Ep. 020 Keyword Podcast: Chinese Seller Culture and History of E-commerce in China

March 6, 2017
Ep. 020 Keyword Podcast- Chinese Seller Culture and History of E-commerce in China

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In this episode, we’re taking a look at the history and rise of e-commerce in China, where Amazon fits in and why Chinese sellers are crucial for Amazon’s future growth.

This week’s Amazon insider is Noah Herschman. Noah was the Category Manager for Home Electronics at Amazon. He’s the reason you can buy a TV on Amazon.


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Show Notes: Chinese Seller Culture and History of E-commerce in China

In this episode, we’re taking a look at the history and rise of e-commerce in China, where Amazon fits in and why Chinese sellers are crucial for Amazon’s future growth. This week’s Amazon insider is Noah Herschman. Noah was the Category Manager for Home Electronics at Amazon. He’s the reason you can buy a TV on Amazon. “That was the biggest accomplishment to turn Amazon from a bookseller to a large screen television seller power house,” Noah says. Noah now works in China for Microsoft, but he’s also working with Amazon Chinese sellers. He helps them optimize their listings and run sponsored ads on the Amazon North america Marketplace. Most Chinese sellers have been selling on Taobao for years then they start on Amazon and realize it’s a completely different way to sell online. The differences don’t always sit well with the Chinese culture. “The main difference is that they have very little patient for building things, they wanna get rich now,” Noah says. Pretty much anything you can buy is made or can be made in China. China’s long been known for producing a lot of fake or counterfeit products. All the manufacturers and factories in china mainly run as OEMs which stands for – original equipment manufacturers. They would run the line and complete their order for a brand owner and then run it again and sell the ‘fakes’ or the products not authorized by the brand owner. That’s on the decline partially because the Chinese Government is funding factories to change their practice. “There’s a lot of government subsidizing here and especially around the e-commerce – moving in the direction of e-commerce because the government feels that thats the future and they see the OEM business declining,” Noah says. To understand Amazon’s entrance into China, you have to understand the history of e-commerce in China. After working at Amazon Noah worked for a company called DH Gate. They were the first company that offered cross border e-commerce, where Chinese sellers could list their products and people in the United States and other countries could buy those products then sell them on Amazon and eBay. After DH Gate came AliExpress, which was doing the same thing. It allows Chinese Sellers to sell to people in other countries. These people would then sell those products on Ebay or Amazon. Noah left DH Gate to work at eBay where they were actively recruiting chinese sellers to sell on eBay directly to customers. That’s when they created the ePacket. “ePacket was the first trackable package that you can send 2.2 Kg or less for less than $5,” Noah says, “So this is about 8-10 days and people ship directly from China and the cost of the packet depending on the weight is very very low and especially the importance you can track it. That changed the whole dynamic of cross border trade.” Taobao was crazy competitive for sellers in China. So the opportunity to sell directly to customers and send a trackable package to the United States, was a major draw to selling on eBay. “So that really drove all of these Chinese guys, you know, it was sort of a gold rush,” Noah says.   At this point, eBay was the gold mine for Chinese sellers. Not Amazon. Amazon had not yet let Chinese sellers sell in different markets and Chinese sellers were not using the Amazon China marketplace to sell in China. “This is at the time when Amazon really understood that they had failed in China domestically in the market,” Noah says. Amazon holds less than one-percent market share selling in China. So, Amazon decides to let Chinese sellers, sell on the Amazon North America Marketplace. “Then Amazon opened up the gates for their cross border trade and now they have 200,000 sellers and they’ve surpassed everyone,” Noah says. Amazon’s ultimate goal is to provide the greatest selection of products at the cheapest prices possible. Remember earlier when I said almost everything is made in China? Amazon wants these factories to start selling their stuff directly on Amazon. That cuts out any middleman and any potential price mark ups, giving customers the cheapest option. “What Amazon’s vision is the customer gets the lower price because Amazon is the only mark up point and Amazon handles all the things in between and then it just becomes like a three legged stool,” Noah says. That is why Chinese sellers are vital for Amazon. Amazon is all about the end consumer, the people shopping on amazon.They want customers to have the best possible experience. That includes low prices. But most Chinese factories aren’t ready to sell direct on Amazon. “They are used to not having to fund their own inventory,” says Noah, “So that means they would never have to use their own cash and never have to carry their own inventory.” “I would say that it’s happening  and it’s happening at factories that have the more innovative perspective and really want to change and change their business for the future but the majority of the factories just don’t want to change,” Noah says. Anyone selling on Amazon knows they’re competing with Chinese sellers. You need to know that having chinese sellers is part of amazon’s goal of creating a good customer experience. And yes, Chinese sellers do use black hat tactics to compete. If you go back and listen to Episode 16, we talk a lot about why they do. In brief, it has a lot to do with culture. “The people who are respected are not necessarily the people who work hard and play by the rules,” says Noah, “The people who are put up on pedestals and emulated are the people who come up with a really clever angle.” It also has to do with the difference between Taobao and Amazon. Amazon’s end customer is the people shopping on Amazon, but Taobao, the customer’s they focus on are their sellers, “The seller pays Taobao their revenue so therefore the seller is the customer and they’ll do whatever it takes to deliver an excellent selling experience for the seller,” Noah says. Amazon in China is being a pioneer by allowing chinese sellers sell across borders. They’re flooding the marketplace with lower costs and giving customers the cheapest price along with vast selection. If you’re a private label seller and you’re sourcing from a Chinese factory Noah says if possible, go meet the people who you deal with and run the factories you buy from. The Chinese value relationships.  If you cultivate a relationship with them, they’ll be more helpful and easier to work with. If you do plan on going to meet them plan on a meeting taking a long time. Noah’s written a whole series of articles about Chinese selling culture. It’s good for anyone selling on Amazon to read. You can read it here.
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