The founder of Shenzhen Damai suffered! Over 100 million shares were frozen for three years

In the past two years, Zebao was like a rising star in the cross-border circle. However, under Amazon's heavy blow, its revenue was cut in half and its profits plummeted to an almost horrible degree. Along with it, there are countless debts, lawsuits and various disputes.

Over 100 million shares of Zebao founder have been frozen by the court for three years!

Recently, Shenzhen's big seller Zebao has once again become a hot topic in the cross-border circle due to equity disputes. It is reported that the shares of Xinghui held by Zebao's founder and his concerted actors have been frozen by the court for three years, and the founder's frozen equity is worth more than 100 million yuan.

The root cause of the incident can be traced back to Zebao's default on VAT. In the past few years, when most sellers were busy making money in Europe, VAT and other tax issues in Europe had already emerged. But at that time, Europe's tax laws were not perfect, and there was no in-depth cooperation with platforms such as Amazon, so that many sellers' tax payment information was not transparent, and the European tax authorities naturally did not increase their inquiries into sellers' tax issues.

However, in the past two years, European countries have begun to tighten VAT policies and have increased their efforts to collect taxes from sellers on e-commerce platforms by signing cooperation agreements with platforms and sharing sellers' store operating conditions. Under strict inspections, many sellers with tax problems have also surfaced, and Zebao is one of them.

As we all know, Zebao owns several European brand stores through Hong Kong companies. In the past few years, these brand stores have generated considerable revenue. The French tax department also took notice of this big sale and determined that Zebao did not fully declare VAT taxes from January 2015 to August 2019. At the same time, Zebao issued a tax payment notice.

According to incomplete statistics, the total amount of taxes and fines owed by Zebao was nearly 5 million euros. Calculated at the exchange rate at the time, it was approximately 40 million yuan, which can be said to be a considerable expense.

This is not the only tax problem for Zebao. A seller revealed that after the French tax arrears incident, Zebao received tax fines from the United States and Germany. So far, Zebao's accumulated tax arrears have reached eight figures.

Tax problems continued to arise, and the founding team of Zebao was sued by the listed company. In September this year, the Shenzhen Intermediate People's Court accepted the case, and the opening scene appeared: Xinghui Shares requested the court to freeze the equity of the two founders of Zebao for three years.

Zebao's incident undoubtedly also warns sellers of the importance of tax issues. In fact, as early as the beginning of September, the British tax authorities issued a new VAT policy, requiring all sellers to use MTD for tax declaration from November 1, 2022.

If a business fails to register for MTD and fails to file a tax return through MTD-compatible software, it will be subject to a default surcharge or a late filing penalty and interest from January 2023. Before the deadline, sellers who meet the requirements but do not use them will not be able to file tax returns and may face a fine of up to £1,600.

In fact, Zebao's own problems are not only tax, but also the decline in both revenue and profit, litigation, and the tangled relationship with its founder. It can be said that since 2021, Zebao has fallen into a vicious circle.

In the first half of 2022, Zebao's revenue on Amazon fell 81.17%

In 2021, Zebao's revenue was only about 2.5 billion, which means that the revenue in 2021 was only half of last year's revenue. In 2022, Zebao's revenue on Amazon fell sharply by 81.17% to only 316 million yuan, but despite the sharp decline, Zebao's revenue on Amazon still accounted for half of Zebao's total revenue.

In terms of products, the revenue of small household appliances with the highest gross profit margin fell by 70.36% to 239 million yuan. As a key product of Zebao, Bluetooth audio mainly includes headphones, neck-hanging headphones, etc., but in the first half of 2022, its performance was not good, with revenue falling by 83.68% to only 43.66 million yuan.

Although the revenue of many main products of Zebao has declined, there is one product that stands out, whose revenue has increased instead of decreased. This product is the slide rail, whose revenue increased by 23.33% to 511 million yuan in the first half of 2022. However, the slide rail is not Zebao's main product, and its R&D and manufacturing capabilities are all under Xinghui Co., Ltd.

From an annual revenue of 5 billion in 2020 to the current downturn, the source of Zebao's situation is even more complicated and confusing.

Cai Gengxi, the founder of Xinghui Precision, believes that Zebao's poor management is due to the fact that Zebao's founder Sun Caijin violated the regulations and was banned. He believes that when he took over Zebao, the company was mainly adopting the model of illegal order-padding, and that Sun Caijin violated Amazon's regulations and opened too many small accounts to fulfill his performance commitments, which led to the Amazon ban . Many brand stores under Zebao were banned and could not contribute to revenue, and the company also suffered losses.

Sun Caijin believes that the sharp drop in revenue and huge losses of Zebao are due to Cai Gengxi's lack of understanding of cross-border e-commerce and chaotic management. The report of Jiemian News mentioned that before the incident of Zebao, Amazon had issued multiple risk warnings, but Cai Gengxi did not respond correctly.

According to incomplete statistics, after Zebao entered the Cai Gengxi era, 90% of the Zebao team members have been replaced. A former Zebao employee reported that Cai Gengxi managed Zebao with a bit of a factory mentality. He believed that products did not need to be developed, and that ready-made products could be directly selected from the factory and then sold on overseas platforms . However, this was inconsistent with the ideas of many employees of the original Zebao team. They believed that cross-border e-commerce products were directly facing customers, and that a lot of costs needed to be invested in product research and development, and that they needed to be put on the market for trial and error, so as to achieve the purpose of product replacement while accumulating experience.

At the same time, in order to ensure that Amazon stores would not run out of stock or experience large-scale unsold inventory, Zebao had also set up a planning department to be responsible for stocking and inventory turnover. However, Cai Gengxi did not take the department seriously, and many of the department's staff resigned one after another.

In addition, Zebao's parent company Xinghui shares and its founder Sun Caijin have always been in a state of confrontation, and from time to time they would stage a quarrel. Earlier, Xinghui shares filed an additional and amended lawsuit request with the court, requiring all defendants to jointly return 1.043 billion yuan to the plaintiff Xinghui shares.

In general, the reason why Zebao fell from the star of tomorrow is not only because of the illegal operation of Sun Caijin's team, but also because of Cai Gengxi's team's inability to adapt to the local environment and poor management of the cross-border e-commerce team. Of course, the interference from the external environment cannot be ignored. We also hope that Zebao can sort out the lawsuits and problems that exist, go into battle with ease, and create greater glory.

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Xinghui Shares

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