STUMP BEZOS
More than 125 stores have reached a
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Dire Warning from Industry Expert Steven Selikoff
Steven Selikoff, a former global business manager for Microsoft and an experienced sourcing expert in China (leading seller sourcing trips since 2018), has issued a critical warning to his clients. The e-commerce landscape, particularly for Fulfillment by Amazon (FBA) sellers, is about to undergo significant changes. Many sellers remain unaware of these impending shifts and how to navigate them. Selikoff has gathered vital insights from timely connections and direct conversations with industry leaders.
Imminent Challenges for FBA Sellers
FBA businesses, especially those relying on copycat and commodity products, are facing severe threats from low-priced factory competition.
If you are selling products in Gift, Home, Pets, Décor, Toys,
Kitchenware, Office, and Apparel, then your factories can, and will, compete directly against you in the Factory Direct division, and their prices will be the same prices they charge you, or lower,
Key Insights and Developments
Amazon’s Discount Program
Recent leaks about Amazon’s direct discounts from Chinese factories are just the beginning, and some details have been misconstrued. Selikoff has been aware of these plans since February and has been preparing strategies accordingly. His insights come from various high-level meetings and discussions:
- Amazon’s Discount Program: Contrary to some rumors, certain products in Amazon’s discount program will eventually be distributed from within the U.S., offering 2-day delivery options.
- Emerging Platforms: New competitors to Temu, Shein, and Amazon are emerging, with some already in beta testing. These platforms, like Temu, are experimenting with U.S.-based shipping.
- Walmart’s Strategy: Walmart is actively recruiting Chinese factories to sell directly to U.S. consumers, providing incentives and support. Walmart is no longer a refuge from Chinese competition.
- Chinese Government Involvement: The Chinese government is encouraging these moves as part of a broader economic strategy.
The Real Threat
The launch of Amazon’s Factory Direct Discount section is seen by some as the end for FBA, but the true threat is even more significant. An economic shift is happening, and adapting is crucial.
Technological Advancements
Selikoff has witnessed demonstrations of Chinese product research tools that identify products, recommend differentiation using AI, and provide mock images and listings. However, these tools lack the understanding of Western cultural nuances and creativity that drives Western appeal in products.
Chinese Government and Cross-Border E-commerce
The Chinese government views cross-border e-commerce as essential for economic recovery, driving factories to sell directly to Western consumers, particularly Americans. This initiative aims to boost the economy by leveraging the success of platforms like Temu and Shein, encouraging factories to lower prices and increase direct sales.
Expanding Sales Channels
Chinese factories now have multiple channels to sell directly to U.S. consumers, including:
- Amazon
- Amazon Factory Direct Discount section
- Walmart
- Temu
- Shein
- AliExpress
- TikTok Shop
The Competitive Landscape
Over 60% of third-party sellers on Amazon are already Chinese, and more platforms are launching, leading to intense competition within the e-commerce market share, which is currently about 15% of U.S. retail. Most of this share is expected to come from Amazon, which is highly vulnerable.
- Amazon: 40-50% of $490 billion third-party sales in 2022 came from Chinese sellers.
- Meta (Facebook): Chinese advertisers grew from 6.5% to 10% of revenue in one year.
- Walmart Marketplace: Over 90% of international sellers are from China.
Strategies for Survival and Success
Price Competitiveness
Price will be the main driver of e-commerce purchase behavior. Currently, online consumers spend 27% more time seeking lower prices than pre-COVID.
Marketing Excellence
Ensure your marketing is impeccable to capture customers on their first search.
Intellectual Property Protection
Focus on intellectual property strategies beyond patents, as many products are not novel enough to be patented.
Physical Store Sales
Explore selling in physical stores, which still account for nearly 90% of purchases.
Product Differentiation
Differentiate your products to make them unique and appealing. Leverage Western cultural insights that AI tools cannot replicate.
Customer Insights
Listen to your customers to make necessary modifications and improvements.
Conclusion
The e-commerce landscape is shifting, and those who adapt will find new opportunities for success. While many so-called experts might downplay these changes, being prepared is essential.
