Stand Out from the Millions: Market Congestion and Information Friction on Global E-Commerce Platforms

We investigate how market congestion and information friction affect firm dy-namics and market efficiency in global e-commerce. Observational data and self-collected quality measures from AliExpress suggest significant demand frictions andpotential misallocation in the online market. A randomized experiment that offersnew exporters exogenous demand and information shocks demonstrates the limitedability of existing platform mechanisms to help small sellers overcome the demandfrictions. We show theoretically and quantitatively that having a large number ofmarket participants undermines the functioning of existing online mechanisms andhinders the discovery of high-quality sellers. Policy counterfactuals highlight thatblanket-wide onboarding initiatives can aggravate market congestion, slow down theresolution of the information problem, and result in market misallocation.