Account balances began to clear as the account was blocked, with one seller losing 10 million yuan

At the end of April last year, Amazon’s account blocking wave kicked off and lasted for 4 months. Many cross-border e-commerce companies, from the top to the second tier of the industry, have been stuck in the quagmire since then.

By June, senior industry insiders estimated that the total funds of sellers involved in this rectification may exceed 100 billion. Later, Amazon officially stated that this ban action closed about 600 Chinese brands and 3,000 accounts, but the public believed that the actual data was far more than that.

The account blocking wave was like a cold wind passing through. Sellers’ requests to communicate with Amazon were rejected, which made sellers who were used to seeing “big sellers’ accounts being blocked and restored within a few days” become serious. People realized that the possibility of these blocked accounts and brands being restored was almost zero, and it would be difficult to get the funds in the accounts back.

The hammer has dropped recently, and several sellers involved in the wave of account bans said that Amazon has begun clearing the balances of the blocked accounts, and the punishment that has lasted for more than a year is finally coming to an end.

Amazon's account suspension wave begins

Shenzhen Amazon seller Li Cheng told En.com that Amazon cleared the balance of the blocked accounts last week. "Before the clearing, I had a balance of more than 10 million on all the blocked sites, but now it's gone."

After hearing that the accounts started to be cleared, another seller, Wang Ming, asked the company's relevant business manager and found out that two of the company's banned stores were also cleared, totaling 50,000 US dollars.

Both of them were once leaders in their industry. Before the account was blocked, Li Cheng had the largest market share in a certain household product market, and his Amazon sales last year were about 800 million yuan; Wang Ming had worked for Amazon for six years, and more than 90% of the company's revenue came from this platform, with orders reaching 1 million in the first half of 2021.

After the company’s multiple Amazon accounts were blocked, their performance in this channel suddenly shrank by 80%, their account balances were confiscated, and they were left with a large amount of inventory that needed to be cleared.

In order to fight for the detained account funds, Li Cheng contacted many sellers, hoping to work together. Among the more than 20 Shenzhen sellers whose accounts were blocked, most were mid-level sellers, with a total annual sales of about 20 billion yuan and a frozen amount of about 300 million yuan. One seller had more than 30 sites blocked and had 20 million yuan of funds seized.

"Among these more than 20 people, five reported that the money in their accounts was gone last week, while the others just lay there and said nothing. As far as I know, about 80 to 90 percent of the people have lost the money in their accounts, which has been transferred away. The platform will not reset accounts with negative balances, but will clear them for those with money." Prior to this, the sellers had not received any relevant notifications from Amazon.

Sellers have already predicted the fate of funds in blocked accounts.

During the account suspension period, Amazon updated a rule, clearly stating that the platform has a zero-tolerance policy for all buyers’ illegal review behaviors. If a seller is found to be trying to manipulate buyer reviews, Amazon will immediately and permanently revoke the seller’s sales privileges on Amazon and withhold funds, etc. Manipulating reviews was one of the triggers for the account suspension.

Due to the huge amount of frozen funds, many sellers still tried to appeal for the funds to be recovered. Unable to appeal, Li Cheng and more than 20 other sellers decided to take Amazon to court, but the platform agreement blocked the conventional litigation path, and they could only go through arbitration. The arbitration fee for a single blocked site may be as high as 150,000 to 250,000 US dollars, and the cost often exceeds the account balance. Sellers can only abandon accounts with smaller balances and try their luck in stores with larger balances.

In order to reduce the cost burden, Li Cheng and others tried collective arbitration, but there was no obvious improvement until the account was cleared.

"Those who went through arbitration basically didn't get their money back. Some of the arbitrations were successful, such as Amazon had to return part of the money to them to pay for lawyers' fees, but the money never reached the sellers in the end because the money they paid was not proportional to the money they got back. For example, they spent 200,000 yuan on the lawsuit, but the arbitration result was that Amazon had to give them 150,000 yuan, which was useless and still a loss," he said. "There are also some cases where the arbitration was not completed because the cost was too high and many people gave up halfway."

So far, many of the sellers whose accounts were blocked have gone silent. Some have gotten one or two accounts back, but many of the remaining blocked accounts have had their balances debited recently.

When the platform clears out blocked accounts, top sellers will face even greater losses.

At the end of August, Xinghui Co., Ltd., the parent company of Zebao, told investors that there had been no substantive progress in the Amazon store closures. As of mid-June last year, the frozen funds of Zebao's related stores were equivalent to about 60 million yuan; as of July, Youkeshu had frozen funds of about 130 million yuan. The cash flow suddenly tightened, and the company's normal operations had been disrupted.

Sellers adjust their cross-border shipping routes

The impact of a large number of accounts being blocked is devastating to the sellers involved, and chain reactions such as layoffs, downsizing, and even closure may ensue. The blocking incident has awakened sellers who rely on third-party platforms. They have adjusted their overseas sales and started to focus on multi-channel sales. The affected sellers are particularly cautious and are unwilling to bet on a single platform.

Youkeshu implements a multi-platform development strategy. While deepening its presence on mainstream third-party platforms such as Amazon and eBay, it also focuses on emerging platforms such as Shopee and Lazada. Zebao accelerates the promotion of online multi-platform operations, continues to increase resource investment in e-commerce platforms such as eBay and Walmart, and strives to build the company's own platform.

However, in the field of cross-border e-commerce, the weight of Amazon's channels cannot be ignored. Even if it suffers a major setback, it is difficult for sellers to completely give up and they can only try not to rely on the platform.

Previously, Licheng Company relied heavily on sales on Amazon, but now it has done very little in this channel. In the future, the company will control the volume of business on Amazon, focus on profits, and only regard it as a part of the business rather than the main force.

"We will do what we can. It won't matter if the account dies. We won't put the goods in FBA and we won't do any activities. That's it." He began to pay attention to other channels. For example, Walmart has a rapid growth in traffic and is a seed player. To avoid similar incidents, the company tries to balance the business in different channels, make the products distinctive, and leverage third-party platforms for sales while planning independent websites. This year, it has also laid out the domestic market.

From selling well in the category to now actively restricting his business on Amazon, Li Cheng has been on a roller coaster ride. He believes that in this account suspension incident, Amazon's punishment was too severe and the handling of the matter exceeded the bottom line.

" Amazon can close down stores. Even if you are very big, you may be back to the old days overnight. " Some sellers lamented. This also sounded a wake-up call to sellers who use Amazon as their main channel: over-reliance on the platform is very dangerous, and the proportion of channels must be reasonably controlled.

Another point that Li Cheng realized is that it is not feasible for sellers to rely on Amazon to build a good brand . Some people in the industry call some third-party brands on Amazon "Amazon grafted brands" because their brand effect is severely limited to Amazon. Once Amazon removes them from the platform, the brand will lose its main traffic supply and become indistinguishable from the crowd. The deeper the brand is tied to the channel, the more likely it is to become such a grafted brand.

As for the situation of the seller group, Wang Ming believes that controlling the channel share is not the way to solve the problem. It is a false proposition to develop on Amazon by relying on the channel's traffic and status. The correct answer is to truly own your own customers.

He has adjusted the company's general direction, transforming it into a vertical category brand and omni-channel marketing. "There are not many businesses on Amazon, and the seller business is unreliable. I would rather not do business than be an ordinary seller."

As multi-channel strategies become more popular, sellers are reluctant to miss any platform with potential. The increasing popularity of Walmart and the enthusiastic pursuit of Pinduoduo's cross-border platform Temu are examples.

According to Marketplace Pulse, Walmart has almost completely canceled the approval process for entry. Now sellers only need to fill in their company name and contact information to go online on the platform. Questions about income, other markets, etc. are gone forever.

Nearly 1,000 new sellers are now joining the Walmart marketplace every week, a figure that is four times higher than before and almost on par with the rate of new sellers added to Amazon’s U.S. marketplace. The latest data shows that in just one year, the number of new sellers on Walmart China (51%) has surpassed that of U.S. sellers (46%).

In addition to diversifying channels, the parties also need to solve the problem of overstocked inventory. As the peak season approaches, many sellers are still struggling to digest the inventory left over from last year. Only by swallowing this half-cooked meal can they return to normal business pace.

Clearing inventory becomes the main theme for cross-border people this year?

Zhang Xiaotong, a cross-border e-commerce practitioner, said that last year a large account of his company was blocked, and there were many fascia gun products and other products to be cleared. Since he joined the company at the beginning of this year, the company has never paid wages on time.

"Our payday is the 25th of every month, which is considered relatively late in Shenzhen. Every time it's payday, the company would delay it on the grounds of financial constraints. For example, March's wages were not received until May 11th; the company said July's wages would be paid on September 25th. I applied for payment of June's wages, but the boss rejected it immediately, and replied that in order to prepare for the peak season, wages must be paid every two months, without exception," said Zhang Xiaotong.

Zhang Xiaotong was puzzled by the company's repeated delays in paying employees' wages, and he seemed a little helpless: "From the perspective of workers, the company should have the ability to resist risks, rather than avoiding them by delaying the payment of employees' wages."

After analyzing the situation, it is found that currently only one product of Zhang Xiaotong's company is profitable. As for other seasonal products, due to large inventory and unsatisfactory sales, a lot of inventory has been pressed. These products that are being cleared out of inventory are all losing money. By September, the company still has about 30,000 products in inventory waiting to be cleared.

Clearing inventory seems to be the most important thing a company has to do when its Amazon account is blocked.

Li Cheng's company is also clearing out inventory after being blocked. He said frankly that the overall business this year is not good, and the inventory has not been cleared out yet. Now he is clearing out some inventory left over from last year. It is expected that it will be cleared out by the end of this year, so that he can do things properly next year.

After their accounts were blocked, many companies experienced similar situations, with sales dropping sharply and clearing inventory at a loss. Some companies also fell into a vortex of capital turnover and eventually became unable to continue, ending up in bankruptcy. Employees of these companies, like Zhang Xiaotong, were owed wages by the company, and some employees lost their jobs and took a long time to find their next job.

The longer it takes for cross-border sellers to clear their inventory, the more disadvantageous it is for the company's development. When clearing their inventory, sellers also encounter obstacles from giants.

This year, Walmart, Macy's and other platforms have been vigorously clearing inventory. In the first quarter of this year, the inventory levels of these platforms have increased to varying degrees. Among them, Macy's inventory turnover rate increased by 9% compared with the same period last year, and inventory increased by 17% year-on-year; Walmart's inventory level also increased by 33% compared with the same period in 2021, exceeding its own expectations; Target's inventory level increased by more than 40% year-on-year.

In order to solve the inventory crisis, Walmart, Macy's, Target and other retailers have cleared many products at low prices in the second quarter. Products in multiple categories , including garden supplies, barbecue supplies, summer supplies, outdoor furniture, and electronic products, are being cleared.

Walmart officials once said that it might take several quarters to get its inventory to a reasonable level. A report from foreign media described Walmart's overstock problem: countless goods piled up in warehouses, making it difficult for employees to walk normally, towering boxes blocking the passages to places such as maternity rooms and bathrooms, and trailers parked outdoors were also filled with goods.

In the second quarter of this year, Target's revenue was $26.037 billion, and its net profit was only $183 million, a year-on-year plunge of 89.9%. The profit plunge was also affected by the sharp price cuts and active inventory clearance.

The "inventory" crisis faced by American retailers is mainly affected by factors such as continued inflation, declining consumer demand, early large-scale replenishment and supply chain problems.

Retailers in the United States are all in a low-price war. This is the case for offline physical retail, so the situation of cross-border sellers can be imagined. In the battle with these giants in the clearance war, many sellers have not achieved ideal results in clearing inventory.

Industry insiders said that the main theme of cross-border people this year is to clear inventory. American supermarkets and cross-border sellers have too much inventory, and under inflation, Americans tend to consume more rationally. When consumption is downgraded and inventory is piled up, low-price internal circulation will inevitably intensify.

This year, the expected sales of many cross-border sellers are not proportional to their actual sales. Too many similar products are cleared at low prices, causing products with normal prices to hit a wall . The traffic of these products is divided, and there is no profit if the price is reduced, and no orders if the price is not reduced. All products have a certain cycle, and perhaps the final fate of these products is to be cleared at low prices.

Under this situation, many cross-border sellers are cautious and conservative in stocking their inventory, and are more likely to adopt small-batch, multiple-time delivery models. In addition, some sellers do not need to stock inventory. Since the beginning of this year, the shipment volume of cross-border sellers has also been decreasing. Affected by this, the price of ocean freight to the United States has dropped significantly this year, which has been particularly obvious in recent times.

Shipping volume dropped sharply and shipping prices plummeted

This year, the volume of imports from China to Europe and the United States has dropped significantly.

Data shows that shipments on US shipping routes decreased significantly from May to August, and ocean bookings from China to major ports in the West and East Coast of the United States were far below the highest level in two years.

The latest data from Container Trades shows that Europe’s imports from China in the first half of the year were 3.84 million TEUs, down nearly 5% compared with the first six months of 2021. The third quarter figures are only expected to be worse.

Amid inflation, European consumer demand has decreased, shippers have been piling up more and more inventory, warehouses across the continent are basically full, and shippers are further delaying or canceling import orders.

The shipment volume to Europe and the United States has dropped sharply, and the shipping prices have continued to fall.

The latest ocean freight rates from Freightos show that freight rates from China to the U.S. West Coast fell 6% to $5,759, while freight rates from China to the U.S. East Coast fell 3% to $9,184.

The data provided by Drewry's latest global shipping market report shows that the world container freight index fell for the 28th consecutive week last week. The freight rate from Shanghai to Los Angeles Port plummeted by 9% last week, and the freight rate per container fell by US$565! The freight rate from Shanghai to New York Port fell by 3% last week, and the freight rate per container fell by US$265! The prices in the East Coast of the United States, which had been strong before, have now begun to fall sharply.

It is worth noting that unlike last year and a few months ago, shipping companies are currently making freight rate adjustments every week in order to attract more bookings.

In Europe, consumer demand has slowed down and when goods arrive at European ports, they quickly fill up all available warehouses, which will inevitably lead to a drop in freight rates. European shipping prices will then fall further.

The sluggish demand in major routes to Europe and the United States and overcapacity have affected the profits of airlines. Recently, HSBC predicted that the record revenue of container liners will drop sharply. Due to overcapacity and falling demand, the profits of container liners will drop by 80% in 2023-2024. The market profit level is expected to bottom out in 2024.

Cross-border people have also felt the sharp decline in shipping prices. One seller said that he heard from a cooperating logistics company that last year their company had 10-15 containers shipped to the United States per week, but this year it is difficult to ship 3-5 containers, and recently the European department was directly cut!

Another seller said that the contract price of the West Coast of the United States in a certain channel is already in the 30s. If it continues like this, even if the price drops further, there may not be so many goods in the market.

A freight forwarder bluntly stated that the shipping prices have recently hit the bottom, and the price for the US West Coast is about to start at 3 digits, so there is no profit to be made. If the price drops further, there will not be so many ships sailing.

When talking about the reasons for the decline in sea freight, senior logistics practitioners sighed: "There is nothing we can do. There is no stock on the market, demand is low, and almost all of our peers are cutting prices!"

What is even more magical is that the freight rate can be negative. A practitioner said that he was surprised to hear that a container cost 50 US dollars a few days ago. Now, Southeast Asian shipping has negative freight rates, that is, you send a container and they pay you back.

The shipping market used to be very crazy. Under the epidemic, freight rates continued to rise, and it was even more difficult to find a container in the market. Many cross-border people tried to switch to the logistics industry. Now that demand in Europe and the United States has declined, the shipping market has gone crazy, and it is a mess. In the end, the entire industry has suffered!

At the press conference on August 29, the spokesperson of the China Council for the Promotion of International Trade said that according to the feedback from enterprises, the freight rates of some popular routes have dropped, and the container shipping market is no longer "hard to find a box". The main difficulties faced by enterprises at present are slow logistics, high costs and few orders.

The funds of blocked accounts have been cleared, orders for accounts on sale have decreased, and clearing inventory has become the main theme ... This year's market conditions have made many Amazon sellers feel chilly!

(All characters in this article are pseudonyms)

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