According to recent estimates from the United Nations Conference on Trade and Development, cross-border eCommerce accounted for 19 percent of all global retail sales in 2020. And China is leading the way with some $1.4 Trillion in online purchases. But while Alibaba may still dominate online retail in the nation, more and more Chinese brands and merchants are looking towards Amazon as their preferred eCommerce platform.
The number of new sellers from China on Amazon skyrocketed from 47 percent to 75 percent between 2020 and 2021. In the city of Shenzhen, where a majority of sellers are located, the term “Made in China, Sold on Amazon” has been pejoratively applied to the bustling community of global sellers. And the feeling is mutual. Each year, Amazon hosts global selling summits throughout mainland China to encourage both potential and veteran sellers as they vie for control of the eCommerce crown currently held by Alibaba.
Yet many Chinese sellers are turning to fake review farms in order to increase visibility in ranking in spite of Amazon’s implicit restriction on review manipulation. And Amazon isn’t alone in their discouragement. In May, an internal memo was uncovered which revealed that the FTC was prodding the retailer to crack down on fake review schemes, leading to the widely publicized suspension in May of over fourteen different Amazon native brands for participating in widespread review fraud.
Except that number is drastically short. According to the Shenzhen Cross-border eCommerce Association, more than 50,000 Chinese retailers have been permanently suspended from Amazon since May, resulting in a total sales loss of $15.4 billion.
"It not only blocked accounts in violation of its rules, but also other related accounts, which could paralyze upstream supply chain and kill the enterprises," said SCBA president Wang Xin. "Is it a penalty decision based on the rules of the platform, or is it a strategic decision? In fact, we see that Amazon itself is also selling products similar to the products of the closed accounts.”
Many top selling brands affected by the crackdown, including Mpow and Aukey, have found their inventory frozen in Amazon warehouses as they fight for reinstatement. While Amazon guidelines forbid sellers to file class action lawsuits, they do allow for an arbitration clause—an often lengthy and obscure process for both domestic and overseas sellers.
In response, the Commerce Bureau of Shenzhen recently met with some of the expelled sellers, offering a settlement of two million yuan (approximately $310,000) in order to establish their own independent online stores—a gesture that may do little to help in the face of the increasing reliance of cross-border eCommerce on Amazon.
“Suppliers cannot be repaid, bank loans cannot be applied for, employees are facing unemployment, and the profits of the past few years have been emptied overnight,” said Xin. “Don’t cross the red line if you want a sustainable business… If Chinese want to get fair treatment in the global market, they need to bring innovative products and strong brands.”
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