If there's anyone who can explain how Chinese ecommerce sellers have become so successful on Amazon, it's Zhang Jie. The 38-year-old Shanghai-based entrepreneur became an eBay vendor in 2004 and was one of the first Chinese people to explore overseas ecommerce markets.
Today, he has a different position in the industry: The company he founded in 2010, Mabang, offers enterprise resource planning software to many Chinese cross-border ecommerce vendors. Zhang coaches them at every step of the overseas sales process, from selecting ecommerce platforms to deciding what products to sell to improving management structure. Clients range from some of China's most successful domestic consumer brands in recent years (Perfect Diary, Florasis and Xtep) to those brands that sell like hotcakes on Amazon whose names no one can remember. ("You wouldn't recognize it if I told you the name of the company or the owner," Zhang said.)
The future of cross-border ecommerce is both promising and uncertain. In just the eight months of 2021, Mabang (whose name comes from the Southwestern Chinese tradition of horse caravans carrying merchants' goods across borders) has completed three rounds of fundraising, securing about $70 million from investors including Softbank. But the overall industry experienced an earthquake when Amazon banned thousands of third-party seller accounts, many coming from China, for violation of platform rules.
In an Interview with Protocol, Zhang explained the difference between his eBay years and the current cross-border ecommerce scene. He also expressed his confidence that the fiasco at Amazon won't impact Chinese sellers much, but it will motivate them to move on to other ecommerce platforms around the world.
This interview has been edited for length and clarity.
Why do Chinese sellers suddenly have so many platform options now, like Shopify, Shopee or Tokopedia? What happened?
The biggest difference is these platforms are coming to China to invite sellers to join them now. It's only possible when the market demand is there.
I remember ten years ago there were also [Chinese] people who wanted to start their businesses on Amazon or other overseas platforms, but they couldn't even register their store. They would go all out and try every shady trick just to start an account, and still couldn't make it work. It all depends on whether the market opens up to you.
Many Chinese sellers' accounts have been banned by Amazon this year. How do you view that?
Currently some sellers are panicking, but I don't think they should. There are so many platforms they can move to. I have always encouraged sellers to operate on multiple platforms at the same time. As an individual seller, you should know how to utilize your back-end capabilities — your supply chain, warehouses, logistics and management — for more than one platform. You can always learn how to operate on a specific platform later.
Do you think geopolitics will hurt the prospects for cross-border ecommerce?
A little, but not much when you look at the whole picture. Because for any country, the demand never goes away for cost-effective consumer goods.
There's a simple question we can ask: Is there a second country in the world, besides China, that has a supply chain as comprehensive and a group of sellers as versatile? An ecosystem of awesome sellers and large exports of labor who can speak a foreign language: Can you find them anywhere else? If you look at the world right now, there's no second choice, so it won't change anytime soon. The policies don't mean much.
Many have said the growth of Chinese cross-border ecommerce is slowing this year, mainly because of the Amazon bans. What do you think of that?
I think slowing down is good. But I have an observation: sellers never truly "die." People always say, "This seller is dead," but I think they live on forever. As long as they have remained profitable for a year, these sellers are able to live on forever. They won't change careers. They won't do other businesses.
They will just try to survive and, after some time, they will find a new business model, either by setting up their independent site, or moving onto Walmart, or continuing selling on Amazon. Their businesses will rebound then. I think now is just a time for them to lay low, but they will stand up again. The whole industry will stand up again.
Will that happen very fast, or will it take a long time?
They will recover very soon. The holiday season will be an important turning point. First, overseas consumer demand will rise again; second, platforms will use it as an opportunity to court more sellers. After they invite the sellers to their platforms, the industry will blow up again instantly when the holidays come.
What other country has the potential to replace China as the dominant ecommerce supplier?
Southeast Asian countries have some potential, but I think it still will take a long time for them to grow. Back in 2007 when Chinese sellers were rising up, we were still very small in terms of our scale. Why? Because we didn't have enough capital, didn't know how to manage well, and just acted like small workshops. Currently, there are many mom-and-pop workshops like this in Southeast Asia. Another problem for these mom-and-pop sellers is that they still rely on supply chains in China. They source 70% or 80% of their products from China.
What has changed between 2010 and now?
Diversification is the current trend in cross-border ecommerce. In the future, there will be more regional platforms and vertical platforms.
For example, there can be a platform in a small European country that originated as a TV shopping channel or a mail order company. Platforms like that have their unique traffic, and they are increasingly opening up to China, or to the whole world.
Many platforms are rising up in South America too. I just heard that the African platform Jumia, incubated by Rocket Internet a few years ago, is also coming to China to find sellers.
Are you saying these regional, smaller platforms are actively courting sellers from China?
For these platforms, China is the only good place for them to find sellers. The strength of Chinese sellers is their extremely comprehensive supply chain and product offerings. And Chinese sellers have learned so much after all these years [of navigating the overseas platforms]. It's been 16 years since I, [a member of] the first generation, started. During these 16 years, I have witnessed numerous cases of failing to meet the platforms' requirements or receiving violation warnings. When they endured so much from the platforms and still managed to survive, they became the best and the most versatile sellers.
Around the world, can you find a group of sellers like that [outside China]? No.
And compared to ten years ago, what part of the ecommerce environment has become less friendly to the sellers?
The platforms have more restrictions for sellers now. Take Amazon as an example. It used to be pretty flexible [with its rules], but as it realized it had too many sellers to worry about losing one of them, it started to think about ways to enhance its business model and improve the customer experience. Now it has control over the sellers, because it no longer fears losing them.
As a SaaS company, how does Mabang think of the recent surge in interest in Chinese SaaS companies? A lot of Chinese companies claim they are SaaS, but none of them jump to mind immediately if you are looking for a typical example.
I think for a SaaS company like us to survive and thrive, it will always be a marathon, never a sprint. You need to figure out a way to constantly iterate your product and grow your clients one by one. It may even mean that you need to strategically give up a type of client in the beginning and only retain them when you reach a certain stage. It's a long battle.
So, I don't think it's theoretically possible for a [Chinese SaaS] company to stand out at this point. I think in 10 years, there will emerge a batch of [successful SaaS] companies in China like Salesforce or SAP or Oracle. Five years at a minimum.
