At Oceanwing, we act as a bridge connecting brands all over the world. As such, we get a front-row seat to emerging opportunities and big changes happening in the global eCommerce marketplace.
Recently, the Thrasio model has become a trending topic in the eCommerce world as an increasing number of aggregator investors find new opportunities in Chinese sellers and brands.
In just the first half of 2021 alone, aggregator businesses raised almost $6 billion in funds for investing in Chinese sellers.
The reason behind it is apparent — in Q1 2021, third-party sellers accounted for 55 percent of products and 63 percent of the value of merchandise sold on Amazon. Nearly half of these third-party sellers are based in China.
Since the pandemic has changed consumers’ online shopping behavior, going global presents a hot new opportunity for retailers.
Getting to know any brand and the global eCommerce environment isn’t easy. Additionally, most people aren’t familiar with China eCommerce and Chinese brands.
As a cross-border eCommerce service provider, we build close connections with brands worldwide and have the inside knowledge to answer your top questions about global Chinese sellers, brands, and what opportunities you can capitalize on in eCommerce.
Why are more and more Chinese sellers and brands establishing themselves in cross-border eCommerce businesses?
The most direct reason is the high competition in the retail market in China. The competition is everywhere, from manufacturing to logistics, from electronics to apparel. The fierce competition cuts into a brand’s profit margin. For example, the average net profit margin of consumer electronics in China is lower than 10%, only 1/2 of the US market.
Doing cross-border eCommerce and selling products globally helps Chinese sellers gain more market share and increased profits. And after many years of trial and error, Chinese sellers now realize the importance of building their own brands.
For example, Oceanwing’s parent company, Anker, became the #1 seller on Amazon. And it’s a Chinese brand.
How strong are Chinese brands in the global eCommerce market?
According to the United Nations Statistics Division, China ranks first in output among the world’s more than 500 major industrial products — at over 220. In addition, statistics from the World Bank indicate that China’s manufacturing industry’s added value surpassed that of the United States to become the world’s number one manufacturing country in 2010.
To put it simply, that means when building an eCommerce business, you can find all the supporting materials and services at the fastest pace with Chinese manufacturing.
And because of high competition, the quality is also much higher. That’s why most international brands build factories in China.
Although in recent years, some companies have looked for cheaper manufacturing locations such as Vietnam, Malaysia, etc. But the overall cost is still much higher than in China. So since then, most have returned to China.
Also, Chinese brands are much more agile and have easier access to VOC (Voice of Customer). Since the user group is quite large, a new brand could collect a significant number of user cases in a short time and make modifications quickly. That’s why B2C businesses in China are fast-growing and innovative.
For example, the online retail live streams are heating up in China, and this model quickly expanded to the US market. Amazon, Walmart, Nordstrom, and other top retailers then created their own live stream channels.
How have Chinese sellers prepared for engaging in cross-border eCommerce business?
To better meet the needs of the rapid growth of cross-border eCommerce, we found the strategy and policy support both inside and outside of Chinese sellers.
From Chinese sellers inside:
More and more companies have established independent departments to manage a cross-border business, which means comprehensive support for every aspect of operations. Many brands have also developed special designs for users outside China. Personally, we’re glad to see the growing focus on product innovation and quality control.
For example, a well-known Chinese scooter brand set the US R&D department to design and test the product. Since the road surface is different in China compared to the US, they created special tires to meet the specific needs of US customers.
From Chinese sellers outside:
There are many national policies to stimulate the growth of cross-border eCommerce. For example, we could see more and more supporting facilities constructed — especially warehouses and logistics — which will help Chinese sellers find partners more easily.
This June, Premier Keqiang Li urged the development of international trade at the State Council’s executive meeting. China will accelerate the growth of new forms and models of foreign trade to push forward its upgrading and foster new competitive strengths.
By the end of last month, China built more than 1900 warehouses for cross-border eCommerce with over 13 million sq.m.
Why did Amazon block many Chinese top sellers earlier this year?
We believe this is the most concerning question about Chinese sellers. Recently, Amazon banned a dozen Chinese sellers with $1 billion revenue because of suspicious behavior. It seems that many Chinese sellers tend to break the eCommerce giant’s rules. But is this behavior widespread amongst Chinese sellers?
First of all, these banned Chinese brands definitely do not represent all Chinese brands on Amazon. This is a complicated question fraught with cultural and historical reasons.
Let’s take a look back through China’s eCommerce history.
In 1999, Alibaba was established, opening up Chinese sellers’ cross-border eCommerce exploration. At this time, China played the role as the world’s factory.
In recent years, Chinese sellers joined the real global eCommerce game. Anker is the most successful example. From designing to building its own brand, Anker made Chinese brands their own voice. However, making the transition from manufacturer to real player is not that easy. Most Chinese sellers are still learning how to play the game.
Secondly, Chinese sellers are facing competition from so many eCommerce platforms in different countries. Needless to say, Amazon has set the strictest policies for sellers to guarantee customers’ best shopping experience.
When Chinese sellers manage multiple platforms simultaneously, the rules vary drastically across different platforms, and it can get confusing. For example, some rules are exclusive to Shopify but don’t exist on Amazon, etc.
So, for Chinese sellers to establish lasting brands with long-term prosperity, strictly following the rules of each eCommerce platform is a must. And we’re glad to see a healthy eCommerce environment emerging and establishing itself.
Global eCommerce opportunities
The pandemic has changed consumer behavior in big and small ways, and retailers have to respond to the new normal. We’re seeing big, bold moves from many retailers. Going global could be just one massive opportunity emerging in the eCommerce market.
The bottom line is that retailers’ future success will ultimately depend on creating a cohesive customer experience. So we need to keep learning new things and roll with the punches.
Are you ready to become bigger, better, and more profitable on Amazon? Work with us, and we’ll fly you to where you want to be.