Need to buy a paintbrush? You might start in the same place millions of shoppers do every day: by opening the Amazon app. In the search results you will find a baffling array of brushes, sold by brands such as CNMTCCO, HTHL and Skaaisont, all largely indistinguishable from one another.
It isn’t just paintbrushes. Look for a cat food bowl and you will be presented with items from YUOHEE; yoga mats by Keplin; water bottles by AOHAN.
These are not household names: many of the brands are seemingly generated at random. But they are what shoppers are faced with when they search the world’s biggest online retailer for millions of everyday items: a volley of bargain and seemingly interchangeable Chinese brands jostling for attention.
In recent years the number of Chinese sellers on Amazon has exploded as the retailer has prioritised independent merchants over goods that it stocks and sells itself. At the start of July, 50.8pc of Amazon’s top sellers were based in China, according to research site Marketplace Pulse, up from 25.8pc at the end of 2018.
Amazon, which celebrated its 30th anniversary on Friday, is now going further. In a presentation in Shenzhen last month, the company told manufacturers it would launch a “direct from China” service, in a challenge to fast-growing retailers such as Shein and Temu that have nipped at its dominance of online shopping.
Under the plan the company would sell low-priced items from warehouses in China, shipped to customers’ doorsteps in the West. Despite the company being associated with instant gratification, goods from China would take several days to arrive. The service is expected to launch by Christmas, although it will feature in a separate section of the app rather than bundled among other goods, at least at first.
The battle for e-commerce supremacy
For the first time in years, Amazon’s supremacy over e-commerce is under threat. Shein, which focuses on clothing, and Temu, which specialises in everyday household objects, have risen from obscurity to become hits with consumers in a way that Chinese predecessors such as Wish.com and AliExpress did not.
Spending heavily on marketing and offering rock-bottom prices, the companies have shown that consumers are willing to sacrifice convenience and brand recognition in order to save a few pounds. Enders Analysis estimates that spending on Shein rose by 44pc last year to $42.3bn (£33bn). Spending on Temu rose from almost nothing to $14bn, and is expected to more than double this year.
The companies have taken advantage of what is seen by some as a tax loophole that exempts packages entering the UK, Europe and US from import duties if their value falls under a certain level. A US Congress committee found last year that more than 30pc of all packages entering the US under this “de minimis” threshold were from Temu and Shein – some 600,000 parcels a day. Sellers that ship to Amazon warehouses in the West in bulk, meanwhile, do pay the charges.
Claire Holubowskyj of Enders Analysis calls Amazon’s response “highly defensive” and says its rivals’ performances have shown that the basis of the company’s success – offering fast shipping and peace of mind – may be fragile.
“Their entire retail business is built on Prime [being] the best way to get something to you. And what Temu and Shein have proved is that, actually, people will buy the cheapest things from a site that they don’t necessarily, initially at least, trust very much. They don’t mind if it takes two weeks to arrive. But they’re still going to buy it because of that price. That will be the threatening aspect because of where it could go.
“Amazon’s model for so long has been ‘if you want something we are the first place to come and the best place to come’. And that’s being put under a bit of pressure by people wanting to go elsewhere for the really cheap goods.”
Amazon has already indicated that it is feeling the pressure. Last year it slashed fees on cheap clothing, Shein’s forté.
Competing for eyeballs
But there are other reasons for it to court the smorgasbord of relatively identikit Chinese brands.
Small merchants without much brand power have less bargaining power than household names. They must also pay to ensure they feature towards the top of search results (there are more than 2,000 results for “water bottle” on Amazon), either by jumping through hoops such as using the company’s own fulfilment network or by buying advertising space.
Amazon now makes more money from advertising than Prime subscriptions, and with merchants desperate to compete for eyeballs, it is the company’s fastest-growing business.
“The more commoditised the product or more competitive the product category, the higher the proportion of spend on ads,” Brian Wieser, an advertising industry analyst, recently wrote, arguing that Amazon’s new direct from China business would speed up advertising growth.
“[Chinese merchants] have to advertise in order to reach consumers on Amazon. They’re not brand name companies. So consumers aren’t going to seek out and search for them by name,” says Sky Canaves, an analyst at eMarketer.
‘Explosion in the catalogue’
There are flickering signs that Amazon’s embrace of overwhelming quantity has started to irk consumers. Customer satisfaction surveys have trended downwards in recent years, although the company’s ratings are typically above average. Customers often lament that Amazon has “got worse”, that the task of wading through sponsored results, haphazard product descriptions and incentivised reviews has diluted the one-click magic. The site’s transformation in recent years has been dubbed “junkification”.
But for now, it does not seem to be deterring shoppers. Amazon’s retail sales are at all-time highs and last month the company hit a $2 trillion valuation for the first time. Consumers do not necessarily demand quality when buying everyday items like garlic presses and clothes pegs.
“Anyone can see the explosion in the catalogue, tens of thousands of similar or exactly the same products with different brand names, it’s all overwhelming. But it doesn’t seem like it has hurt Amazon,” says Juozas Kaziukėnas of Marketplace Pulse, who points out that rivals such as Walmart are now following the playbook.
Whether that survives a deeper push into China remains to be seen. To the extent the company has gone downmarket, it has so far not been at the expense of speed: goods are still shipped from Amazon’s warehouses using its huge distribution network and typically delivered the next day.
Shipping from China will change that, possibly muddying the average shopper’s experience.
“For people who have been shopping on Amazon for decades, to now go back to having items come in two weeks seems like a giant step back,” says Kaziukėnas. Canaves says that while Temu and Shein’s shoppers are largely motivated by price, Amazon’s tend to value speed.
Amazon’s China push has only brought success to date, but its next step carries risk. Last week, Jeff Bezos revealed plans to sell $5bn worth of shares. The company’s founder has had a knack for cashing in while Amazon is riding high.
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