Amazon closed its Chinese site, Amazon.cn in 2019 after failing to crack a market dominated by domestic giants like Alibaba and JD.com. But that didn’t mean the e-commerce giant had given up on China completely.
In fact, Amazon has been working hard at recruiting Chinese businesses to sell their products on its e-commerce sites in the US and Europe, opening “cross-border e-commerce parks” where sellers can receive help with logistics, branding and instructions on how to navigate Amazon’s platform.
Prior to Covid-19 the American firm had held conferences in cities like Shanghai that were attended by more than 10,000 sellers, many of whom were looking for higher margins for their products as compared with what they get from domestic platforms like Taobao and Pinduoduo.
Its efforts have been paying off. The number of sellers from China on Amazon’s US site surged to 63% of the total in 2021 from 28% in 2019, according to statistics from Marketplace Pulse. That helps to explain why when you look up consumer electronics like massage guns and power banks, more often than not you are offered a host of Chinese brands such as HOVAMP, Mpow, Opove, Aukey and Anker. The chances are you will also find thousands of positive reviews for many of these companies’ products.
But herein lies the problem: since early May, Aukey’s power chargers have been listed as “currently unavailable” on Amazon. Similarly, Mpow, a brand owned by the Chinese company Patozon – which specialises in audio products – are no longer available for sale on the platform either. In fact, Marketplace Pulse, which tracks e-commerce sites, reckons that at least 11 sellers from China have been suspended by Amazon.
The US e-commerce firm refuses to directly address why these Chinese producers have disappeared from the platform, simply saying that it has detected “suspicious behaviour” from them.
“We have 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,” Amazon said in a statement.
Caixin Weekly believes that the Chinese manufacturers may have been manipulating customer reviews. It won’t be the first time that Chinese companies have been accused of faking rating and customer feedback on e-commerce platforms. But TechNode found that even ‘verified purchases’ on Amazon could be faked (companies often purchase their own products using gift cards and then write glowing reviews). In China, merchants have often resorted to using bots to inflate sales, a tactic called “brushing,” to get better placements on e-commerce platforms like Taobao.
Anker Innovations Technology, a gadget accessory producer best known for portable battery packs and cables, has not been banned by Amazon. The Shenzhen firm is a top seller on the US e-commerce site. It is currently valued at Rmb61 billion after going public on ChiNext last September (see WiC509).
Yet Amazon’s ban on Anker’s Shenzhen rival Aukey, which owns the power tool label Tacklife and home gadget brand Aicok (think neck massagers and juicer machines), couldn’t have come at a worse time.
For a start, Amazon just moved its annual two-day discounting sale Prime Day from July to June (it has yet to announce the exact dates of the event). If Aukey stays banned, it could lose out on billions of yuan in sales; the unsold inventory could also put enormous pressure on its supply chain.
Worse, Aukey is planning to launch a share offering on the New Third Board in Beijing. In the first three quarters of 2020, the company’s revenue reached Rmb6.6 billion and it made a net profit of Rmb500 million. Aukey’s prospectus reveals that the company is increasingly reliant on Amazon, generating as much as 75% of its sales from the platform as of 2019, from just 29% in 2016.
In addition to Aukey’s overdependence on Amazon, investors may also be worried about its lack of innovation. Its prospectus reveals that it spends relatively little on research and development. Between 2016 and 2018, its R&D accounted for just 1.5% of its total revenue. In comparison, during the same period, Anker’s spending on R&D was 5% of its sales.
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