Reports of Amazon's Demise Are Greatly Exaggerated

Submitted by Jack on Fri, 05/17/2019 - 15:15

“Is Amazon dying?” “Do you think Amazon will be around in 5 years?”

These questions, if posed by anyone living in the United States today, would be considered absurd.

You would not even have to know that Amazon posted record profit in their most recent earnings reports. Or that Amazon is already three-quarters of the way to lowering Prime delivery time from two days to one. You would not have to know that Amazon Web Services is the leader in cloud computing (and has double the market share of Microsoft and Google, its two nearest competitors, combined). You would not have to know that Amazon is a legitimate threat to the digital advertising duopoly or that more households have Amazon Prime than attend church on Sundays.

Even if you knew none of those things but still lived in a Western market, you would still lack any inkling that the Bezos empire is in jeopardy. The danger that lies ahead for Amazon, to the extent that there is any, lies in the fact that it is doing too well, as discussed in the recent Wall Street Journal article, “Amazon’s Size Is Becoming a Problem—for Amazon.”

Yet, take a trip to Shenzhen, China, known as “the world’s factory” for all the products it makes and sells to the rest of the world, and you will be bombarded with inquiries of Amazon’s pending doom. What gives?

You would expect companies that make their bones selling their wares the world over to have a keen (and data-driven) understanding of Amazon’s might. But instead you will find company after company, manager after manager, telling you they are shifting away from Amazon to a crowdfunding or self-sale strategy.

Part of this is understandable. After all, as omnipresent as Amazon is in Western markets, it is not available for domestic use in China. Amazon ceased its Chinese marketplace operations last month, admitting defeat at the hands of the native Chinese e-commerce companies that dominate. That decision left 1.3 billion potential consumers with the impression that Amazon is a loser.

So, TaoBao and JD.com maintain their strong hold on the Chinese e-commerce market. But the Chinese don’t necessarily expect Americans to buy from them, and they do not devote marketing budgets to appealing to US consumers on those platforms.

Reports of Amazon’s demise around the world have been delivered not by international news agencies but by aspiring upstarts attempting to wrest a swath of Chinese vendors away from the Amazon ecosystem. Specifically, crowdfunding sites like Indiegogo have pitched directly to Chinese sellers, casting themselves as the next phase in US e-commerce.

I’ll have more to say about raising money via crowdfunding (and why it is appealing to Chinese sellers) in a future blog post. Whereas Americans think of the strategy as an option for those with little capital or manufacturing knowhow, Indiegogo has successfully convinced established Chinese brands that this is the avenue through which new products should hit the market.

Just as Chinese sellers mistakenly interpret Amazon’s domestic withdrawal as global weakness, they take Indiegogo’s pitch at face value. This has resulted in a strategy shift to crowdfunding platforms, online locations all but a tiny sliver of Americans have never visited.

This is a losing proposition for almost all parties involved. Chinese sellers lose by leaving behind a large consumer base. US consumers lose access to the latest and greatest innovations from “China’s Silicon Valley.” And Amazon loses vendors, a big deal considering 40 percent of Amazon third-party vendors are based in China.

Amazon looks to confront the problem head-on, recently announcing a lending service to China-based merchants. The company is likely to reassign employees from the shuttered China market side of the business to manage seller accounts. Both Chinese and US sellers gripe about Amazon’s unresponsiveness, and it would be smart to start making vendor relations a priority.

In America, Amazon can afford to be opaque and intransigent; US sellers know they are unlikely to sustain their business without access to such a valuable sales channel. In China, such a perspective does not exist. Without an on-the-ground look at US consumer behavior, Chinese sellers are liable to have a skewed understanding of the American market. And they are susceptible to misinformation on the subject.

Current Sino-US relations make an unbiased viewpoint even harder to come by—and much more important. Amazon is certainly not dying, and it will certainly be around in 5 years. Chinese sellers who do not face that reality risk obsolescence. In order for continued success, the Chinese need to seek out and listen to candid information from the West.

At Foxbat Media, we act as that missing link between US cultural trends and Chinese business patterns. With years of experience working with Chinese sellers plus backgrounds as US media professionals, we can offer the unbiased Western viewpoint that benefits all parties involved.