Why Chinese Sellers Are Quitting Amazon

An anonymous reader shares a report: You might have seen the headlines over the past year: Chinese sellers are leaving Amazon. Since early 2021, the e-commerce giant says it has banned 3,000 Chinese accounts for using paid reviewers to artificially inflate ratings, a practice known as 'brushing.' The narrative sounds pretty simple, right? Dishonest Chinese sellers gaming the system! Of course they should be punished. Amazon has said that it issued the bans after repeated warnings over manipulated reviews, and that no seller has been targeted by nationality. Meanwhile, in Chinese media, the sellers have a different account. They describe paying ever-rising costs, while struggling with restrictions on how they sell on the platform. When they have brushed up their ratings, sellers told Chinese tech media Pingwest, it's because Amazon's stringent requirements have pushed them to, in order to survive. (A Chinese e-commerce industry association estimates at least 50,000 banned.) Either way, the relationship has somewhat soured.

In 2012, when Amazon entered China and aggressively recruited sellers onto its third-party Marketplace platform, merchants treated founder Jeff Bezos with reverence. Many of them considered him a role model, and resonated with Amazon's lofty principles of 'putting the customer first' and 'creating long-term value.' Amazon Marketplace was appealing to Chinese sellers in two important ways: there was almost no barrier to entry, and they could mark up their products as much as they liked. Products that cost 5-6 yuan on Taobao could be sold for $20 (about 140 yuan) on Amazon -- a markup of 20-30 times the original price! Not percent, but times. Lured by the crazy-high profit margin, the number of Chinese sellers on Amazon climbed sharply.

Within a few years, Marketplace growth took off. Between 2014 and 2015, sales from Amazon's Chinese merchants tripled. By 2017, one-third of all international sellers on Amazon were from China, and Marketplace's sales volume had surpassed that of the main Amazon platform. Here comes the catch. Despite all the PR around Amazon Web Services, we know that Marketplace is Amazon's real moneymaker. Recall that Amazon charges for commissions, advertising, logistics and warehousing. And warehousing costs alone have soared since Chinese sellers came on board, continuing to grow with a nice 11% bump just this February. Costs to advertise -- something crucial for smaller sellers -- surged 50% during the pandemic.
But the thing is, it's hard to sell if you're not part of Prime, wherever you're based, and that probably means signing up for all the above charges. And this is the case inside just the Amazon universe.

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