I listened to an interesting interview of Peter Zapf from Global Sources on Evolution of Amazon and Sourcing from China on the Global From Asia podcast.
According to Peter, all Chinese suppliers are interested in Amazon sales. However, the vast majority of the factories that have tried to sell on Amazon have failed.
Why is that? They need to learn how to do many new things:
- Marketing — getting the copy right, taking nice photo shots, thinking of a nice brand (name, logo…) and registering it;
- Making the products first, then selling slowly out of that stock, and then getting paid later;
- Managing pricing, updating it to remain competitive;
- Establishing a consistent pricing policy in case the products are also sold through retailers.
This is not surprising. It is an entirely new business for Chinese factories. And a totally different business model — starting slow and taking 100% of the risks (typically that’s what they hate to do when working with overseas buyers).
Instead, Peter says, many entrepreneurs are handling all these tasks. They buy from manufacturers and sell on Amazon. It means there are two intermediaries in the supply chain — these entrepreneurs and Amazon itself.
I think this will be the model for years to come. I don’t see Chinese manufacturers selling through Amazon en masse.
Ironically, many of them already sell on Taobao (the local version of eBay), which keeps things much easier. No need to worry about an elaborate image, good copy, regular supply, etc. Just make a few hundreds more pieces, put them aside, and sell the exact same products you made for that other customer! If the packaging is in English it looks more valuable.
To be fair, many products sold on Taobao are not counterfeit. And most are sold by intermediaries rather than manufacturers. However, if I were an importer of branded products, I would keep an eye on that channel — I would not be happy to see my products sold on Taobao!!