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It is learned that Marketplace Pulse recently released its annual review of the e-commerce market in 2023, which deeply analyzed the market overview, development trends and challenges faced during the year.
In the previous article, the report provided an in-depth insight into the current development status of the US market: stock competition continues to escalate, and new forms of social media e-commerce are releasing dividends. This report will focus on the competitive situation of platform entities in the North American market, as well as the development status of Amazon sellers, and look forward to the market trends and sales opportunities of North American e-commerce in 2024.
In the wave of going global to the US e-commerce market in 2023, Shein and Temu, two Chinese companies, are undoubtedly the most eye-catching new stars. They have quickly completed their global layout in a short period of time, not only ranking at the top of the app download charts in many countries, but also representing the third iteration of China's commercial going global. China's business going overseas has gone through three stages. The first was "Made in China" going overseas, with Chinese factories providing goods manufacturing for foreign retailers. However, consumers did not care about the specific production location of the goods, which prevented Chinese goods from truly entering the international market. The second stage is the overseas expansion of Chinese sellers. They sell goods through cross-border e-commerce platforms such as Amazon and eBay, and begin to have their own production and sales channels, but they still rely mainly on foreign platforms and have not really entered the field of vision of overseas consumers. The rise of Shein and Temu marks the beginning of the third stage of China's overseas business expansion. Chinese products have finally entered the eyes of consumers and started to compete head-on with foreign e-commerce platforms for market share. For decades, Chinese-made goods have dominated the shelves of American retailers and brands. However, it was only in recent years that Chinese brands began to truly go global, allowing overseas consumers to purchase products directly from Chinese brands instead of through local retailers or e-commerce platforms. Amazon has become a major conduit for Chinese goods exports, and today, nearly half of the top third-party sellers on Amazon are from China. As more and more Chinese sellers seek overseas opportunities, e-commerce platforms such as Shein and Temu have emerged to meet the needs of merchants. AliExpress and Wish have tried the same model before, but Shein and Temu have risen faster. Shein has established a huge social media marketing network, and its number of followers on Instagram is more than the sum of Amazon, Walmart and AliExpress. Not only that, Shein is transforming from a fast fashion brand to a third-party market platform. In May 2023, Shein announced the launch of the platform model and began to add local and international sellers. Opening physical stores in the United States is part of Shein's localization strategy. However, as of the end of 2023, most of its sellers are still from China, and localization has not yet been fully realized. Thanks to the financial support of its parent company Pinduoduo, Temu has become the fastest retailer in history to grow from zero to scale. In just over a year since its launch in the United States, Temu has expanded to nearly 50 markets around the world. It also focuses on low-priced goods, but unlike Shein, Temu was positioned as a market platform from the beginning and only allowed Chinese sellers to enter. At the same time, Shein and Temu have invested heavily in advertising and marketing, especially in paid channels such as Google and Meta, and advertising costs have been affected. Data shows that in the fiscal year ending September 30, 2023, more than 1 billion packages entered the United States, a record high and twice that of 2019. With the rise of Shein and Temu, Amazon's position began to be threatened. In December 2023, Amazon announced that it would reduce referral fees (i.e. transaction fees paid by sellers) for clothing products priced below $15. For products priced between $15 and $20, referral fees were also reduced. The move is designed to reduce costs for sellers, allowing them to lower prices by a few dollars and maintain the same profit. Although commissions remain at 17% for more expensive items, the lower fees will make sellers more competitive. Currently, Shein, Temu and AliExpress have a combined monthly website visit volume of more than 1 billion, which is about half of Amazon in the United States and twice of Walmart. However, it is worth noting that Shein and Temu mainly drive most of their sales through their applications rather than through websites. Although the total GMV of the three combined is still far from the scale of Amazon, their influence in the US e-commerce market cannot be ignored.
According to internal Amazon forecasts obtained by The Wall Street Journal, Amazon will deliver a staggering 5.9 billion packages in the U.S. in 2023, surpassing FedEx and UPS combined for the first time. Five years ago, Amazon delivered just 1 billion packages. It is understood that Amazon's delivery business is not undertaken by itself, but by cooperating with thousands of small businesses and relying on the power of hundreds of thousands of drivers to build a huge delivery network. However, it cannot be ignored that the labor dispute between Amazon and delivery drivers has intensified and become an issue that is difficult to reconcile. As early as December 2013, Amazon announced that it would begin testing a drone delivery service, which it named Amazon Prime Air . The service promises to deliver packages in 30 minutes or less. However, it wasn’t until seven years later in 2020 that Amazon received approval from the Federal Aviation Administration (FAA) to operate its Prime Air delivery drone fleet. Unfortunately, Amazon’s drone delivery business still hasn’t been launched on a large scale until 2023. Over the past two decades, Amazon has continuously increased its investment in logistics and delivery infrastructure to ensure that more goods can be delivered to a wider area more quickly. For Amazon, efficient logistics and delivery has become one of its core competitive advantages. Today, most orders can be delivered within two days or even within the same day. In 2023, Amazon also launched the Supply Chain by Amazon supply chain service . This innovative service not only provides end-to-end supply chain delivery services for sellers on the Amazon platform, but also handles the entire process of goods from manufacturers to consumers. More importantly, the Supply Chain by Amazon service is open to non-Amazon sellers, further expanding its business scope. In 2023, Amazon Logistics also underwent a major transformation from primary warehousing to two-tier warehousing. Previously, Amazon Warehouse Delivery (AWD) only automatically replenished FBA. However, this year, Amazon Warehouse Delivery (AWD) also began to replenish other channels. At the same time, Walmart has also made significant progress in the field of e-commerce logistics. Without a large-scale logistics infrastructure like Amazon, Walmart mainly uses its physical stores across the country as distribution points. In the United States, about 90% of the population can find a Walmart store within 10 miles of their residence. Since the last mile delivery is usually the most expensive part of logistics, delivery through physical stores helps to reduce costs. Walmart is one of the leaders in grocery e-commerce in the United States, with a large portion of its e-commerce orders coming from online grocery business, a category that is particularly suitable for delivery through physical stores. However, using physical stores for delivery means that product selection is limited, as Walmart sells more than 100 million items online while delivery through stores is limited to tens of thousands. Therefore, 50% of Walmart's sales come from physical stores, and the other 50% comes from Walmart warehouses and seller warehouses.
In recent years, Amazon's third-party sellers have continued to grow in size, accounting for 60% of total sales and an even higher share of GMV. Since 2016, the number of third-party sellers' merchandise sales has exceeded Amazon's own brands for the first time, and this trend has been growing steadily since then, although there have been some fluctuations in certain quarters. Since third-party sellers surpassed Amazon's own brands, their market share has continued to grow at a rate of 150 basis points per year. However, in 2020, this growth rate was briefly affected by Amazon's restrictions on sellers' storage capacity in order to optimize warehouse operations. At the same time, the sales costs of third-party sellers are also rising. Currently, the sales costs of third-party sellers account for more than 50% of their total revenue, compared to only 40% five years ago. Of this, logistics costs account for about 20-35%, while Amazon advertising and promotion costs account for about 15%. These costs vary depending on factors such as category, product price and size. In terms of Amazon’s sales commission, most categories have a commission rate of 15%. However, there are differences between categories, and some categories have commissions as low as 8%. In addition, Amazon raises delivery and storage fees every year, which makes sellers more dependent on FBA for their business. As the number of sellers increases, Amazon advertising costs are also rising, making competition increasingly fierce. In addition, as the main channels for acquiring consumers, the advertising costs of Google and Facebook are also rising. In contrast, the cost of using third-party logistics 3PL is lower than FBA. With the launch of Amazon's supply chain, Amazon will convert more sellers' costs into revenue. In short, the US e-commerce market will usher in a new pattern in 2023, with platforms such as Temu, Shein, and TikTok rising rapidly to compete with Amazon for market share. These emerging platforms have attracted a large number of consumers with their unique business models and marketing strategies, posing a threat to Amazon's dominance. As market competition intensifies, the e-commerce landscape is gradually entering a white-hot stage. Looking ahead to 2024, the US e-commerce market will face more intense competition, and each platform needs to continue to innovate to maintain its competitive advantage. At the same time, consumer demand will continue to change, bringing new opportunities and challenges to the e-commerce industry.
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