Amazon sellers and customers alike are familiar with the Chinese sellers whose offerings are beginning to dominate the platform. Their items have a knack for appearing on the first page of search results with some of the lowest prices, and the product detail pages are marked by a dialect light on prose and heavy on keywords.
We’ve all encountered these Chinese e-commerce companies at some point, whether searching for products for our personal use or scoping out competition for a potential product launch. You might wonder how these sellers have achieved such an ubiquitous reach: no matter what product, category, or search query, their listings appear, often with stellar star ratings and a throng of reviews.
If you’ve ever wondered how these sellers continue to perform outstandingly despite the innate competitiveness of the Amazon marketplace, you’re not alone. In this report, we’ll investigate the disparities between Western and Chinese business culture, practice, and ethics that account for this success.
An outward-facing eye
Many of the sales managers employed by Chinese e-commerce companies spend the majority of their time monitoring competitors. Where the Western approach tends to factor in competitor research as auxiliary to building and focusing on your own brand and products, the Chinese approach attacks top competitors as a quick growth strategy.
Chinese companies take an aggressive approach to knocking out the competition by constantly undercutting prices and quickly matching new features of competing products. Their pricing and product development strategy is often not based on their own sales metrics or customer data, and is instead drawn directly from competitors.
A focus on products, not brands
Part of this meticulous research involves finding new products with low barriers for entry. When a low-competition, high-performing product is found, a sales manager pitches a test round to their management team. If approved, the company will then buy the inventory and put it out on the marketplace to test its profitability.
There are no parameters for these products other than their performance. That is to say, Chinese companies are far less concerned with brand identity than they are with making the sale. One company may sell products ranging from personal care items to consumer electronics under the same brand umbrella.
Western companies invest significant time and value into creating a unified brand presence, which extends to maintaining a product line of related products. With this, they are focused on their specific niche and the competitors that exist there.
Chinese companies do not experience the limitations that come with brand identity, viewing the entire marketplace and every category as their competition and acting accordingly. This allows them to operate at a fast pace to reflect the ever-changing nature of the marketplace. After releasing hundreds of test rounds of products spanning all categories, the ones that become popular can be quickly manufactured with new features or in different variations. In this way, one company dominates a niche and wards off competitors who would otherwise take note of their success and jump in with their own variation of the product.
In a similar vein, the Chinese mentality of faster = better extends to the typical workflow of an e-commerce company. A seller is more likely to see a profitable product opportunity and immediately get a trial run in the works than to first lay out a business plan.
In the West, we are prone to strategizing, researching, analyzing, and passing ideas through multiple teams before awaiting management approval. We perceive this process as the necessary steps to build the foundation for a successful product launch. However, you can see how this delays the turnaround of new products when compared to China’s approach.
This isn’t to say that one approach is better than the other. Chinese companies who invest in products that turn out to be unsuccessful suffer a loss of resources that Western companies, who would have planned and implemented a careful marketing strategy, likely would not. The Chinese model is also not conducive to long-term success, which is why the constant product research and new releases is essential to keep the revenue stream flowing.
Entrepreneurship over company loyalty
One of the cultural differences between Western and Chinese business practices is the latter’s propensity for early entrepreneurship. It is extremely common practice for a sales manager to learn as much as they can from an e-commerce company in their first years of employment, then breaking off to create their own Amazon store. In fact, many sales managers begin their own businesses while still employed at an established company, and go full-time as soon as revenue from their startup exceeds wages from their employment.
Turnover is high in these e-commerce companies, and the stigma against leaving a company after only a short few months of years that exists in the West does not translate to the Chinese job market. However, companies are wising up to the trend of employees using their employment as a source to mine information, and are becoming more selective in what information is revealed to employees. This phenomenon also drives down wages, as companies are hesitant to invest too much in an employee who may leave at any moment and become a competitor.
One of the key advantages that Chinese sellers wield over Western sellers is their much easier access to valuable resources. Chinese companies are able to quickly source products from suppliers who may be in the very same city. Many of these companies also receive government funding.
Proximity to suppliers not only cuts down turnaround time, but helps promote positive working relationships. Face-to-face interactions with a supplier gets Chinese companies higher priority and better deals than Western companies carrying out all of their communications via faceless email.
This also makes QA fast and easy, as sellers can simply visit a factory in person to check on production. This saves them the investment that overseas sellers must make in hiring QA agencies or professional inspection services.
Adding to these logistical advantages is the vast amount of capital that the Chinese government devotes to its e-commerce companies. This backing is part of what facilitates the many test runs of yet-unproven products, giving companies plenty of margin for error.
This means Chinese companies have a massive safety net, allowing them to lose more money over a much longer period of time than Western companies could ever afford.
Black hat methods
So far, we’ve discussed the cultural and logistical differences that contribute to Chinese companies’ advantage over American companies in the Amazon space. In this section, we’ll be getting into the less straightforward, more manipulative tricks that sellers use to stay ahead of the competition.
Known as “black hat,” these strategies intentionally violate Amazon’s terms of service in order to gain a competitive edge. This approach is increasingly popular in China as competition grows, with seminars offered to Amazon sellers around the country at high price points that can range up to $4000 per student.
One of the main areas of focus in the black hat space is gathering reviews. Compiling reviews on new products through black hat methods is ubiquitous across most Chinese Amazon sellers: it’s how a brand new, freshly launched product can already have dozens of glowing reviews attached.
This can be as simple as someone buying and receiving a product, making them eligible for a verified purchase review, and receiving both a refund and a small commission from the seller. While this is strictly prohibited by Amazon’s terms of service, sellers in China have access to black hat technologies to outsmart the tracking algorithms that Amazon uses to monitor and prevent this practice.
Another popular tactic is “brushing,” in which a customer who has made an Amazon purchase is sent multiple packages containing items that they did not order, each worth next to nothing.
The seller behind this is using the customer’s information to create fake purchases that translate to “verified purchases” on Amazon, improving a product’s ranking and in some cases, allowing the seller to leave their own review on the purchase.
This is illegal in China, but harder for the Chinese government to monitor or discipline when practiced overseas. Sellers committed to this tactic will consistently build a large database of customers in other countries spanning many IP addresses to avoid detection.
The prevalence of black hat tactics in China can also be attributed to cultural differences. The Western values of making it to the top by working hard do not apply as cleanly to an ultra-competitive business culture, where working “creatively” is held with higher regard due to its greater tendency for quick results. “Creativity” in this context often means turning to methods that competitors are not using— and these tend to be black hat.
Chinese startups rely on black hat more than the established e-commerce companies, often even operating multiple accounts to prepare for the risk of suspension.
Crowdfunding for a product launch
One method that Western sellers may not be aware of is the pre-launch of a product on Kickstarter before bringing it onto Amazon. Chinese companies view the platform as a brand-building opportunity, getting their product in front of a new set of eyes and granting it the possibility for media attention.
While crowdfunding is associated with genuine startups and original new products, sellers who use this tactic rely on the percentage of viewers who will have not seen competing products and believe that their product is the first iteration. Whether or not the product receives significant crowdfunding, sellers have nothing to lose on the platform. Even a project with no funding at all will have promoted some brand awareness, and any funding that is received is simply accounted as extra revenue.
Understanding the cultural, practical, and ethical differences between how Chinese and Western e-commerce companies do business is the first step towards demystifying those ultra-successful sellers that we’re all familiar with.
As you’ve learned, some of this success can be attributed to the black hat tactics that we don’t recommend, as they are not conducive to building a long-standing e-commerce business. However, the simple instances of performing constant competitor research, casting a wide net rather than focusing on a niche, and minimizing the time between product sourcing and launch are all ideas that you can draw from for your own business. There will always be differences between how Western and Chinese companies do business in the e-commerce sector, and it’s best to not let the advantages that your overseas competitors enjoy discourage you— instead, treat them as a source of information and inspiration when you’re looking to restrategize.