Nearly 8 million yuan of funds were frozen, and Jiazhilian was also banned by Amazon!

Jiazhilian’s account was blocked by Amazon, and nearly 8 million yuan of funds were frozen.

In the tide of account blocking, Jiazhilian, as a long-standing cross-border e-commerce seller, was not spared. In a recent announcement released by its parent company Xunxing Co., Ltd., due to the account blocking, the funds of Jiazhilian frozen by Amazon were close to 8 million.

Nearly 8 million yuan of funds were frozen, and Jiazhilian was once banned by Amazon

Last year, Amazon’s account ban wave hit many Chinese sellers hard. Top sellers collapsed, small and medium-sized sellers were silenced, and cross-border sellers were no exception.

In the latest announcement released by Xunxing Co., Ltd., the parent company of Jiazhilian, Jiazhilian had a balance of 16.841 million yuan in accounts receivable for bad debt provision for its cross-border e-commerce business in 2021, with a bad debt provision of 6.8557 million yuan , a provision ratio of 40.71%. Among them, due to the freezing of some accounts by Amazon, the bad debt provision for Amazon was 2.6393 million yuan.

Specifically, the funds in Jiazhilian’s account frozen on the Amazon platform amounted to 7.8975 million yuan . Jiazhilian explained that this was due to adjustments to the Amazon platform rules and some of its stores were suspected of not complying with the platform rules.

Although Jiazhilian said it is communicating with the platform to recover the frozen funds, judging from the recovery of the frozen funds of most sellers, there is no sign of unblocking the accounts, and the probability of recovering the funds is also very small. At present, Jiazhilian has already made a single provision for bad debts at 30% for this part of the receivables.

In fact, this is not the first time that Jiazhilian has been involved in an account suspension controversy.

Earlier, the implementation of the new EU tax law triggered a major change in the European VAT system. Since the management team of Jiazhilian at the time failed to respond in time, some of its accounts on Amazon Germany were frozen and the sales proceeds could not be recovered . In addition, due to the early violation of the operating rules of the AliExpress platform, the relevant accounts of Jiazhilian were frozen. Later, the management team at the time decided to withdraw from the AliExpress channel, resulting in the inability to recover the remaining sales proceeds.

In the 2021 financial report of Xunxing Co., Ltd. , the parent company of Jiazhilian, the cross-border e-commerce business revenue was 550 million yuan, a year-on-year increase of 46.48%, of which the total profit was -9.8891 million yuan, a year-on-year reduction of 74.98%. As far as Jiazhilian is concerned, the instability of its revenue and profits in 2021 is not only affected by the account blocking trend, but also includes many other factors.

The soaring advertising costs seem to be a problem faced by all sellers. Since Amazon's tightening policies, many sellers have directly said that Amazon's advertising costs have skyrocketed and they can no longer afford it. Jiazhilian also feels the same. According to the financial report data, in order to stabilize and improve the product listing ranking, Jiazhilian increased its advertising and marketing promotion expenses by 21.14 million yuan in 2021 , an increase of 352% compared with the same period last year.

Many sellers have witnessed the surge in logistics costs last year. In 2021, Jiazhilian spent a total of 65.8492 million yuan on logistics for the first and second stages. In addition, since more than 30% of Jiazhilian's inventory is stored in temporary warehouses in the UK, Japan and other countries, the storage costs incurred by Jiazhilian in 2021 were as high as 12.4158 million yuan.

Inventory is also a major factor affecting the revenue of Jiazhilian. In 2021, the inventory of Xunxing Co., Ltd.'s cross-border e-commerce business increased by 93.9867 million yuan. The main reason given is that Jiazhilian just took over from the original management team in July 2020, mainly to digest the original inventory ; in 2021, the layout of new stores and new products was increased, and more purchases were made from August to October, and inventory was in preparation for the peak season sales in the fourth quarter; fierce competition in the fourth quarter and changes in Amazon platform policies led to lower-than-expected sales, resulting in a year-on-year increase of 96.35% in inventory at the end of the period, and an inventory turnover rate of 1.88 times, a decrease of 24.14%.

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In 2022, from the financial report data of Xunxing Co., Ltd., we can see that its operating income in the first quarter was 474 million yuan, and the net profit attributable to shareholders of listed companies was 20.2961 million yuan. Among them, the e-commerce business of Xunxing Co., Ltd. increased by 23.46% year-on-year. In contrast , in 2021, its cross-border e-commerce business achieved operating income of 550 million yuan and a profit loss of 9.8891 million yuan. It can be seen that the revenue of Jiazhilian is still maintaining steady growth.

All products sold under Jiazhilian are its own brands. Its products cover multiple fields such as household daily necessities, health and beauty, 3C electronic products, automotive peripherals and other products . Its products are mainly sold to the United States, Europe, Japan and other regions through third-party platforms such as Amazon and Shopify independent stations.

There is no doubt that its products provide huge support for the operating income of Jiazhilian. According to the data, in 2021, Jiazhilian achieved online sales revenue of 521 million yuan through third-party sales platforms, an increase of 49.80% compared with the same period last year. The revenues of home furnishings, beauty, 3C, automotive peripherals and other products were 105 million yuan, 168 million yuan, 171 million yuan, 55 million yuan and 21 million yuan respectively, accounting for 20.21%, 32.34%, 32.8%, 10.56% and 4.09% of the total annual e-commerce business revenue respectively .

As a long-established seller, the successful methods of Jiazhilian are still worth learning from for many sellers . It is reported that Jiazhilian has set up a supply chain procurement department, which is mainly responsible for the procurement of goods and packaging materials , the payment of purchases, and the maintenance of supplier relationships, to ensure that Jiazhilian purchases products on time and smoothly. Secondly, it is to prepare goods in advance according to market conditions through small batches and multiple batches.

But in terms of the overall environment, the future development of Jiazhilian is still an unknown. In recent years, the epidemic has brought huge growth to cross-border e-commerce, but it also foreshadows ups and downs. Compared with the previous two years, sellers' profits have declined quite seriously, especially since the account suspension last year. The first quarter financial reports of 2022 issued by cross-border sellers clearly illustrate all this.

Cross-border Communication: During the reporting period, the operating income was 1.466 billion yuan, a year-on-year decrease of 51.01%, and the net profit attributable to shareholders of the listed company was a loss of 10.16 million yuan, a year-on-year decrease of 121.21% ;

Huading Shares (parent company of Tongtuo Technology): operating income during the reporting period was 1.569 billion yuan, down 33.79% year-on-year, and the net profit attributable to shareholders of the listed company was a loss of 76.23 million yuan, down 187.09% year-on-year ;

JMET: During the reporting period, the operating income was 184 million yuan, a year-on-year increase of 16.78%, and the net profit attributable to shareholders of the listed company was a loss of 9.08 million yuan, a year-on-year decrease of 165.71%. ;

Rebecca: During the reporting period, operating income was 322 million yuan, a year-on-year increase of 4.55%, and net profit attributable to shareholders of the listed company was 12.78 million yuan, a year-on-year decrease of 28.33% ;

Tianze Information (parent company of Youkeshu): During the reporting period, operating income was 230 million yuan, a year-on-year decrease of 71.13%. The net profit attributable to shareholders of the listed company was a loss of 27 million yuan, a year-on-year decrease of 13.96%.

Among them, there are industry giants who have been listed for many years, as well as high-quality sellers that have just been listed; there are sellers who have been deeply involved in multiple platforms, and there are industry role models who mainly run independent sites. But without exception, their performance in the first quarter of 2022 was not ideal.

As for sellers, cross-border e-commerce is still developing. As waves of new sellers emerge, waves of sellers will also be reshuffled. As the cross-border e-commerce industry becomes more compliant, sellers need to change their traditional methods of seeking dividends and think about new strategies.

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