Chinese companies aiming to secure a share in the overseas e-commerce market cannot bypass Amazon; Amazon faces not only fierce competition from Chinese companies but also multi-faceted regulation and employee protests. Amazon is metaphorically on the hot seat.
On December 12, 2023, at the Shenzhen Convention and Exhibition Center, the Amazon Global Storefront Cross-Border Summit was held in the 15,000 square meter Hall 9, with over 30 Amazon global executives in attendance and tens of thousands of participants, most of whom were sellers interested in the platform's latest policies. The entrance to the venue was bustling with people, and service providers were handing out business cards and soliciting business. Amazon holds annual meetings for Chinese sellers, and this was the largest scale in history.
On the same day, in another exhibition hall of the convention center, the Shenzhen Import and Export Trade Expo was taking place, where TikTok Shop was recruiting merchants. Gao Mingpei (a pseudonym), who has been operating a store on Amazon since 2018 with a company of over 100 people, mainly dealing in digital products, showed little interest in the Amazon summit and was recently studying TikTok's strategies with friends.
"The current period is the TikTok dividend phase," he stated, noting that a significant portion of Amazon sellers are exploring TikTok channels. Another Shenzhen seller mentioned that since October of last year, the shipment volume of TikTok sellers around him has mostly tripled or quadrupled.
This reflects changes in the industry. Chinese platforms going global with a focus on low prices and a full-service model, such as Temu, Shein, and TikTok, have seen rapid growth in 2023, becoming a presence that cannot be ignored. Users who complain about Amazon's high prices, as well as Chinese sellers struggling with Amazon's strict rules and high operational costs, now have new options. The media uses headlines like "At the Gates" and cites the rapidly growing data of new platforms to illustrate that this veteran e-commerce giant is under threat. An Amazon employee in Europe has recently stopped shopping on Amazon and switched to Temu because of its affordability.
However, within Amazon, several employees claim they do not feel the competitive atmosphere. In a company-wide meeting following the release of the quarterly report in November 2023, executives discussed logistics efficiency and the Israeli-Palestinian conflict; during the Q&A session, employees asked, "Can the days for working from home be more flexible?" Amazon employees who attended the meeting recalled that no one mentioned emerging e-commerce competitors throughout the event.
In China, the sense of urgency is more intense. During the Q&A sessions of the all-staff meetings and the group interviews with executives after the summit, employees and journalists mentioned the formidable new competitors. Amazon's senior executives in China are unanimous in their stance: "Obsessed with customers, not obsessed with competitors." This is a rule set by Amazon's founder Jeff Bezos.
Founded in 1994, Amazon's latest market value is $1.6 trillion, ranking fifth globally in 2023. E-commerce is the starting point and the core of Amazon. Out of Amazon's six main sources of revenue, all except for AWS cloud services are e-commerce or directly related to e-commerce, accounting for over 80% of total revenue.
Amazon is the biggest fortress that Chinese e-commerce platforms hope to conquer. According to Chinese customs data, from January to October 2023, the export volume to Europe was 341.2 billion yuan, and to Southeast Asia, 351.2 billion yuan, while the United States alone reached 420 billion yuan. Industry insiders generally believe that while significant growth in order volume can be achieved in Southeast Asia, the United States is the most valuable market for making money and building brands. In 2022, Amazon's market share in the United States was about 38%, six times that of the second-place Walmart.
Amazon is also a direction for Chinese peers to learn from. The flywheel theory, long-termism—principles proposed by Bezos and adhered to by Amazon—have become the creed of many Chinese entrepreneurs. For Chinese e-commerce companies to win in the fierce competition of the overseas market, they cannot bypass Amazon.Amazon's New Rivals
"Advertising and pricing are two ends of the same spectrum—low prices are the best advertising," a notion that once inspired Amazon. Now, challengers from China are pushing both ends to the extreme.
Once, Amazon was virtually the only choice for Chinese cross-border e-commerce practitioners. It brought enormous wealth to Chinese sellers, especially during the pandemic's online shopping boom, helping them purchase luxury homes in Shenzhen worth tens of millions of yuan with cash. Sellers regarded Bezos as the god of wealth. Some even set up statues of him in cafes, complete with white liquor and incense burners for worship.
Now, they frequently complain about Amazon's increasingly strict rules, increasingly complex operations, and rising operational costs year by year. In recent years, Amazon's transportation and storage fees have been continuously increased, and the in-platform advertising adopts a bidding mechanism, with more and more competitors driving up advertising costs. One seller recalls that in 2016, Amazon's in-platform CPC (cost per click) was less than $0.5, but now it has exceeded $1.5, and during the Black Friday promotion, it can reach $2-3. According to market research firm Marketplace Pulse, since 2016, the percentage of sales that Amazon sellers pay to the platform has been increasing year by year, and in 2022, it exceeded 50% for the first time.
The "store closure wave" that lasted for three months in 2021 was a concentrated manifestation of the contradiction. At that time, Amazon was cracking down on "brushing orders," forcing the closure of a large number of stores and freezing payments and inventory. The "skills" that Chinese sellers are good at, including opening multiple stores and creating positive reviews, once detected by the system, result in store closures. Sellers who had prepared goods in advance in overseas warehouses suffered heavy losses, dragged down by the unrecouped payments and ongoing storage fees, and some major sellers with sales of several billion yuan went bankrupt. The luxury homes in Shenzhen that were once bought with cash were put up for sale again.
Since then, finding new sales channels and reducing dependence on Amazon has become a consensus in the industry. As cross-border e-commerce platforms from China rise, relying on lower prices and innovative operational models to attract users and sellers, people like Gaoming Pei have also seen new opportunities.
The new rivals are declaring war on Amazon with "low prices." Since its establishment, Amazon has emphasized low prices. In 2002, Amazon employees spent 6 hours visiting chain bookstores, comparing the prices of the top 100 best-selling books, and found that 72 of them were cheaper on Amazon, 25 were the same price, and 3 were cheaper in the bookstores. They then lowered the prices of these 3 books.
Low prices are an important part of Bezos's "flywheel theory"—lower prices attract more customers, higher sales volumes, which in turn attract more sellers and lower-priced products. Under the effect of scale, Amazon can gain more profit from fixed costs (such as servers, logistics centers). Therefore, Amazon has established a price comparison system to capture the prices of the same products in real-time to ensure that it is the lowest price on the entire network.
American retail giants Walmart and Costco adopt a similar logic. In the view of Walmart's former CEO, Lee Scott, advertising and pricing are two ends of the same spectrum—low prices are the best advertising, so Walmart takes part of its marketing expenses to reduce prices.But now, their Chinese competitors are pushing both ends to the extreme. Temu, backed by its parent company Pinduoduo's substantial profits from its domestic main site, is generous on both ends, monopolizing advertisements on platforms like Google and Meta, spending $14 million (approximately 96 million yuan) to purchase ads for the "American Spring Festival Gala," the professional football final "Super Bowl," and offering substantial subsidies to users, such as distributing $100 coupons during the "Black Friday" period.
They also go a step further, directly connecting with the source factories, eliminating middlemen, and driving prices to the lowest possible. Shein is a typical example—having spent nearly a decade delving into the supply chain, digitally transforming the supplying factories, creating the "small order, quick return" model in the apparel industry, and building a system capable of predicting fashion trends to guide factories to first produce a small batch of dozens of pieces, test the market with these trial versions, and then mass-produce if the sales performance is excellent. A Shein insider stated that the company's division of labor is very detailed, with the step of "capturing fashion trends, capturing historical order information, and deducing popular elements" being broken down into several parts, each managed by specialized personnel.
This requires great patience, gradual transformation and upgrading, and allowing suppliers ample profits to gradually build trust, so that factories are willing to continue cooperation.
Temu operates a fully managed model where merchants only need to ship goods to Temu's domestic warehouse and declare the supply price; subsequent operations, placements, and pricing are all handled by Temu. Temu also reforms the supply chain. An industry insider said that Temu's buyers guide factories, such as replacing a certain part of the product with another model to achieve a lower price. However, factories are hesitant about this because once the production line is changed, it is difficult to revert it back.
As for TikTok, it is inherently a traffic entrance with a daily active user base of 1 billion, and there is no need for additional advertising placements. After TikTok launched its closed-loop e-commerce business, orders that were originally advertised on TikTok and directed to Amazon for purchase can now be completed directly within TikTok. It is understood that the recruitment standard for TikTok's US station is an annual sales volume on Amazon exceeding $2 million. A Temu seller said he received a recruitment invitation from TikTok, which stated that he could use Temu's inventory but required the supply price to be lower than Temu's.
Some argue that Amazon is better at high-priced brand products, while Chinese platforms excel at low-priced products, and the two sides are in a staggered competition. A person who sells low-priced home goods on Amazon disagrees, saying that Amazon needs stable traffic, and only high-repurchase low-priced daily necessities and home products can bring stable traffic, and now this part of the traffic is being contested.
Since its establishment, Amazon has never lacked competitors. Relying on its increasingly improved self-operated logistics system, relatively low product prices, and a sufficiently rich variety of products, it has left behind former competitors such as Barnes & Noble, vertical e-commerce platforms, and Walmart. It has not encountered an equal opponent for a long time, and as a result, Amazon was sued for antitrust in September 2023.
In the Chinese e-commerce market, Amazon has been defeated by Alibaba and JD.com, and now its market share is less than 1%. In July last year, Amazon's e-commerce business in China was suspended. People attribute the failure to "not being suitable for the local conditions."
Twenty years later, Amazon is facing Chinese competitors again, this time on the overseas market, especially in the United States, with the roles of home and away teams reversed, and it is the Chinese platforms that are "not suitable for the local conditions." Currently, the scale of Chinese newcomers is still not comparable to Amazon, but they are growing rapidly. According to data from mobile analytics company GWS, in September 2023, Amazon's mobile monthly active users were 142 million, a decrease of 7 million from the same period last year, while Temu and Shein's mobile monthly active users increased from 4.6 million to 82.4 million and from 15.4 million to 29.5 million respectively during the same period. The average daily usage time of mobile users on Temu, Shein, and Amazon is 22 minutes, 12 minutes, and 11 minutes, respectively.
The new competition has already begun.Amazon Emerges from the Gloom
The pressure on Amazon is not solely from its competitors but also from its own performance losses. After "cost reduction and efficiency enhancement," Amazon's performance improved in 2023. The executives who looked gloomy during the all-staff meeting in the poor quarter of 2022 finally joked around with ease at the third-quarter all-staff meeting in 2023.
In response to the aggressive new competitors, Amazon's response is cautious.
"Amazon wants sellers to have innovative products, not low-price competition with the same products," said Fei Dai, Amazon's Global Vice President and Executive President of Amazon Global Store in the Asia-Pacific region.
This may be because the size of the new competitors is still far from comparable to Amazon's. According to Amazon's financial reports, in the first three quarters of 2023, its online store's net sales amounted to $161.3 billion; British media reported that Shein's revenue target for 2025 is $58.5 billion; it is reported that Temu's GMV (Gross Merchandise Volume) target for 2024 is $30 billion. According to data from a ShipMatrix article in December 2023, Temu and Shein ship an average of about 1 million packages in the United States daily, while Amazon ships over 20 million.
However, it is certain that Chinese competitors have caught Amazon's attention. In June 2023, according to American media reports, Amazon had removed Temu from its price comparison system, no longer requiring the same products to be priced lower than Temu. In addition, an Amazon insider said that inspired by Temu, Amazon has increased its efforts to cultivate and recruit factory-type sellers.
The key turning point for Amazon to shift from noticing to taking new competitors seriously was the 2023 "Black Friday." The American "Black Friday" is equivalent to China's "Singles' Day." An industry insider who researched in the United States in 2023 mentioned that at that time, Amazon had already noticed a decline in consumers' enthusiasm for big promotions, while the new platforms were making a big splash, forcing Amazon to start taking them seriously.
During the 2023 "Black Friday," Chinese platforms extended the discount period to 26 days or even a month and a half, and Amazon also extended the event duration from 5 days to 11 days. This was the first time Amazon had extended the period.
Amazon also adjusted the fees on the seller side. Starting in January 2024, Amazon reduced the commission rate for clothing products priced below $15 from 17% to 5%; the commission rate for clothing priced between $15 and $20 was reduced from 17% to 10%. One seller was surprised because Amazon usually only raises fees and does not proactively lower them. This move was interpreted by the outside world as a strategy to counter the lower-priced Chinese platforms. In response, Amazon's Chinese executives still focus on themselves and "user-centered" approaches, providing users with more low-priced options.
Another Amazon China insider revealed that executives pay attention to new competitors, feel competitive pressure, and believe that there is a need to respond. The way to respond is through self-improvement, "because you cannot change the competitors, the only thing you can do is to change yourself."In fact, the pressure on Amazon is not entirely from competitors. In 2021, the growth rate of Amazon's e-commerce and related businesses began to slow down, with online store revenue growth falling from 40% in 2020 to 13%, and third-party seller service revenue growth dropping from 50% to 28%. In 2022, online store revenue decreased by 1% year-over-year, third-party seller service revenue growth was only 14%, and the advertising revenue growth, which was nearly 60% year-over-year, slowed down to 21%.
That year, after seven years, Amazon recorded its first net loss. By the end of 2022, Amazon's stock price fell to $84, a 55% decrease from its peak. An Amazon employee who joined at the beginning of 2022 recalls that after the release of a poor quarterly report, the executives looked gloomy during the all-staff meeting.
Under pressure, Amazon began to reduce costs and increase efficiency. Multiple rounds of layoffs started from the beginning of 2023, not only affecting peripheral projects such as music, human resources, and gaming, but also profitable departments like cloud computing and advertising. To date, the total number of layoffs has exceeded 27,000.
On the other hand, there was an increase in revenue. Amazon continued to broaden its traffic channels. Last year, Amazon partnered with Meta (which owns Facebook, Instagram) and Snapchat, allowing U.S. users to shop through Amazon without leaving the social media apps. Analogous to the domestic scenario, this is equivalent to users being able to browse advertisements within the Weibo app and complete the entire Taobao shopping process without having to switch to the Taobao app.
"Third-party seller services" revenue accounts for more than 20% of Amazon's total revenue, and Amazon is also focusing on this area, launching more seller service packages to increase revenue. Last year, Amazon launched the "Buy with Prime" service, where sellers can use Amazon's warehousing, logistics, payment, and Prime membership services on their own independent sites by paying a certain fee. In terms of logistics, Amazon introduced the "Supply Chain by Amazon" (Supply Chain by Amazon), similar to the "full management" in the logistics field: cross-border transportation, customs clearance, land transportation, warehousing, replenishment, and final-mile delivery are all handled by Amazon, and sellers can subscribe by paying a fee.
Thanks to these efforts, Amazon's performance improved in 2023, with a net profit of $19.8 billion in the first three quarters, the highest level since its listing. Amazon CEO Andy Jassy said at the third-quarter earnings call that the performance was good because there were improvements in the service costs and delivery speed of the retail business. During a major promotion in 2023, more than 100,000 Amazon products were delivered within four hours after customers placed their orders.
The aforementioned Amazon employee said that at the all-staff meeting in early November 2023, the executives finally relaxed, joked around, and used lyrics from the popular American singer Taylor Swift to connect their speeches.
Amazon and Chinese platforms: the competition between humans and machines
Both Amazon and Chinese Internet companies emphasize data, machines, and systems. At Amazon, the system is the core, and employees become a part of the machine; in Chinese Internet companies, the system serves people, and "the boss is the system's bug."Having just emerged from the gloom, Amazon, with the United States at its core of overseas markets, is encountering Chinese rivals. Amazon is like a cold machine, while Chinese e-commerce companies are more like passionate people.
A person who has worked at both Alibaba and Amazon recalls that at Alibaba, there is a pledge meeting every quarter. Teams gather in hotel banquet halls, with red bands on their heads, taking turns to go on stage to wave flags and shout slogans: "Our target for the next quarter is xx billion!" Everyone is moved to tears.
At Amazon's staff meetings, bosses emphasize the "Day 1" (every day is the first day of entrepreneurship) spirit, but the style is gentle, "like (Apple CEO) Cook at a product launch, speaking in a measured way." Li Qingtian (a pseudonym), who has also worked at both companies, recalls that at Alibaba, during big promotions, there is gong beating and slogan shouting. He was not used to it at first, but after staying for a long time, watching the GMV numbers on the big screen continue to rise, he also became excited.
"Amazon believes in management mechanisms, systems, and algorithms, while Chinese companies have a stronger human governance color," said Li Qingtian. Amazon uses algorithms and big data for sales forecasting. After the system comes up with a baseline value, people only need to translate unknown information to the system (such as traditional festivals, big promotions, and purchase restrictions) into numbers and input them to get the final value. If there is a significant deviation between the two numbers, the person in charge needs to explain to the leaders and related partners.
Alibaba also has a system, but the system's voice keeps changing. A person who has worked at Alibaba for more than 10 years said that Alibaba's e-commerce forecasting system is very intelligent, covering almost all factors that affect sales, including payment, logistics, delivery cycle, traffic distribution, and operational strategy. When new factors appear in the outside world, such as a certain type of product becoming "mainly promoted" due to competing with competitors for market share, or a certain product suddenly becoming a "hit product," people need to mark it in the system and repeatedly verify to get a new result.
Li Qingtian recalled that Alibaba's sales forecast is decided by discussion between juniors and merchants, internal cooperation teams. For example, during a big promotion, the system forecast based on historical data is 6.5 billion yuan, but the company's goal is 10 billion yuan. The 3.5 billion yuan gap is negotiated and assigned by team leaders, and the responsible person takes the initiative to take on the task. The remaining few hundred million that no one takes is directly assigned.
The aforementioned Alibaba person also mentioned that similar situations often occur because "the system serves the boss," and "the boss is the system's bug."
Temu's parent company, Pinduoduo, also mainly relies on human governance, with power highly concentrated in the hands of core executives. Employees only need to execute and rarely have invalid reports and PPTs. It is understood that within Pinduoduo, the information obtained by employees is very limited. Colleagues call each other by pseudonyms, and departmental barriers are strict. Employees have no way of knowing the organizational structure outside their own department. After the top-down command is issued, employees can be quickly mobilized, showing amazing efficiency and combat effectiveness—since its launch in September 2023, in less than a year and a half, Temu has entered nearly 50 countries and ranked at the top of the download list in many regions.
Comparing the two, the advantage of the Amazon model lies in its sound mechanism and high efficiency in the medium and long term, while the advantage of the Chinese big factory model lies in its rapid response and high short-term efficiency. A few years ago, employees in the same position at Amazon could manage hundreds of suppliers and tens of thousands of SKUs (minimum inventory units) with less overtime; at Alibaba, they could only manage less than a hundred suppliers and a few thousand SKUs, and they also needed to work overtime. In recent years, this situation has improved.
This is related to Amazon's founder Jeff Bezos. He has been interested in numbers since he was a child and obtained a degree in computer science and electrical engineering from Princeton University, working at a quantitative hedge fund. He works based on data and believes in data. He founded Amazon in 1994, also because of a data he calculated— the annual growth rate of the Internet is 2300% (although this data was later proven to be inaccurate).Countless data collectively form processes, systems, and machines. Bezos believes that machines and systems are more efficient and accurate, while human communication is inefficient, indicating that people are not collaborating in the best way possible. Over the three decades since its founding, Amazon has gradually built a vast system and complex algorithms, and by acquiring robotics companies and investing in artificial intelligence, it manages 1.5 million full-time and part-time employees and 2 million merchants, making it the company that transports the most packages in the United States each year. It also helps Bezos become one of the richest people in the world.
Thus, at Amazon, the system can determine if a merchant has violated regulations, take down stores, manage workers, supervise drivers, act as customer service, solve user problems, and automatically reply to appeal emails. However, the system is not perfect; it cannot perfectly align with reality, and the resulting deviations may not be corrected.
In 2021, a 63-year-old Amazon delivery driver received an automatically sent email stating that he was deemed derelict of duty by the algorithm and was fired—dismissed by a machine. In reality, uncontrollable factors affected his work, such as the delivery apartment building being locked. His subsequent email appeals were unsuccessful.
American media cited a former Amazon manager as saying that Amazon is aware that delegating work to machines can lead to adverse consequences, but they believe that trusting the algorithm is cheaper than paying to investigate system misjudgments, as drivers can be easily replaced. Amazon responded by saying that this does not represent the experiences of the vast majority of drivers, and the company invests heavily in technology and resources to help drivers understand the situation and investigate all driver appeals.
People become a part of a huge machine. Amazon's approach to treating people like machines has long been criticized. People refer to excellent employees who meet Amazon's standards as "Amabots," which is a combination of Amazon and Robot, implying that humans have become one with the system.
Amazon's Home Turf
After facing setbacks in the Chinese market for many years, Amazon is once again confronted by Chinese competitors, only this time the battleground has shifted overseas, especially in the United States. This is Amazon's home turf, and it's now the Chinese companies that face the issue of "not being suited to the local conditions."
The "Amabot" philosophy has helped Amazon defeat Barnes & Noble, eBay, Walmart, and other regional e-commerce platforms outside the American market, and it has given it enough capital to acquire several vertical e-commerce websites, expanding its territory.
Brad Stone, a senior American business journalist who has been covering Amazon for years, wrote "The Everything Store: Jeff Bezos and the Age of Amazon," published in 2014. The book states that Amazon's finance department has a "Competitive Intelligence Department" led by senior executives, responsible for investigating competitors. They purchase a large number of competitor products, test their quality and service speed, and submit the data to a committee led by executives like Bezos, who then formulate competitive strategies based on this information.
Amazon's e-commerce business has expanded to over a hundred countries. In the global market, Amazon never lacks competitors, competition, or victories. This is also one of the reasons why some Amazon insiders believe the company is not anxious today.In China, however, Amazon's philosophy has failed. By 2016, after 12 years in the Chinese market, Amazon's e-commerce market share had dropped to less than 1%, far behind Taobao Tmall and JD.com.
Li Qingtian once worked at Amazon China. He believes that there were issues with Amazon China's localization, a typical example being that in the early days, the website design was adopted from overseas with a black and white color scheme, which did not conform to the aesthetic habits of Chinese consumers. Later on, Amazon learned from its Chinese competitors, and its marketing design style moved closer to Taobao, which was incompatible with the minimalist website framework.
All of this was summarized as "not acclimatized." Behind "not acclimatized" was a lack of commitment to investment. According to Brad Stone's "The Everything Store," a former core executive of Amazon's international business, Pier Santini, once said that the company was always worried that if it made a large investment in the Chinese market, it would be dragged down and waste a lot of money. "We didn't have the courage to face the competition head-on; we have always been a timid follower."
Years later, Amazon faced Chinese competitors again, but the battlefield had shifted overseas, especially in the United States. This is Amazon's home field, and it's time for Chinese companies to face the issue of "not acclimatized."
Firstly, there is the management system. In Silicon Valley, Amazon has the reputation of a "sweatshop." Compared with other top tech companies, it has low salaries, poor benefits, and long working hours because Bezos is skeptical about benefits, fearing that some people will stay at the company for the sake of enjoying them. "Frugality" is even written into the company's fourteen leadership principles. However, compared with the "996" work culture of its Chinese counterparts, Amazon's style is already considered mild.
In April 2023, the U.S.-China Economic and Security Review Commission released a report accusing employees of Temu's parent company, Pinduoduo, of "extreme overtime" and labor violations in Shein's affiliated factories in Guangzhou. The commission is an agency established by the U.S. government through congressional authorization, and its reports serve as a guide for these two parties in determining U.S.-China policy.
On the other side of the pressure is higher efficiency. An Amazon employee said the only dissatisfaction he had with the company was that the project initiation speed was too slow. In two weeks, Amazon hadn't even finalized the documents, while Chinese companies had already produced enough results to race.
Secondly, there is the issue of user needs and product design. Two industry insiders said that overseas users prefer a minimalist style, care about personal privacy, like to study instruction manuals on their own, and do not like to have too much contact with customer service or receive promotional information frequently. Chinese users, on the other hand, are accustomed to communicating with customer service. Therefore, Amazon's detail pages contain detailed information, and the customer service entrance is hard to find. However, the successful transplantation of Pinduoduo's colorful visual style and lottery gameplay to Temu overseas seems to indicate that in the face of low prices, product design is not important.
Outside the company, the e-commerce environment in the United States is also significantly different from that in China. Wang Rui, the founder of Ruiqi Digital, a digital consulting company for Chinese companies going overseas, has lived in the United States for many years and now helps many Chinese companies with overseas consulting. He found that American consumers value brands because their income is high enough. A truck driver's annual salary is $170,000, which even exceeds the income of many Chinese company executives, and they are willing to pay a premium for brands.
In addition, another major characteristic of the U.S. e-commerce industry is the dispersion of traffic. In China, consumers mostly go directly to e-commerce platforms to search for related products or are influenced by content "planting grass." American consumers will search for product purchase channels on almost all platforms, including Google, Meta, Twitter, Instagram, and TikTok, and they are more willing to try new channels because traditional large platforms are seen by many American consumers as "omnipotent big capital."This means that China's new platforms can quickly reach consumers, but at the same time, they need to continuously spend money on multiple channels to buy traffic for the long term.
Amazon has been cultivating the US market for a long time, and currently, the commercialization rate of Amazon's internal traffic exceeds 50%, while the traffic of new platforms mainly comes from outside the platform.
The ways to deal with competition are also different. Several Amazon employees said that the company emphasizes user experience, and the leadership's questions also revolve around this. One employee mentioned that Amazon will not accelerate the promotion of specific projects because of competitors.
Chinese companies deal with competition more fiercely. An insider said that the names of competing companies often appear in Alibaba's daily work. Some front-line employees use competitors as a "tool": when a junior employee (equivalent to a business operator) wants to promote a new product to a high-quality position, the boss objects, and the junior employee argues that "if it can't be on, it will be launched on the competing platform first," and the boss will loosen up. There are also junior employees "telling stories" to take credit: a certain product was originally going to go to the competing platform, but after its persuasion, it came to Alibaba for the first launch.
In the early days, the main assessment indicator for junior employees was GMV, and they were also responsible for key projects. Some junior employees came from brand parties, and the projects focused on new brand entries and the launch of new products from old brands; some junior employees came from competing platforms, and the key projects were "spying on the enemy," such as a certain merchant's share last year was half Alibaba and half competitors, then the junior employee's goal this year is to have a share greater than the competitors.
The aforementioned Alibaba insider confirmed the above statement and said that Alibaba pays attention to competitors, but the competitors at different times and in different departments are different, some are staring at JD.com, some are staring at Meituan, and others are staring at Pinduoduo.
The counterattack against Pinduoduo is a classic case. According to public reports, in 2018, Pinduoduo accused Alibaba of forcing brand merchants to "choose one of two." In March 2020, Taobao implemented a risk control strategy against Pinduoduo employees, who could not receive the billion-dollar subsidy from Juhuasuan; there are also Pinduoduo employees who said that Alibaba banned Pinduoduo junior employees' entire family's Taobao App, and the IP of employees from Yitu Technology downstairs was also banned.
In 2023, JD.com proposed a low-price strategy and launched a "billion-dollar subsidy" similar to Pinduoduo. A JD.com employee said he was blocked by Pinduoduo's IP and could not browse the information of Pinduoduo's billion-dollar subsidy products. In January of this year, JD.com's procurement personnel shouted in the live broadcast, "Please stop blocking Pinduoduo and compare prices directly."
Many industry insiders mentioned that going overseas requires serious investment, and there must be a strategic-level organization and patience, "the boss has to be all-in," otherwise it is difficult to succeed. "Foreign companies entering China are all doing consumer surveys, advertising tests, product tests, and channel deployment bit by bit, and only then can they succeed." said a person from a consulting company.
Amazon's new challengeBalancing the interests of users, merchants, and the platform itself is the most central and challenging issue for all platform companies. The "flywheel theory" is a phased answer that Amazon has proven, but now it faces new tests.
As the defender, Amazon has many advantages, such as brand mindshare and customer satisfaction. Among them, the self-operated logistics facilities and supply chain computing systems, which have been accumulated and optimized over more than twenty years, are very core. They enable Amazon to provide next-day or even same-day delivery services for users, while the delivery times for Temu, Shein, and TikTok in the US market are generally a week or more.
An industry insider analyzed that when TikTok Shop was recruiting in the United States, it set a threshold of "annual sales on Amazon exceeding 2 million US dollars" in order to use Amazon's logistics. This is because sellers have already stocked goods in advance in Amazon's overseas warehouses, and goods are directly shipped from local warehouses, resulting in shorter delivery times.
"Amazon is like a huge ecosystem," several people close to Amazon commented. Whether it's a "grass" couple's shop or a "giant tree" with annual sales of hundreds of millions of yuan, sellers of different types can find a place to survive. However, in recent years, as the number of sellers has increased, Amazon has also been in a state of internal competition, and the stories of starting from scratch are becoming fewer and fewer. Talented people with operational experience may succeed. "Now the grass that can grow is not the real grass, but the seeds sown by the giant trees," an industry insider commented.
This is related to the way traffic is allocated. Two cross-border sellers who have stores on Alibaba's B2C platform AliExpress and Amazon said that AliExpress has very little natural traffic, and sellers can only spend money to burn "Direct Train" (a product of Alibaba's advertising) to rank their products at the top; Amazon's advertising costs are also rising, and the rules for advertising are becoming more and more complex, even becoming a "discipline," but there is relatively more natural traffic, and paid traffic not only depends on money but also on skills. As for Temu, the traffic allocation of the same product mainly depends on the price. A factory owner who supplies several cross-border e-commerce platforms said that on Amazon, the same product and the same link may have a high weight and maintain a top position for three to five years; this is almost impossible on other platforms.
Therefore, although there are many complaints, Amazon is still the first choice for many sellers. A multi-platform seller said that this is essentially because Amazon has a large number of users, and as long as there are continuous orders, sellers are willing to stay.
The full management model of Temu, Shein, and TikTok is more suitable for factories. A seller said that there is still a place for traders to survive on Temu now, but as competitors pour in, the supply price is getting lower and lower, and traders will eventually be squeezed out by factories with better cost control capabilities.
To some extent, facing the fierce Chinese competitors, Amazon's challenges are similar to the past. One of them is how to retain Chinese sellers. Amazon cannot do without Chinese sellers. According to Amazon's data, as of November 2022, the number of third-party sellers on Amazon is close to 2 million. Data from the third-party e-commerce information website EcomCrew last November showed that more than 63% of Amazon's third-party sellers come from China. According to this estimate, the number of Chinese sellers on Amazon exceeds 1.26 million.
Chinese sellers have caused trouble for Amazon - when low-priced Chinese goods flooded in, American sellers and Amazon's own retail department were dissatisfied. Some Chinese products also got Amazon into lawsuits due to intellectual property rights and counterfeit issues. There have been disagreements within Amazon about this, and in the end, Amazon's decision is to "be obsessed with users" (which is also the first of Amazon's fourteen leadership principles), to give users what they want. They kept the low-priced Chinese goods, and thus retained users.
This is related to the second challenge Amazon faces: how to retain users. Previously, Amazon's answer was:* A wide selection of products
* Low prices
* Convenience
Nowadays, new competitors are continuously expanding their product categories and pushing the limits of low pricing. The backdrop of consumer downgrading has led some consumers to sacrifice convenience for the sake of lower prices. Low prices are a testament to efficiency, and when efficiency has reached a certain level, further improvements lead to a sharp increase in costs. To avoid endless low-price competition, more innovative products and services are needed.
Now, Amazon is no longer the only choice for Chinese sellers. They are well aware that they were once constrained by Amazon and will be constrained by new platforms in the future. Their new direction is to create their own brands and independent websites, keeping consumer data in their own hands. Amazon has seen this trend and has increased its efforts to support brands going global. Sellers can use Amazon's services, including logistics, distribution, and marketing tools, without selling on the platform.
In addition to the loss of sellers and users, Amazon faces pressure from multiple fronts. In January 2024, the French data protection authority CNIL fined Amazon's French warehouse operations 32 million euros, claiming it had set up an "excessively intrusive" system to track employee performance and collect employee data to measure their work efficiency and rest times. Amazon stated that CNIL's conclusion was "inaccurate" and reserved the right to appeal.
Furthermore, Amazon workers have repeatedly expressed their protests through strikes. During the "Black Friday" period in 2023, Amazon warehouse workers in multiple European locations went on strike, demanding higher wages and improved working conditions. Amazon workers in the UK are planning another strike at a new distribution center on January 25, 2024.
In September 2023, the Federal Trade Commission and the attorneys general of 17 states sued Amazon, alleging that it had illegally monopolized the market, preventing competitors and sellers from reducing prices, lowering product quality, charging sellers excessive fees, and preventing competitors from competing fairly.
In the short term, Amazon can breathe a sigh of relief from the intense antitrust investigations. Amazon has already told the Federal Trade Commission that the rapid rise of new platforms proves that Amazon does not have a monopoly. However, Chinese competitors are continuously challenging and dividing traffic in every aspect of the flywheel, including users, sellers, low prices, and diverse products. In just four years, Pinduoduo and Douyin have challenged the once-dominant e-commerce giants Alibaba and JD.com, capturing more than 25% of China's e-commerce market share. Chinese sellers have bid farewell to the era of "making money while lying down" on Amazon, and so has Amazon.
For Amazon, this is a new competition, facing entirely new opponents and a completely new mode of operation; it is also an old competition, concerning the most core and difficult problem for all platform companies: how to balance users, merchants, and the platform.
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