The biggest melon in the circle! Shenzhen seller exposed that he was cut by the Internet celebrity "Xi*"

A dispute has made "agent operation" once again a hot word in the cross-border circle.

In March, the two agency companies, Sanyi and Henan Baiyao, were shut down by the police for suspected fraud, and hundreds of people were arrested. The industry was shocked by the huge pitfalls of agency operations. In recent days, Shenzhen seller *Ze revealed that he was cheated by the Internet celebrity "Xi * " and lost millions of dollars. The news continued to be screened in the industry, attracting a lot of attention.

As the parties involved released more information, the discussion of the incident became more and more intense. From the level of agency operation to the price difference in the procurement and logistics links, to the constraints of the contract terms, even if the sellers have heard a lot of disputes in the circle, they are still amazed. This incident has become the biggest melon in the cross-border circle in 2023.

The seller revealed that he suffered a loss of millions of dollars

Around May 5, the cross-border seller *Ze released a number of messages in succession, saying that after cooperating with the "Shanghai Mai*" company on a brand incubation project, he lost millions of "shooves" from 2022 to 2023, and shared his experience of being cut.

Xi * is a cross-border e-commerce blogger with more than 300,000 fans on a certain platform. It is not an exaggeration to say that he is an Internet celebrity. *Ze said that he has been following Xi * for many years. Out of trust, he paid a membership fee of 4,999 yuan to him and became one of more than 600 members. He also invested 50,000 yuan in original shares and became a shareholder (a total of more than 40 people).

In January 2022, *Ze signed a brand incubation and operation agreement with Xi * and paid a 200,000 yuan deposit as required. According to the contract, the seller must invest 2 million yuan within one year. If it makes a profit, he will take 70% of the profit and Xi * will take 30%. If it loses money, the latter will cover 70% and the seller will bear 30%.

To be on the safe side, *Ze chose the pet category that Xi * was best at. He started designing and developing products in February, and the first product was launched at the end of June. After that, the sellers gradually discovered some problems, which he listed as follows:

1. Operation

The ads were put up for sale on June 29, but the report was downloaded on July 19 (20 days apart). We later discovered that there were huge problems with the ads. They had been running for several months without even the most basic pre-negative and post-negative. We questioned them, and they confessed that the company's operators were newbies, lacked experience, and were in the training stage. They apologized several times in the video conference.

The second report download was on September 20 (63 days apart). Only two reports were downloaded in 83 days, and no adjustments were made. This is what is called professional agency operation.

From July 17 to September 17, 2022, ACOS reached 100%-800%, burning tens of thousands of dollars, but the operation did not notice. The gross profit margin of products excluding advertising is only 0.16%-20.48%, and with advertising expenses, it is already a negative gross profit margin. From the launch of the first product to the contract on January 6, 2023, advertising burned 89,823 US dollars.

2. Product ex-factory price difference

In September, the project of dog puzzle toys was launched. The ex-factory price of similar products on 1688 was between 16 and 20 yuan, and the price might be lower if we cut it down. However, Xi * offered 54 yuan, 43 yuan, and finally 33 yuan for this product.

The price of competing products on Amazon is between US$10 and US$15, without coupons. Assuming that the new product is priced at 14.99, based on the purchase cost of 33 yuan, minus the first-mile and FBA delivery fees, excluding coupons and advertising, the gross profit margin is 8.5%.

During this period, the other party said that in order not to delay the progress, I should pay half of the mold fee of 55,000 first. On September 9, I paid half of the mold fee of 55,000. However, until I paid the remaining 55,000 balance of the mold (November 22) and ended the cooperation (January 6), I did not get a detailed quotation and did not touch the sample.

3. Patents

Starting from May, I mentioned to the other party many times that I wanted to apply for a design patent. In October, I asked about the patent again. The other party provided a picture showing that my patent was registered under the name of Xi * Company on September 15, 2022. There was no notification or prior discussion for more than a month in between.

When the cooperation ended, the other party’s legal affairs department told us that the first annual fee of the patent had not been paid, the patent had not taken effect, and would automatically expire on February 23.

4. Mold opening

The other party proposed to develop a pet feeder and quoted us 680,000 yuan for the mold. We got the materials, quotation and 3D drawings of the feeder and found three factories. The quotes were all around 280,000 yuan and not more than 300,000 yuan. Two of the factories also stated that if they were willing to produce, they would be willing to help pay half of the mold fee. Xi * said that the different precision of mold parts would lead to a large price difference, and a price difference of hundreds of thousands was normal. After all kinds of communication, I agreed to pay 400,000 yuan for the mold fee.

In terms of unit price, other factories estimated the ex-factory price to be 70-110 yuan, while Xi * quoted 175 yuan. Who took the huge price difference of 70-80 yuan? I asked them to send me the quotation sheet, but they insisted that I give them some privacy and respect each other.

In addition, the seller and the agent also had conflicts in the early stages of pet drinking fountains and the price difference of agent logistics, and the cracks in the cooperation became larger and larger. In November 2022, *Ze expressed his willingness to terminate the cooperation and was willing to transfer 100% of the equity of the incubation and agent operation company. The seller said that in the communication the next day, Xi* expressed his understanding and agreed to stop losses in advance and end the cooperation in advance.

But later the other party continued to make operational suggestions, and under various factors, the cooperation continued. Until January 6, the West* party sent a notice to terminate the contract, because the seller did not place an order for 1,000 dog puzzles on December 7, resulting in a breach of contract; and the seller said that he was still waiting for the West* party to send the dog puzzle information.

"After the contract was terminated, Xi* lost 70% of the guarantee in the contract. The store's calculated loss was more than 1 million yuan at the time. They also took away the 200,000 yuan deposit on the grounds that we breached the contract. Nearly 20,000 pieces of rotten goods in the store were left for us to clean up by ourselves. They cleaned up the mess they caused, and in the end we still owed Xi* 8,186.8 yuan." said the seller *Ze.

Xi * responded to the conflict, "You can take legal action"

Recently, *Ze began to release a lot of news about this agency operation incident, and the industry was in an uproar. A few days ago, Xi* responded to this and explained several issues mentioned by the seller in question:

1. Agreement

The agreement states that we are responsible for product development and operation , he is responsible for investment, the store, brand and payment collection are all his, we bear all labor costs, and if there is a loss one year after the product goes online, we will cover the loss . If there is a profit , we will split it 37-7 with 3 for us and 7 for him. Our way of cooperation itself carries greater risks, so after negotiation, he took the initiative to propose a deposit of 200,000 yuan, which can be refunded after the cooperation expires.

2. Poor advertising

He said the ads were not good, so our operations manager patiently explained our advertising ideas to him. The first batch of products were pet toys with a customer unit price of about $15, so the early advertising data would definitely not look good. Then they also agreed.

3. End of cooperation

On November 1st, he suddenly came to me privately and said that he wanted to unilaterally terminate the cooperation. He had already started product development and distribution, and he wanted us to repurchase the products in advance. Of course, we did not agree, and then we had an online meeting to communicate. Our suggestion was that the peak season for this type of product was coming soon, so we suggested waiting until Christmas was over .

4. Profit and mold

We did the profit calculation on November 8th. It was only 4 months from July to November, but the store has started to generate profits. Except for a few products that failed in testing, other links have achieved profitability. Subsequently, we will launch the second batch of products according to our plan, and the store will be formed.

According to the plan, the second batch of products were pet feeders and educational toys, both of which required molds . As a result, he only paid a deposit and the factory made the molds. Later, he unilaterally terminated the contract and did not pay the balance. He dragged on paying until last month, and then completed the mold handover.

Xi * said that if the seller felt cheated, he could take legal action. Both parties held different opinions, and the sellers had different views on the matter.

One seller said: "From the perspective of agency operation, they are responsible for all the initial operating costs, and they also cover 70% of the losses. They build their own team to create patented brand stores for the other party, and they only want 30% of the net profit. Is this a kind heart?"

Important contracts

Regarding the cooperation between the two parties, some sellers pointed out that since *Ze discovered the operational problems, why didn't it correct them in time or stop the losses as soon as possible when things gradually deviated from expectations? One reason was the contract mentioned many times by both parties.

After seeing the contract content posted by *Ze, a seller said frankly that his biggest mistake was signing this contract. Some of the terms of the contract are as follows:

In fact, because it involves two entities with different interests, the inherent disadvantages of agency operation are constantly being magnified. In the industry, "agent operation" is almost equal to "fraud", so countless sellers have suffered.

Sihai Shangzhou was once the leading company in the industry. According to its official website, Sihai Shangzhou established offices in Japan and Australia from 2013 to 2015; led more outstanding Chinese export companies to enter the traditional supermarket sector in Europe and the United States; cooperated with nearly 60 ODM/OEM "hidden champions" in subdivided categories; and started management output business. However, at the end of last year, Sihai Shangzhou announced liquidation and immediately stopped operations. The model of agency operation has been difficult to be recognized by the industry.

Judging from the frequently exposed disputes and even cases, the biggest challenge facing this model is how the agency companies can establish a trustworthy cooperative relationship with customers while keeping data and accounts transparent.

What do you think about the seller *ze?

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