaming capabilities. However, the marketplace is currently littered with cheap buys and knockoffs that brands may not want to associate themselves with. If customers wanted goods from China, they could simply opt to stick with Temu and Shein.

Overall, these emerging China-based shopping apps still have a lot of potential to play a major role in Americans looking for an easier way to buy goods at bargain prices. But whether these stores can consistently meet customer delivery expectations is still up for debate. 

It’s likely that 10 to 20 years down the road, we’ll reflect on one of these eComm players as  now a colossal company, despite falling short compared to Amazon in 2023. This prospect bodes well for both sellers and consumers.

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