E-commerce platforms in China have offered a lifeline to many smaller suppliers, but it hasn’t been smooth sailing for everyone. The platforms are giving suppliers access to a large consumer base around the world, but there are challenges that come with it, such as thin profit margins and pressure to cut prices.
One example is electronic product seller Jason Xie, who initially sold products on platforms like Amazon and Pinduoduo. In May 2023, he accepted an invitation from Temu to sell on their platform. However, Xie soon began to question the sustainability of Temu’s sales method due to the smaller profit margins and larger competition on the platform.
Some suppliers have had success, such as Zhejiang Maibo Industrial Co., Ltd, which began selling its own brand products on Temu with a 20% profit margin, higher than its profit margin for other brands.
The business models of these platforms have disrupted the e-commerce supply chain, with on-demand orders and fast restocking. However, this shift in the supply chain has created challenges for some suppliers, such as those who have found themselves with large backlogs of inventory or faced fines from the platforms.
Competition between the e-commerce giants Xiyin and Temu continues to grow, with both platforms increasingly targeting the same overseas customers. This competition has led to stricter pricing policies by Temu, alienating some sellers who found the platform no longer financially viable for their businesses.
The crowded e-commerce market is leading sellers to test multiple platforms to determine which brings them the best sales and profits. As the market continues to shift, it remains to be seen how smaller suppliers will navigate these challenges and find their place within an increasingly competitive industry.