In 2012, Amazon introduced the Amazon Global Store (AGS) program, opened a door for global sellers to expand into new markets and sell to millions of its loyal customers. Since then, Chinese sellers rapidly become an integral part of the world's biggest online e-commerce platform. On one hand, Amazon's sales volume in both US and global markets soared attributed to a large influx of Chinese merchants; on the other hand, many early sellers have earned huge profits by selling to U.S. and other developed Countries.
However, the relationship between Amazon and its Chinese sellers is quietly changing in recent years. According to a feature article published by Pingwest, a Chinese tech media focuses on stories about tech industry, many Chinese sellers accusing Amazon of using covert actions to infringe on their interests and "discriminating" against them.
"In the past two years, Amazon has designed a 'punishment' system for Chinese sellers and used its mastery of platform and rules to accelerate the harvest of high-quality Chinese manufacturing resources and expand its own brands. " The article says.
"In the game between the two sides, the hope of China's manufacturing breakthrough in the past foundry model has become even more embarrassing." wrote the author.
"I lost my Shipment"
Xue Chang, a Chinese seller who lost a shipment of products in the summer of 2017, doubt that Amazon "steal" the goods and sell them under their own accounts.
Xue told media that they were selling a toy which became popular suddenly on Amazon. Their Amazon's US warehouse was short of supply, so his team immediately replenish by ordering new toys from local factory and ship to the warehouse. Later Amazon informed them that the goods have been counted.
However, two days before the new products was about to be put on shelves, Xue suddenly received an email which told them the new shipments were "all lost".
Xue and his team instantly stumbled to see that one week's effort became in vain as the sales number reached zero. "No buyer will wait for you; this trending product has nothing to do with us since then," said Xue.
And then, something even stranger happened.
Just a few days after the notice, Xue discovered that a new seller started selling the same product, and that is an Amazon's first-party seller. Their selling price was much higher; however, the sales volume was not affected, and it was still trending.
"We have never seen this Amazon account selling this product before. And it has always been a very minority catalog, not many factories can produce it right away." Xue Chang said. Analyzing all the situation, he can only find one explanation: "We and many of our peers suspect that Amazon took our shipment and selling it themselves."
The reason for this suspicion is based on the dual role of Amazon: Amazon is both a platform and a retailer. "Amazon often helps first-party accounts to suppress other three-party sellers," Xue said.
However, Xue could not find strong evidence to support his suspicion. Moreover, Amazon has stated clearly in the rule that the Amazon will fully be compensated for the lost goods due to its own responsibility. However, the warehouse fees that have already been paid by third-party sellers, as well as the advertising costs, will not be paid back, not to mention that the potential profit that would be generated from the merchandizes.
"Almost every small and medium-size seller I interviewed has been reported loss of shipment." The author wrote after a survey with more than ten sellers in the different areas of China, "They have been used to this kind of experience."
Forcibly Recycling Returned Merchandise
The article noted that sellers believe "stealing goods" is not the common way Amazon use to suppress the hot-selling products from third-party. The more common way they encountered is "forcibly recycling returns by Amazon and then selling the products by their first-party sellers."
On Amazon, a listing page is a place to displace a product with all sellers' information be included, however, only best seller or seller with highest authority will be the default seller that showed on "golden spot" and have right to modify the listing page. Others sellers' information will be folded on the left side of the listing page, under a button called "other sellers on Amazon".
"Golden spot" is what every seller competes for. However, small sellers without rich resources usually fowler other sellers to sell products that already trending, a strategy that can help sellers in the early stage to save costs of product promotion and accumulate buyers.
But when Amazon's first-party sellers decide to sell trending products, they will automatically become the default seller on the listing page and get the authority to modify listing page. That's to say, they will forcibly take away other sellers' customers.
Chen Pan, a seller from Shenzhen was selling a home decoration product on Amazon. At the beginning of this year, a shipment of goods was returned due to damage to the package during transportation. When the merchandise arrived at Amazon's warehouse, Chen was informed that Amazon decided to by this shipment.
"There is no problem with the shipment, but the package damaged a little big, but Amazon wants to buy it at a low price and sell it themselves." Said Chen, "I can't refuse it. They are not discussing with you, but only inform you. All of these has already been written in the rules they made."
After that, Amazon first-party seller quickly put the merchandise on the shelf and they were immediately sold out. During this period, not even of piece of Chen Pan's products were sold.
"Amazon does use a variety of methods to suppress third-party sellers and support their own brands." A person close to Amazon China told to PingWest. "Sometimes they don't really steal your goods. Instead, they create a time gap by losing goods. E-commerce is very time sensitive when the time window passes, there is nothing is left."
Many cross-border sellers interviewed by PingWest said that they had experienced the sudden loss of goods and result to out of stock of their hot-selling product. Who do they think is the beneficiary?
"Amazon's own brand."
"There are more and more unreasonable losses in the past few years. Then you know that something is wrong." Said Chen Pan.
A Retailer, a Product Creator, and a Platform
The cross-border sellers' s accusation against Amazon based on the latter's role in business, it's a retailer, as well as a platform, and sometimes even a product creator. It's like a man plays the role of an athlete in the game, in the meantime a referee.
As Amazon claimed, they will consider selling any products with its own brand, it sets the unfair competition market environment on the first day of the business. Third-party sellers boosted the sells on the platform and in the meantime take the trial risk, while Amazon can simply harvest profits with "God's perspective".
"For e-commerce, data is the most important. Now the data is in the hands of the platform, they know better than anyone else what is good to sell." A senior seller who has been in business for five years told media.
"In addition, the traffic ranking is controlled by Amazon. As long as they decide to sell with its own brand, no matter how much spend on promotion you will never compete with their own brands." The seller added.
Since the profit to sell a product directly is higher than to receive commission from third-party seller, what Amazon needs most is not a cross-border independent seller, but a pure manufacturing supplier. It can use the big data to find popular products with a slower update cycle, fewer stock keeping units (SKUs), and better stability. On one side, Amazon can use its huge traffic advantages to monopolize sales; on the other side, it can also directly find best sellers and "naturalize" them as suppliers of Amazon's own brands.
When sellers found by Amazon refuse to cooperate, the cost sometimes is catastrophic.
At the end of 2018, He Ping, the founder of a medium-sized e-commerce company in Hangzhou, a southern city in China, suddenly received an email. "We invite you to be our supplier and work with our own brand." The email comes from Amazon's US headquarters, and they take a fancy on her high-end car accessories. The profit margin of cooperation mentioned in the mail was significantly lower than of operation of the online sale on her own.
She quickly refused the invitation. The reason is very simple. "I don't want to hand over the profits to Amazon." He Ping's father is running a furniture factory in Zhejiang. She knows the drawbacks of the traditional foundry business and knows how to upgrade business.
"Without my own brand, I can't enjoy the brand premium. I work very hard by can only survive by relying on the upstream company, instead of master pricing power in my own hands." The product that been pretended by Amazon have been profitable after many years of diligent operating, He wants to keep the brand and make it bigger.
But what happened next was beyond her expectations.
Just six days after officially rejecting Amazon's invitation, she sat in the office and suddenly heard the shouts of the employees: the car accessory they were selling was forcibly removed from the platform by "infringement".
He immediately contacted customer service and merchants' manager. After a month of inefficient emails, she found that the reason given by Amazon was that there was a word in the product description allegedly infringing, however, this word was just the English expression of the product.
"You are infringing when it says you are," He said. "Ultimately we proved that the word is neutral after one month, but it is already late." The ranking of this product has fallen from the top one to behind one hundred. She interprets this experience as "the price of rejecting Amazon" and believes this is a warning from the giant e-commerce platform.
According to the observations of several Amazon sellers, Amazon registered a large number of self-operated brands last year, and the proportion of these products increased significantly. At the same time, more and more cross-border small and medium-sized sellers with large sales volume have received Amazon's invitation to serve their own brand. Many sellers have chosen to become Amazon's suppliers, and once again give up the profits to Amazon.
2017-2018: A Punishment System Tailed for China sellers Formed?
In 2005, Amazon entered the growing Chinese market through purchase of Joyo, the largest online seller of books and electronics then for $75 million, the division was later renamed Amazon China. However, this has been proved to be a complete failure. As of 2018, Amazon China only had 0.7% of online sales in China Market, trailing far behind Alibaba's 58.2%, according to eMarketer.
Compared to the awkward status of Amazon China, Amazon Global Store become the number one platform for Chinese cross-border sellers to enter the U.S. market since 2015.
"By 2015, many eBay sellers abandoned the eBay and other platforms due to cost issues, while Ali's AliExpress also exclude U.S. market for its overseas expanding, Amazon thus become the only choice for Chinese sellers who want to enter into the US market."
This provides Amazon a perfect chance to monopoly the market and be strong enough to ask Chinese sellers to follow its rules instead of adapt to the Chinese market.
From the end of 2017 to around mid-2018, Amazon began to manage Chinese sellers strictly with a new set of tailored rules.
Several sellers told PingWest, start from the access criteria, Chinese sellers need to provide more complicated information, and the approval cycle is lengthened. Secondly, various important indicators are limited by absolute values for Chinese sellers. For example, the review rate should not exceed 3%. "That is to say, one hundred people bought the products, the review amount should not exceed three, or it will be regarded as review manipulation and will be punished accordingly."
What impacts Chinese sellers the most is this rule: once a seller was reported with conduct of infringement or make fake reviews, Amazon will directly "close the account, freeze the fund and hold the merchandise" without any verification.
"We know that in previous years some Chinese sellers' malicious operation brought damage to the platform's business environment," said Chen, "but after these regulations came out, the effect was actually the opposite. The same sellers who have wrong conducts make use of these regulations to submit malicious reports against their competitors."
Besides, Amazon's massive cuts in Chinese employees have made it even more difficult for Chinese sellers who comply with rules to protect their rights. According to PingWest's investigation, at the end of 2017, Amazon transferred mass account service jobs to Indian, and lower the limits of authority of Chinese account managers and merchant agencies.
"In the past, sellers with high sales volume have direct contact with an account manager, problems can be dealt with in a timely manner. For example, if we received malicious complaints, we can appeal promptly before the accounts been closed and avoid loss. Now Chinese account managers have no authority to deal with this kind of issue, and even don't know which department they should assort to solve the problem." Said He.
Many sellers said Amazon will ask sellers who received complaints to prove they have no infringement or fake review. However, the sellers whose sales have suffered from the platform's punishment usually don't know exactly the reason they received the punishment, as the email didn't tell specifically.
According to sellers, Amazon didn't put effort to solve the China seller's problem but just reduce the service, they even adjust the time of American account service for Chinese seller that made contact harder and reply email slower. "It's normal to receive the response after 48 hours." Said one seller.
After all these changes, Amazon packaged and upgrade the services and sell them to Chinese sellers, while these are the ordinary free account service in the past.
"2,500 dollars a year," Chen revealed the price. Many sellers think this is a protection fee in disguise. "Amazon does not care about Chinese sellers. If it was a Chinese company, it has been cast aside." Chen added.
"But it's their platform, if we want to play the game, we should only follow their rules." Said Chen.
Only Chinese Foundry, No Chinese Brand
The counterproductive result has led many Chinese sellers to doubt the true intentions of Amazon. "Amazon's positioning of seller resources in the Chinese market has always been a big foundry," said a person close to Amazon China.
According to PingWest's, Amazon's goal this year has been to expand the factory cooperation instead of wooing merchants. Amazon's Vendor Central (VC) already leaning traffic and other resources to its own brand's cooperative factories, and it is said that Amazon will launch a new program called "LBP", which is to judge the good products sold based on the data of the Amazon platform collected and then directly find the factory.
"In this way, what you sell is completely for Amazon brand." The person familiar with the matter said.
"When the environment is suitable for developing business, Chinese sellers only expand the scale, didn't realize the importance of R&D and building brands," said Chen, "Now since Amazon is tightening regulation towards Chinese sellers, and increasing support for first-party brands, there is no room for third-party sellers to earn profits in many catalogs. And it's too late to build a brand too."
