This year, we were tasked with providing support for a client to list their products on Amazon Germany. To comply with Germany’s Value Added Tax (VAT) regulations, obtaining a VAT registration number became mandatory. However, due to the large number of international sellers on Amazon Germany, there was a surge in applications for VAT registration, resulting in a wait of about six months to obtain the number. The reason for this abnormal situation was the rapid increase in Chinese sellers. In fact, according to e-commerce research company Marketplace Pulse, as of 2021, 80% of new Amazon sellers in Germany were Chinese sellers. Furthermore, research by the same company showed that in marketplaces like France, Italy, Canada, and Spain, Chinese sellers’ sales had already surpassed those of domestic sellers.

Sales percentages of domestic, Chinese, and other sellers in these four marketplaces are as follows:

Ref: Amazon Marketplace is Not International Except for China

Now, let’s take a look at the situation in Japan. It’s similar to Germany, with 80% of new Amazon sellers being Chinese, and this trend is likely to continue increasing. Therefore, whether Japanese sellers engage in cross-border e-commerce using Amazon or list their products on Amazon Japan, they will likely face competition from Chinese sellers, and it’s expected that they will need to take countermeasures in many cases.

Before considering countermeasures, let’s analyze how Chinese sellers have managed to achieve significant sales growth in a short period. One of the most representative approaches is known as “Black Hat Tactics.” According to ChinaTalk’s article, until 2016, many Chinese sellers used to write numerous positive reviews for their own products and write large numbers of negative reviews for competitors’ products to boost their SEO on Amazon. After Amazon banned this practice, the “Black Hat Tactics” emerged, where Chinese sellers purchase competitors’ products and then flag them as fake or dangerous, leading to returns. If this happens repeatedly, Amazon hides the relevant products or stores, and it takes several weeks for them to reappear on Amazon, causing significant damage to the competitors. Amazon, as a platform, turned a blind eye to such actions since the low-priced offerings from Chinese sellers generated high sales, but with numerous media outlets exposing these malpractices, they eventually had to ban many sellers and stores engaged in such activities.

In addition to these tactics, as mentioned in Flamingotools, Chinese sellers have succeeded due to factors such as:

1. Excellent market research: Using various Amazon marketplace research tools for both domestic and international markets to understand product trends and competitor information, aiding in product development and marketing efforts.

2. Efficient product processing: Being able to manufacture domestically (Made in China) enables timely responses to product trends.

3. Relatively cheap shipping: Many shipping companies offer significant discounts for shipping from China to the USA, making it possible to deliver products at a similar cost to domestic shipping. This allows them to maintain competitive pricing while selling on international marketplaces.

4. Lower taxes: In 1985, the Chinese government exempted export goods from double taxation through the export tax refund policy. This enabled the abolishment of VAT, making it possible for sellers to expand their production scale.

5. Amazon’s support: Amazon introduced the Chinese Seller Central, employed Chinese staff, and provided training to Chinese sellers. Moreover, they allowed end-to-end shipments from China to Amazon warehouses, granting them special treatment.

Given all these success factors for Chinese sellers, they pose a significant threat to domestic sellers, and their numbers are likely to increase further. The Flamingotools article provided the following tips for Japanese sellers to compete against Chinese sellers:

1. Build the brand through owned media: Establish a brand website and consistently post content to promote brand stories and the attractiveness of products. Relying solely on Amazon may cause customers to perceive the products as Amazon products, leading to price competition with Chinese sellers.

2. Target niche products: Identify niche products with a smaller number of sellers but a demand for high-quality products, such as tools used by professionals in the construction industry, to avoid price competition with Chinese sellers.

3. Show human touch: Use words and phrases that convey friendliness and reliability to gain respect as a seller.

4. Create differentiation points for products: Analyze competitor products and develop high-value-added product features that customers desire.

5. Utilize influencers: Customers tend to trust brands when they hear about them from trustworthy individuals. Leveraging domestic influencers can increase brand and product recognition and trust.

With the increasing dominance of Chinese sellers and the numerous success factors they possess, it is crucial for Japanese sellers to take early measures to expand the perception of their trustworthy brands and products.

Masaki “Mark” Iino
Founder & CEO
SOPHOLA, Inc

P.S.: Sometimes, for some inexplicable reason, I find myself wanting to go back to the disc park where I used to play every day as a child.