Shenzhen seller lost the lawsuit and was ordered to pay suppliers more than 50 million!

The relationship between cross-border sellers and their suppliers can be described as a toothless relationship. When a seller is in bad luck, the suppliers who are highly dependent on the seller are the most direct victims. This is also true between Shenzhen seller Zebao and its subsidiaries and their suppliers. As the main suppliers of Zebao and its subsidiaries, Yafu Electronics, Tekway and other suppliers have been in arrears of more than 50 million yuan in payments, but now the case has come to an end.

Xinghui shares lost the lawsuit and was ordered to pay suppliers more than 50 million

Zebao's parent company, Xinghui Holdings, recently issued an announcement on the company's progress in litigation and arbitration.

The subsidiaries of Xinghui Holdings and three suppliers were involved in compensation for goods, liquidated damages and other expenses, involving an amount of RMB 50.488 million. The three suppliers were Yafu Electronics, Tekway and Cooper Electronics, and the amounts involved were RMB 23.0394 million, RMB 21.6465 million and RMB 5.8021 million respectively.

After preliminary calculation of the relevant expenses involved in the above case, it is estimated that the impact on Xinghui Co., Ltd.'s 2023 annual profit will be RMB 14 million.

The amount involved in the contract dispute between Yafu Electronics and Xinghui Co., Ltd.'s subsidiaries Linyoutong and Danya Technology is RMB 23.0394 million. Among them, Linyoutong is the domestic purchasing entity of Zebao Company, which is mainly responsible for purchasing products from authorized suppliers, and then reselling the products to Hong Kong, the United States and other regions, and selling them on Amazon through Zebao's overseas subsidiaries.

After the ruling of this case, the payment for goods paid by Linyoutong and Danya Technology to Yafu Electronics and the liquidated damages during the period of arrears are estimated to be around 19 million yuan, while the fee previously applied for by Yafu Electronics in arbitration was 25.69 million yuan. Although the amount is quite different, fortunately, Yafu Electronics got back the overdue payment for goods and also received part of the liquidated damages requested.

However, the compensation for finished products, semi-finished products and material losses that Yafu Electronics requested was RMB 24.36 million, but the final award in this case was only RMB 3.7358 million. Some sellers previously believed that if the arbitration request of Yafu Electronics was accepted by the court, it would rewrite the supply terms and other cooperation methods between large sellers and suppliers in the cross-border industry, but now it seems that it is not feasible.

On this point, some sellers suggest that cross-border e-commerce sellers and suppliers should clearly define the compensation for "semi-finished products and exclusive stock materials" when drafting relevant contract terms to avoid legal disputes where rights and responsibilities cannot be defined.

In terms of attorney fees and other expenses involved in this case, there have been reductions compared to Yafu Electronics' arbitration application.

The sales contract dispute between Taikewei and Xinghui Holdings' subsidiaries Zebao and Linyoutong involved a sum of 21.6465 million yuan.

After this ruling, Linyoutong will mainly pay the relevant expenses to Taikwei, including RMB 7.25 million in payment for goods and RMB 8.6728 million in liquidated damages, RMB 5.0757 million in finished product inventory, and RMB 396,100 in re-labor costs. The court rejected Taikwei's other claims and also rejected all of Linyoutong's counterclaims.

The sales contract dispute between Cooper Electronics and Xinghui Company, Linyoutong, Sun Valley, and Zebao involved a sum of 5.8021 million yuan.

Last year, Cooper's announcement of suspension of production and closure went viral in the cross-border circle. One of the important reasons for the closure was that it was owed money by multiple cross-border e-commerce sellers, one of which was Zebao. Xinghui Co., Ltd. did not deny this when interviewed. Cooper is Zebao's second largest supplier, mainly providing Bluetooth headsets for Zebao.

The amount involved in the sales contract dispute between the two parties was as high as 12.94 million yuan. However, according to this ruling, Cooper only received part of the payment and the corresponding loss of funds occupied and litigation costs, totaling 5.8021 million yuan.

In addition, Xinghui Company and its subsidiaries are also facing a number of small lawsuits, and the cumulative amount of arbitration matters is RMB 5.4697 million, accounting for 3.56% of the company's latest audited net assets.

Suppliers and big sellers are deeply bound together, and both sides share weal and woe. If they win, both parties gain, but if they lose, disputes will arise.

Is it a fight between big sellers and suppliers, or a win-win situation?

If you ask who can best perceive the business status of sellers in the entire cross-border e-commerce trade chain, the most common answer is definitely suppliers. One supplier lamented: "Some time ago, the person in charge of connecting with us still paid on time every month, but after this person left, no one connected with our payment, and now the accumulated amount is nearly one million."

The phenomenon of suppliers hanging banners and going to the door to collect debts is also common in the cross-border e-commerce industry. Previously, a supplier issued a "reminder letter" to a large seller's Shenzhen branch, indicating that the large seller owed the supplier more than 1.5 million yuan in payment. If the payment was not made within the specified time limit, the supplier would prepare to sue the large seller to protect its rights.

Zebao was also blocked by Amazon, which led to inventory backlogs, inability to repatriate funds, and default on payments to Cooper, which dealt a fatal blow to Cooper. However, in the overall environment, it was not only Cooper that was affected, but also thousands of suppliers. Due to the reduction in seller orders and other reasons, they had to announce holidays, salary cuts, and even stop work and production.

According to industry insiders, at the end of last year, several large factories that had been operating for decades announced their closure. Their products were basically 100% exported, but they did not receive any new orders. Under financial and operational pressures, they had no choice but to announce their official closure.

It is difficult for sellers and suppliers as well. Most of the suppliers' factories are asset-heavy enterprises, and huge costs are required for product development, research and development, and production. In addition, there is competition among peers. In order to obtain more big-selling orders, they lower prices and follow the payment terms of big sellers. But the reality is that it is this problem that drags them down.

This phenomenon is often found in cross-border big sellers and suppliers. In contrast, big sellers are more likely to gain the trust of suppliers and can get lower prices and credit support when listing products. In a good environment, big sellers and suppliers can make a lot of money, which is relatively common.

But when a big seller has problems, it is inevitable that the supplier will suffer. The Cooper incident fully demonstrates the risk of suppliers. As the saying goes, the lips and teeth are cold, and when the seller is under pressure, the factory that supplies it will be affected, and there will be no orders, and finally it can only announce the closure of business. The earlier collapse of Global Easy Shopping is also a good example. When the seller encounters a crisis and the purchase volume drops sharply, the supplier's life will not be good.

In the entire cross-border e-commerce industry, sellers, suppliers, logistics, etc. are all part of a food chain. No one can survive alone. Let's work together to get fire, treat each other well, and achieve a win-win situation.

Zebao

Shenzhen big seller

supplier