China Courts US Consumers Through a Familiar Storefront in Amazon

Despite fake reviews, China-based merchants make up 50 percent of all Amazon sellers
By Fan Yu
Fan Yu
Fan Yu
Fan Yu is an expert in finance and economics and has contributed analyses on China's economy since 2015.
July 4, 2021 Updated: July 5, 2021

News Analysis

“Made in China” is a phrase with which all U.S. consumers are intimately familiar.

In past decades, that term referred to major branded products sold at U.S. stores manufactured by factories located in China. For example, a Matchbox car bought from Toys “R” Us and made in China by Mattel. Today, U.S. consumers are increasingly purchasing Chinese-branded products from Chinese stores directly over the internet, and both Beijing and the world’s largest online retailer—Amazon.com—have been facilitating that trend.

Half of Amazon Sellers Based in China

On Amazon, 50 percent of all global sellers are based in China, according to data from Marketplace Pulse, a website that provides e-commerce market data. Those sellers store their goods and products in the United States at Amazon’s warehouses, so the items are shipped domestically and qualify for fast “Prime” shipping—also dubbed as the “Fulfillment by Amazon” program.

Chinese sellers make up the highest percentage of all sellers on Amazon.es, the company’s Spanish retail website, at 64 percent. More than 50 percent of Amazon’s French, Canadian, and Italian sites are Chinese sellers, highlighting a dearth of domestic e-commerce companies within those countries. Amazon’s U.S. website is made up of 44 percent Chinese sellers, meaning the majority of sellers on the U.S. website are based in the United States—for now.

But the U.S. trend is also shifting. More than 60 percent of new sellers on Amazon’s U.S. website in January 2021 were from China, compared to less than 40 percent in January 2020, according to Marketplace Pulse data. Globally, China’s share of new sellers is even higher, 75 percent, for Amazon’s websites as a whole.

While these raw numbers could be skewed because some sellers maintain multiple selling accounts, the directional trend is clear: Amazon is the largest and most efficient direct-to-consumer vehicle for Chinese brands to target U.S. and European consumers. And China is the world’s biggest factory and arguably has the highest e-commerce adoption. On paper, it shouldn’t be shocking that many products on Amazon are from China.

But there’s a transparency concern. Since the sellers all market their products on Amazon’s local e-commerce websites, consumers may be unaware that they’re purchasing their products directly from Chinese stores.

E-Commerce Expansion a Key Initiative for Beijing

This trend has been years in the making.

In China, the “Made in China, sold on Amazon” motto is a critical business model for Chinese e-commerce merchants. Merchants selling products on Amazon have formed a hub in the southern city of Shenzhen, Guangdong Province, a region dubbed as China’s “Silicon Valley.” Many well-known brands on Amazon are headquartered there, including Aukey, Mpow, RAVPower, and Taotronics, which all make popular tech accessories sold on Amazon.

This strategy has the blessing of the Chinese Communist Party (CCP) at the highest levels.

On July 1, China’s customs began implementing a new, faster clearance system for outbound business-to-business e-commerce in an effort “to promote healthy and orderly development of cross-border e-commerce and to help the expansion of Chinese companies in international markets,” according to a South China Morning Post report.

This effort has cabinet-level support. Premier Li Keqiang said at a late June meeting of the State Council that cross-border e-commerce is a key strategic initiative for Beijing and signaled for Chinese merchants to build up their inventories abroad and increase logistical capabilities.

While the biggest merchants had an advantage before, the new rules should allow smaller Chinese merchants to clear customs faster.

There’s a Chinese cottage industry to support this as well. A website called Yuguo Platform provides training courses for Chinese sellers to establish themselves on Amazon, AliExpress, TikTok, eBay, and a number of foreign e-commerce websites.

It’s important to note that Amazon currently doesn’t operate an e-commerce site in China, having shut down Amazon.cn in 2019, citing domestic competition from the likes of Alibaba and JD.com. However, Amazon maintains operations in China for its non-e-commerce business lines.

A Tumultuous Relationship

Amazon has also actively courted Chinese sellers.

Amazon has built a Chinese-language website specifically catering to Chinese sellers, offering tutorials and guidance on setting up storefronts. Amazon also holds “seller conferences” in several cities across China to gather current and potential sellers for education and networking sessions.

The Seattle-based giant doesn’t disclose the number of gross sales made by third parties (non-Amazon sales) or the number of sales made by Chinese third-party sellers, so the magnitude of China-originated sales is unknown. A representative from Amazon declined to provide China-based sales numbers in an emailed statement.

Founder and Chairman Jeff Bezos’s mantra is putting customers first, which includes offering products at the lowest prices—often sourced from China.

“How in the world can a company in China make, ship, and pay Amazon fees and commissions and sell an item for $3 when it costs more than an American seller can even buy it for wholesale?” A U.S.-based seller wrote in a post on Amazon’s seller forums. “We have an item manufactured for us in China and we sell it at $10 and make only a couple of bucks after all the costs. The same company that makes our product sells it on Amazon 5 for $10 ($2 a piece). How is that possible?”

Amazon has also battled integrity issues with its Chinese sellers. Several China-based storefronts on Amazon were temporarily suspended in May 2021, including those of popular sellers Mpower and Aukey.

While Amazon didn’t disclose the reasons for the suspensions, the enforcement actions were related to fake product reviews, according to a letter Amazon sent to its third-party seller base.

Amid the competitive environment, some vendors have resorted to paying customers for product reviews. This author has received e-mails from certain China-based vendors to post reviews on Amazon in exchange for an Amazon gift card, which is a violation of Amazon’s seller agreement.

“I admit that I pay for some reviews, but that’s because my competitors are doing the same. I have to do it, too,” a seller wrote in a discussion forum of an online merchant community about Amazon’s fake review crackdown, according to a South China Morning Post report.

“If there’s a healthy environment for competition, who would want all these deceptions?”

Fan Yu
Fan Yu
Fan Yu is an expert in finance and economics and has contributed analyses on China's economy since 2015.