New! Another 60 accounts of Shenzhen Dama were blocked

Amazon's iron fist has caused a lot of suffering to many top sellers. On Thursday this week, a Shenzhen seller updated the number of accounts that had been blocked.

Previously, Tianze Information announced that about 340 Youkeshu sites were shut down by Amazon. Yesterday, it responded to the Shenzhen Stock Exchange's inquiry. As of September 16, Youkeshu had a total of about 400 new sites closed this year, an increase of 60 from July.

In addition to the latest store closures and frozen funds on Amazon, Tianze Information was also requested to disclose details such as the reasons for abandoning the independent site, the risk of recovering deposits, employee turnover and cash expenditures, inventory price drop categories and impairment amounts, goodwill impairment, etc. This seems to be the first time that Youkeshu has revealed its assets so thoroughly since being acquired.

The number of blocked sites on Youkeshu has increased to 400

Last week, Tianze Information received an inquiry letter from the Shenzhen Stock Exchange regarding its semi-annual report. Yesterday, it explained the relevant requirements.

Has the situation worsened after Youkeshu’s store was closed?

Tianze Information disclosed that after verification and confirmation, as of September 16, Youkeshu’s store funds on Amazon were frozen by about 128 million yuan; the cumulative number of newly blocked sites in 2021 was about 400. Compared with the number disclosed in the previous period, the newly added sites in the later period were mainly sites that had not yet started operating. It also stated that the overall situation of frozen funds and blocked stores has not continued to deteriorate.

(Screenshot of Tianze Information Announcement)

Youkeshu has set up a special working group to communicate with Amazon and actively file a complaint. However, due to the large number of accounts involved, the complexity of each account, and the high cost of overseas litigation, the company is selecting a law firm to represent it based on the progress of the account complaint, similar case precedents, etc. In the future, Youkeshu plans to negotiate with Amazon through a law firm and will take legal measures to protect its legitimate rights and interests depending on the progress.

It is embarrassing to say that despite the recent setback on Amazon and the possibility of going to court with it, Amazon's market position and huge number of users determine that it is still a mainstream platform that Youkeshu cannot ignore for cross-border exports. Amazon is the e-commerce platform with the largest revenue for Youkeshu. In the first half of the year, Youkeshu achieved more than 30% of its revenue through Amazon, but it has dropped 57% year-on-year.

So Youkeshu continued to attack Amazon. "The company will not completely abandon the Amazon market just because of temporary problems in developing its platform business." This is also the helpless choice of many blocked sellers.

Because of the account suspension incident, some suppliers came to Youkeshu to collect debts. In the latest announcement, Tianze Information stated that Youkeshu had disputes with a small number of suppliers over product quality and some payments were overdue. Youkeshu is communicating and negotiating with relevant suppliers to try to properly resolve the disputes as soon as possible.

Youkeshu's performance is at risk of further decline

The big setback on Amazon made Youkeshu cautious. While doing business on Amazon, the company also made multi-platform layouts, deeply cultivating mainstream third-party platforms such as Amazon, eBay, AliExpress, and Wish, while also actively developing emerging platforms such as Shopee and Lazada to avoid over-reliance on a specific platform.

Youkeshu's operations on other platforms are relatively stable, but its revenue on platforms such as AliExpress has declined. This feeling of loss has been compensated on Shopee.

The independent station business was ignored by Youkeshu. When the Shenzhen Stock Exchange asked about the reasons for Youkeshu's adjustment of the independent station business, Tianze replied:

Last year, affected by the epidemic, Youkeshu's independent station business developed rapidly. In order to protect the rights and interests of consumers, third-party payment platforms such as PayPal, which are bound to independent sites, have increased their review of fund lending since 2020, resulting in an increase in the phenomenon of withholding funds, which has led to a significant slowdown in the sales collection speed of Youkeshu's independent station business and higher capital occupation costs. In addition, building an independent station requires higher promotion and publicity costs to obtain external traffic, etc., and there is no condition for developing an independent station in the short term. Therefore, Youkeshu has reduced its independent station business and team size.

Is there a hidden story? Last year, Time magazine in the United States found in its investigation that the company holding the domain name of the suspected fraudulent e-commerce website was a subsidiary of Youkeshu, and this problem of mismatching goods was still brewing not long ago.

In general, Youkeshu is facing a more competitive environment at this stage, and its operating performance is still at risk of further decline in the short term. However, a lean camel is bigger than a horse, and Youkeshu's position as a top seller remains unshakable. As of June this year, Youkeshu still has more than 1,500 salaried employees.

The trouble of large stocking, 6 categories of products dropped by more than 600 million

In the first half of this year, Youkeshu's sales on multiple platforms declined year-on-year, and the company had to stock up a lot of inventory, which put "trouble on the horizon." Because many products were not selling well, Youkeshu had to set aside more than 600 million yuan in inventory impairment provisions for six categories of inventory.

Why did the price drop so much? According to the reply from Youkeshu, the reasons are probably as follows:

1. Stock up in large quantities. In 2020, affected by the epidemic, the huge development potential of the cross-border e-commerce export industry was stimulated. Based on the optimistic estimate of the subsequent business development and taking into account the objective conditions such as unstable logistics and supply chain, Youkeshu stocked up in large quantities to prevent out-of-stock situations, especially strategic stocking for the Amazon platform.

2. Business has shrunk significantly . Affected by changes in the policy environment of the Amazon platform and the significant shrinkage of the independent station business, Youkeshu's operating income in the first half of 2021 decreased by 51.12% year-on-year.

3. Logistics costs have risen sharply and price wars have affected the company . Due to the significant increase in logistics costs, some companies in the industry have chosen to reduce inventory quickly through price cuts and promotions in order to accelerate capital recovery, resulting in a more competitive environment for Youkeshu.

In addition, in terms of logistics costs, Youkeshu's order execution fee ( logistics-related costs for shipping from Amazon FBA warehouses to end consumers) was 46.2376 million yuan, an increase of 463.32% year-on-year. Youkeshu mentioned that the number of FBA orders during the reporting period reached 1.1 million, an increase of nearly 400% year-on-year, so the order execution fee also increased accordingly.

This year, even big sellers will be affected by rising logistics prices and price wars, not to mention small and medium-sized sellers in the industry!

It is difficult for Youkeshu to achieve its expected profit in 2021

A large number of accounts were blocked and the inventory could not be sold, which would inevitably affect Youkeshu's revenue. According to the semi-annual report released by its parent company, Youkeshu's revenue in the first half of this year was 1.092 billion yuan, a year-on-year decrease of 51.12%, and its net profit was a loss of 742 million yuan.

Among them, Amazon is an important source of revenue for Youkeshu. In the first half of this year, its performance on the Amazon platform plummeted by 57.15%.

At the end of 2020, the company made a forecast for Youkeshu's profits in the next few years, predicting that its revenue in 2012 would be 5.128 billion yuan and its profit would be about 500 million yuan. Judging from the current situation, it is difficult for Youkeshu to achieve the expected profit.

Although Youkeshu's operating performance and profit forecasts are not optimistic, the parent company believes that based on preliminary judgments based on the industry environment, operating performance, profit forecasts and other aspects, there is no obvious sign of impairment of the goodwill formed by the acquisition of Youkeshu, and the long-term value of Youkeshu will not be affected.

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