Amazon's Successful Multifaceted Approach At Overcoming Supply Chain Bottleneck
December 4, 2021
May 13, 2021
If you ever bought power banks, water bottles, toys or other daily goods on Amazon, the chances are your suppliers are from China. Analysts have estimated that the share of Chinese merchants represented 75% of Amazon's new sellers in January, up from 47% the year before, according to Marketplace Pulse, an e-commerce research firm.
Chinese sellers are swarming not just Amazon but also eBay, Wish, Shopee and Alibaba's AliExpress. The boom is in part a result of intense domestic competition in China's online retail world, which forces merchants to seek new markets. Traditional exporters are turning to e-commerce, cutting out excessive distributors. Businesses are enchanted by the tale that a swathe of the priciest property in Shenzhen, an expensive city known for its tech and manufacturing, is now owned by people who made a fortune from e-commerce export.
But the get-rich-quick optimism among the cross-border community came to a halt when several top Chinese sellers disappeared from Amazon over the past few days. At least eleven accounts that originate from Greater China were suspended, according to Juozas Kaziukenas, founder of Marketplace Pulse.
TechCrunch has reached out to Mpower and Aukey, whose Amazon stores are gone and were two of the most successful brands native to the American marketplace.
In total, the suspended accounts contribute over a billion dollars in gross merchandise value (GMV) to Amazon, said Kaziukenas.
Amazon didn't comment on the status of the suspended accounts, but said in a statement for TechCrunch that it has "long-standing policies to protect the integrity of our store, including product authenticity, genuine reviews and products meeting the expectations of our customers."
"We take swift action against those that violate them, including suspending or removing selling privileges," said an Amazon spokesperson.
Chinese e-commerce exporters were startled by the incident. Inside WeChat groups where hundreds of sellers normally exchange business strategies, anxiety is rife and the consensus is that the targeted sellers have "crossed the line" in conducting questionable platform practices. Amazon says it shares enforcement actions directly with selling accounts.
"This isn't the first time Amazon has shut down accounts over fake reviews and other behavior that violate its rules, but the scale of this wave is unprecedented," said Bill Zhang, who develops and exports smart training suits through Amazon.
It's no doubt that Amazon needs Chinese suppliers for affordable and diverse products, of which average quality has also increased remarkably in recent years. But as competition heated up among Chinese sellers, black hat tactics that were common in Chinese e-commerce became a necessity to survive on Amazon.
"It's an open secret that a lot of Chinese sellers are aggressive toward marketing," said Cameron Walker, who worked for an export trade show in China for over a decade before running a toy export business.
One of the common tricks employed by Chinese sellers is manipulating reviews, which affect how a product is listed on Amazon. This can be done by paying real buyers to leave a positive review or sending fake orders and leaving good comments through zombie accounts.
The latter approach is often delegated to agents that call themselves "product review" services, which offer a suite of resources to emulate real accounts: IP proxies, virtual credit cards, overseas addresses, any pieces of identity that can help avoid suspicion from Amazon's fraud detection algorithms, said an executive at a payments service who works closely with Chinese exporters.
Another prevalent tactic, which perhaps poses a greater existential crisis to Amazon than fake reviews, is to direct buyers away from Amazon onto merchants' own web stores. Amazon restricts merchants from collecting sensitive buyer information such as emails, but Chinese exporters find a way around: sending postcards to customers and asking them to leave reviews on their own websites.
These tricks have been around for years; what caused the sudden attack on top sellers?
Five exporters contacted by TechCrunch pointed to a data breach uncovered by SafetyDetectives, a cybersecurity firm, which contained a trove of direct messages between Amazon sellers soliciting fake reviews from buyers. The data, which implicates more than 200,000 individuals, was hosted on a server that appears to be in China, according to SafetyDetectives.
The report didn't mention the names of the sellers involved. TechCrunch cannot immediately verify claims in the report.
Amazon did not say whether it was aware of the data breach. It, however, assured that it uses "machine learning tools and skilled investigators to analyze over 10 million review submissions weekly" and monitor "all existing reviews for signs of abuse and quickly take action if we find an issue." It also works with social media sites to report "bad actors who are cultivating abusive reviews outside our store."
But bad actors will likely come back even after the latest episodes of crackdowns, said the cross-border payments executive.
"Amazon is fighting an entire lucrative and tight-knit ecosystem of merchants and fake review services, not just a few big sellers."
In recent years, Amazon has been nudging more new sellers to join and be "good brands," observed Walker. Merchants now need to meet strict requirements for brand registries, safety testing and insurance liability, he said.
"It's getting more difficult and costly to run a business on Amazon."
These challenges have encouraged hordes of exporters to diversify sales channels beyond Amazon and invest in their own Shopify-based web stores, where they get to write the rules. They are encouraged by what Shein, an independent e-commerce store that sells made-in-China apparel to overseas markets, has achieved. In the first quarter, Shein was the world's second most downloaded shopping app, according to data provided by app analytics firm SensorTower. Many Chinese sellers dream that one day they, too, could break free from the grip of a behemoth like Amazon.
December 4, 2021
MSBM - UK
The Professional Certificate in Organizational Value Creation Through Leadership aims to equip the learner with an understanding of a leader’s role in creating organizational values.
3 hours per week
MSBM - UK
The Professional Certificate in International Market Research aims to equip the learner with the fundamental knowledge and skills to be able to successfully conduct international market research.
3 hours per week