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How U.S. Brands Can Compete with China on Amazon

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eCommerce has few borders, and increasingly countries like China are selling direct on America’s leading e-retailer, Amazon.

“The Chinese sellers absolutely have a lot of advantages. Most of the world’s production is in China, so if a factory is going to sell on Amazon directly, they’re going to have lower costs,” Marshall Taplits, founder of Amichai LLC and an Amazon seller, said to Internet Retailer.

That has many U.S. brands nervous and asking how they can possibly compete.

How Chinese Sellers are Winning on Amazon

Amazon remains China’s gateway of choice. If Chinese companies want to sell directly to the American consumer without having to have a contract with Macy’s, or Claire’s in the local shopping mall, Amazon is their gold standard.” [Forbes]

As Amazon strives to dominate not only the U.S. but also the global e-retail space, they’ve been working to attract Chinese and other foreign sellers to their marketplace with special incentives. Amazon already makes it easy for sellers to post their products and start selling right away — it’s a major reason they’re so appealing to small businesses. But Amazon has sweetened the deal for foreign sellers like the Chinese by making it cheaper for them to ship their products overseas (for example, it is now cheaper to send a package from China to the U.S. than it is to send it domestically.) They also offer a Chinese-language version of Seller Central, Amazon’s management system, on its U.S. and U.K. sites, and have hired Chinese-speaking support staff.

It’s working. A study released by Payoneer Inc., a payment services company, reported 62% of Chinese e-retailers that sell outside of China said they sell goods on Amazon, and out of that number 91% sell on Amazon.com in the United States, with many more claiming they have plans to start. According to Online Retailer, Chinese sellers on Amazon.com may represent about one-tenth of the more than 2 million marketplace sellers Amazon reported it had in 2015.

You could say that foreign competition is just part and parcel of capitalism on a global scale. However, there are a few bad apples from China that are threatening to spoil the Amazon selling experience for the rest of the bunch — particularly U.S. small businesses that initially experienced success on the site and are now seeing their sales and Amazon ranking plummet.

The problem? There are two that are of particular concern to Amazon sellers: counterfeiting and fake reviews.

Can you tell the difference between these two coffee mugs?

“According to a recent report by the OECD, over 60% of the world’s counterfeits originate from China, and 40% of the country’s domestic online marketplaces are made up of counterfeit goods.” [Forbes]

Amazon’s eagerness to usher in foreign sellers from China and other countries also enabled those countries’ counterfeiters to move in and copy the successful designs of American sellers. The problem has become so ubiquitous that MSNBC reported that there’s even a Facebook group called “Who Stole My Images” to help draw attention to the problem. The group of 915 members and counting is made up of artists, designers and photographers who have banded together to stop the theft of intellectual property, such as what happens when a foreign seller steals an illustration on a coffee mug or t-shirt from a U.S. designer, copies it and sells the merchandise for a fraction of the price to an unsuspecting buyer.

Counterfeit merchandise is not only problematic because it cuts into a legitimate brand’s sales. It also threatens to weaken (or even destroy) that brand’s image. Often counterfeit merchandise is a shabby imitation of the original, and yet it can be difficult for consumers to differentiate the real from the fake — particularly if they are first-time buyers of the brand. Not realizing that they have been sold fake goods, a disappointed seller may leave a bad review on the legitimate brand’s Amazon product page or website. A brand with a great reputation can quickly see their image sullied through no fault of their own.

So what can you do about counterfeiters on Amazon? According to CNBC, “Amazon has an anti-counterfeiting policy in place and responds to infringement notices, investigating and kicking off sellers who break the rules.” But savvy counterfeiters are skilled at online identity shifting in order to evade punishment. They can quickly disappear without a trace, only to reemerge under a new company name in order to resume their crimes.

Another way the retail behemoth has been trying to police the problem is with what they’re calling Amazon’s Brand Registry. According to Amazon,

Your enrollment in the Amazon Brand Registry provides access to powerful tools including proprietary text and image search, predictive automation based on your reports of suspected intellectual property rights violations, and increased authority over product listings with your brand name.

Business Insider reports that in order to enroll in the Amazon service, your company must “have a registered trademark that matches the brand name printed on its products and its packaging.”

You can also do something more dramatic and final, like pulling your products from Amazon’s marketplace indefinitely. That’s what German footwear brand Birkenstock did. In a written statement, Birkenstock CEO David Cahan wrote,

“The Amazon marketplace, which operates as an ‘open market, creates an environment where we experience unacceptable business practices which we believe jeopardize our brand. This includes postings by sellers proven to have counterfeit Birkenstock products. It also includes a constant stream of unidentifiable unauthorized sellers who show a blatant disregard for our pricing policies. Policing this activity internally and in partnership with Amazon.com has proven impossible.”

Quick Guide Getting Started in eCommerce

”This vegetable spiralizer is truly a miracle! Five stars!”

Another issue facing U.S. sellers on Amazon is an influx of fake reviews. Some U.S. sellers point to Chinese sellers on Amazon who populate their product pages with biased product reviews obtained through sites that pay reviewers either in cash or in discounted or free products, in return for their posting glowing reviews. The more fabulous reviews the Chinese seller’s product receives, the lower the rankings and sales become for their competitors with legitimate reviews.

In response, Amazon has started suing its sellers for posting fake reviews. According to Gizmodo.com, “The web giant has sued three of its sellers: a Chinese company called CCBetterDirect, Michael Abbara, and Kurt Bauer. For all three, fake reviews comprised up to 40 percent of the stores’ total reviews, so the violations were clearly not subtle.”

Of course a glowing review that is legitimately earned is far more valuable than a fake one, and savvy customers are likely to catch on when a string of reviews seem too good to be true.

Practical tips for staying competitive in eCommerce

If your sole strategy is to lower your prices to stay competitive with Chinese sellers, you’re headed for disappointment. Trying to compete with Chinese wholesale prices is like going head-to-head on a basketball court with Lebron James. You’ll need to bring more to your sales game than just low prices.

That’s not to say that price doesn’t matter. But there are other differentiators you can employ.

  • Strive for better customer ratings, both on Amazon and on your own eCommerce site, if you have one. Customer loyalty is far more valuable in the long term than luring a one-time shopper into purchasing an inferior product because it was cheaper or had glowing (but fake) reviews. Better ratings that were legitimately earned have the added benefit of improving your Amazon ranking in search results. With Amazon cracking down on fake reviews, this will matter in the long term.
  • Do research to increase your understanding of your market segment and customers. Use the information you gather to optimize your photos and descriptions to better serve your customers’ needs.
  • Boost your brand cache by making sure you have an appealing and unique brand story that attracts consumers who are looking at more than just sticker price.
  • Sell products where the quality and craftsmanship matter to customers.
  • Offer superior customer service with a personalized touch.
  • Include upsells on your product page to encourage larger purchases.

Need some help staying competitive in global eCommerce?

Contact Orderhouse with questions about your eCommerce business today.

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Topics: ecommerce sales ecommerce services ecommerce strategy online retail customer experience amazon ecommerce