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Made in China, Sold on Amazon: The Numbers are Skyrocketing

Amazon Seller select your marketplace country icons displayed on a Samsung smartphone

One of the most successful direct-to-consumer shopping outlets for China-based vendors outside of China’s own Alibaba e-commerce platform is Amazon. This trend has been accelerating for years.

China-based sellers represented 75 percent of new sellers on Amazon in January, according to a report by Marketplace Pulse. This marks a significant increase from 47 percent in the previous year.

This large segment of China-based sellers on Amazon has not yet impacted the gross merchandise volume (GMV) market share. Domestic sellers are responsible for most of the total sales.

Three-quarters of new sellers in the top four core Amazon markets — U.S., UK, Germany, and Japan — are based in China. That percentage is the calculated average of the four marketplaces, according to Marketplace Pulse analysis of more than 40,000 sellers that joined those Amazon marketplaces so far in 2021.

Each of those four core marketplaces, along with the other three European marketplaces (France, Italy, Spain) and Amazon’s other international platforms, exhibit an identical pattern.

Sellers based in China represented 47 percent of new sellers in January 2020 and 41 percent of new sellers in January 2019. Their share has more than doubled on Amazon in the U.S., from 28 percent in 2019 to 63 percent in 2021. Since March 2020, more than half of new sellers in the United States are from China.

Amazon is the most efficient direct-to-consumer platform for Chinese brands to reach U.S. and European shoppers. Despite the Universal Postal Union’s drastic cut last year in the subsidy for low-cost small package shipping from China, the fast delivery lanes are still wide open to China-based manufacturers.

China’s trade through Amazon is not impeded despite the immediate doubling in shipping rates. That is largely due to the ability of Amazon sellers to warehouse their inventory locally through the Fulfillment by Amazon (FBA) program. FBA enables vendors to store their products in Amazon’s fulfillment centers, where Amazon workers pick, pack, ship, and provide customer service.

Both pricing and product offerings create a competitive challenge for domestic manufacturers selling on Amazon. For Perch, a commerce company that acquires and operates Amazon FBA businesses with winning products in their categories, Chinese retailers are the chief competitors. Perch acquired over 20 brands since its launch in December 2019.

“They pose our biggest risk,” Nate Jackson, vice president of acquisitions at Perch, told the E-Commerce Times.

Competitive Breeding Ground

Perch first looked at this situation about six months ago and found that about 45 percent of the top sellers on Amazon were based in China, according to Jackson. Another 45 percent were based in the U.S. The remaining 10 percent were from everywhere else.

With 75 percent of new Amazon sellers based in China, he sees that trend continuing. It is not a political concern, however. Especially in these pandemic times, retail sales are extremely competitive by nature.

Those numbers might be partially inflated because some vendors operate with multiple accounts. Amazon allows multiple accounts by the same business as long as each one is a totally different brand or addresses different business needs, he explained.

“So, we see more and more competition from Chinese sellers,” Jackson confirmed. To the customer, all that may matter is price and convenience. The location of the seller is not an issue.

Any Chinese seller that is a member of the Fulfilled by Amazon program will get the product to you the same as other U.S.-based shippers to stateside delivery, said Jackson.

The Chinese seller ships a supply of the products to Amazon’s distribution center. Amazon handles the sale and delivery of those China-based sellers like any other U.S.-based seller.

Otherwise, if the seller has to actually ship from China, and the consumer failed to notice the lack of Prime availability or actual arrival dates, the wait will be longer.

“The majority of products sold by Chinese sellers are FBA members and are delivered just as fast as products from other sellers,” said Jackson.

Buyers Mostly Unaware

The vast majority of Amazon consumers have no idea who is selling the product. Many consumers wrongfully assume that the merchandise comes from established brick-and-mortar storefronts. In reality, many sellers are single-person or mother-son resellers working out of garages or basements in faraway locations, according to Jackson.

Amazon is starting to increase transparency into that scenario, he added. Right now, European customers can click a link on a third-party seller page and see the seller’s information, pictures of the store, etc. Amazon enabled that ability in the U.S. in September as well — where for some merchants, potential customers can similarly locate seller information, he said.

“Initially, many of those sellers objected because they felt that transparency exposed them. But in many cases, consumers just look at a product picture, read the details, check the price, and read the reviews before clicking on the cart button,” said Jackson.

Invariably, the product is sitting in FBA and gets the same treatment as anyone else. It does not matter if the product is made in China or anywhere else. Sometimes, if you are not paying attention to the shipping details, it literally is coming directly from China and will take weeks to arrive, he explained.

Amazon Merchant Primer

Typically, people who shop on Amazon do not understand the retail structure of the digital marketplace. Amazon has several types of sellers in addition to the home-based merchants noted above.

These merchants are resellers. They might buy products from wholesalers at lower bulk prices and resell them on Amazon at higher prices to make a profit.

Also, there are plenty of private-label brand merchants. Many of the China-based sellers fill this category, noted Jackson. They are not actually buying the product someplace else but instead trademark some of what they manufacture as a separate brand.

“These sellers started as manufacturers who made the same product for multiple companies and then decided to put their own label on some products and sell them directly on Amazon,” he said.

Impact on Amazon’s Ecosystem

Amazon is relentlessly known to be end-customer focused, according to Jackson. For consumers, the customer experience is all about assortment, quality, customer service, and price. For Amazon, increasing the number of sellers who can provide low prices is good for the customer.

“Sadly, there are some negative buyer reactions to China-based shippers. Those comments turn up in product reviews. Some consumers will give a one-star review just because it comes from China without saying anything about the quality of the product or the seller’s service,” Jackson added.

Some shoppers only want to buy products made domestically. That is the primary way domestic sellers can compete, according to Jackson. They can find ways to establish unique brand identities so that the customer is not just selecting on price.

“For instance, we have some merchants who show photos of their facilities made in the USA. They might have pictures of their production line in an identified state and things like that. For some customers, that is really going to resonate,” he explained.

Overall, the prominence of China-based vendors at the end of the day benefits Amazon’s customer base, offered Rohan Thambrahalli, president of UpstartWorks. It provides them with more selections and competition.

“However, it is also a bad change because consumers need to be careful about the type of products they are buying from potentially counterfeit sellers. Proper regulatory approvals could be missing from claims made in listings,” he told the E-Commerce Times.

For example, during Covid-19, many sellers are selling counterfeit disinfecting and PPE supplies while illegitimately making kill claims, among other things, he explained.

The Cost of Made in China

The continued account openings by China-based sellers have been ongoing for years and are a fact of life for anyone selling on Amazon or other marketplaces, according to Chris Bell, founder & CEO of Perch. He does not think of it in terms of being good or bad for e-commerce.

“It is just the outcome of continued globalization of e-commerce marketplaces,” he told the E-Commerce Times. “There are poor quality and fraudulent sellers based in China, the U.S., and anywhere. There are also good, high-quality sellers based in all of these places.”

One admitted disadvantage that China-based suppliers bring to Amazon may be a cost advantage over the U.S. or European-based suppliers, he said. But they also have challenges in understanding local preferences, creating product listings that appeal to local customers, and optimizing the platform to compete with other sellers.

“Consumers globally want to confidently buy a great product at a great price, and that is what good brand owners globally can offer their customers,” Bell offered.

Perch, despite constantly increasing competition in most of its product categories from China- and US-based sellers alike, has been able to hold or grow market share because the company offers great products, proven with great reviews, at a compelling price point. Those reviews are partially driven by great products and partially by great customer service if there is ever an issue, he added.

Globalization makes it harder to sell a mediocre product at high margins because of perceived scarcity, given a lack of options. Bell thinks this trend towards unlimited options through marketplaces like Amazon and lots of suppliers competing for the customer makes all of us need to constantly raise our game and stay competitive and not get lax in our approach.

“But as long as we continue to serve our customers well and stay sharp on products, cost, merchandising, and customer service, we can continue to win a large portion of consumer spend,” he concluded.

Amazon’s Quality Control

Sellers based in China are particularly good at bringing products to market at lightning speeds, noted Thambrahalli. Generally speaking, launching a new product in the U.S. can take anywhere from six months to two years, but Chinese sellers can bring a product to market in less than 90 days.

“Because of such quick speed to market, Chinese sellers will continue to impact the Amazon ecosystem solely through the sheer number of products being sold on the platform,” he said.

This means Amazon must continue to increase scrutiny of authenticating brands and vetting products to ensure they pass local and federal regulatory requirements.

Amazon must keep customer confidence in products sold on Amazon at a premium, he warned. Also, Amazon will need to work very hard to prove products are safe to use as well.

Jack M. Germain

Jack M. Germain has been an ECT News Network reporter since 2003. His main areas of focus are enterprise IT, Linux and open-source technologies. He is an esteemed reviewer of Linux distros and other open-source software. In addition, Jack extensively covers business technology and privacy issues, as well as developments in e-commerce and consumer electronics. Email Jack.

2 Comments

  • I agree with MaryVD. Amazon hurts U.S. business and is an ATM for Chinese government.

    This situation becomes particularly problematic when sellers operate from overseas, as they may not adhere to United States law and are often unresponsive to lawsuits in U.S. courts. As a result, consumers not only fall victim to fraudulent and misleading claims but can also be harmed by defective products. Additionally, businesses that have developed innovative products and built goodwill in the market can see their customer base and sales rapidly decline due to the proliferation of “knock-off” products. Ecommerce platforms, including Amazon, have more incentive to accommodate a higher number of sellers rather than taking effective action to prevent such practices.

    It is crucial to recognize that Amazon and other ecommerce outlets profit from the advertising, sale, and fulfillment of products on their platform, irrespective of whether these products defraud consumers or not. When consumers and businesses seek Amazon’s intervention to halt these unlawful practices, their efforts are often met with insufficient responses. Depending on the extent of harm caused, some individuals or businesses resort to legal action, and ecommerce platforms frequently seeks immunity under Section 230, which was never intended for such purposes.

    A small U.S. business is suing Amazon for $500 million for its part in being complicit in the sale of mislabeled and falsely described printer cartridges that were being passed off as cartridges they sell. Through Amazon, these Chinese sellers seem to have flooded the U.S. market with these printer cartridges destroying an entire U.S. industry built on diverting used printer cartridges away from landfills and recycling them into a new low cost product for consumers. The complaint lays out Amazon’s failures to do anything but protect there own interests. Read about complaint here shorturl.at/noS07 or just google $500 million lawsuit against Amazon.

    It is good the FTC is finally going after Amazon too.

  • Although interesting and relevant the article does not mention the extent to which direct sales from China to the US are affecting our small businesses, consumers and our country as a whole.

    The article does make it very clear that Chinese businesses are on their way to take over Amazon just as they did eBay, not only here but in most first world countries, where the money is.

    1. Both pricing and product offerings create a competitive challenge for domestic manufacturers selling on Amazon.

    This would be true if it were fair competition. The main challenge domestic businesses face is the copying of their products, the use of their pictures, almost always in disregard to US copyright and trademark laws. The cost of copying a product can never equal the cost and time involved in creating a product from scratch. Then there is the challenge of competing against businesses being subsidized by the Chinese government.

    2. Those numbers might be partially inflated because some vendors operate with multiple accounts.

    Many of these vendors are large manufacturers themselves who hire employees to sell online.

    3. To the customer, all that may matter is price and convenience. The location of the seller is not an issue.

    The customer is unaware that a large number of items sold in Amazon are cheap copies of products

    created by domestic businesses and are of inferior quality not subject to US government safety regulations.

    4. there are plenty of private label brand merchants. Many of the China-based sellers fill this category, noted Jackson. They are not actually buying the product someplace else but instead trademark some of what they manufacture as a separate brand.

    Amazon led a campaign to have businesses all over the world create their own brand. This does not mean you create the product yourself. Only that it has your brand label on it.

    5. Amazon is relentlessly known to be end-customer focused, according to Jackson. For consumers, the customer experience is all about assortment, quality, customer service, and price

    True to an extent. True concern for the customer means protecting them against being deceived into buying knockoffs of inferior quality or products that may be toxic.

    6. "Sadly, there are some negative buyer reactions to China-based shippers. Those comments turn up in product reviews. Some consumers will give a one-star review just because it comes from China without saying anything about the quality of the product of the seller’s service," Jackson added.

    This negative reaction comes from a growing awareness by US consumers of the widespread abuse of ethical practices used by large numbers of Chinese government backed China-based sellers, such as buying positive feedback for themselves, buying negative feedback for competitors, sending empty boxes to customers, etc. The overwhelming AM ount of unethical practices in Amazon come from China. There are multiple groups in Facebook dedicated to this.

    7. "However, it is also a bad change because consumers need to be careful about the type of products they are buying from potentially counterfeit sellers……For example, during Covid-19, many sellers are selling counterfeit disinfecting and PPE supplies while illegitimately making kill claims AM ong other things…

    This is a widespread problem in Amazon.

    8. One admitted disadvantage that China-based suppliers bring to Amazon may be a cost advantage over the U.S. or European-based suppliers, he said. But they also have challenges in understanding local preferences, creating product listings that appeal to local customers, and optimizing the platform to compete with other sellers.

    Just watching how many local products are knocked off by China-based suppliers shows finding what to sell here is not much of a challenge. Just look at the feedback, if it has a lot, copy it, or better yet, look at Amazon’s list of best selling products in the site. Amazon provides all the tools to find this information at the click of a button.

    In all, these sellers are not just damaging US small businesses through unfair competition and unethical practices, they are also deceiving customers by misrepresenting the product they will receive and by sending the infamous "empty box". But in a larger scale, US businesses who lose sales not only stop supporting their local infrastructure, such as carriers, the post office, local suppliers for their businesses, etc…and all the jobs that could have been created but also pay less taxes to our government, which are paid instead by those sellers to the Chinese government while making their infrastructure stronger. Customs are avoided by sending small parcels. US importers do however pay them whenever they bring in imports.

    The fact that I AM the only one leaving a comment here, shows how unaware we are , as a country , as to what this really means to us all. Just like the Silk Road project is physically making China’s presence strong in the world, places like Amazon provides them the same service for free.

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