Shenzhen seller sues Amazon

Some people say that 2021 is a "disaster year" for many Amazon sellers, especially cross-border sellers. After the vigorous "account blocking wave", a group of big sellers began to have a hard time, from the heyday at that time to the decline today.

Among them, one of the most frustrated sellers is There is a Tree.

Youkeshu files two new lawsuits, with Amazon as the defendant

Recently, Youkeshu included a statistical table of recent accumulated lawsuits and arbitrations in its announcement. From the table, it can be seen that the lawsuits were mainly concentrated after December last year, and the most eye-catching one was Youkeshu’s lawsuit against Amazon.

Specifically, Youkeshu filed a lawsuit against Amazon on the grounds of abuse of market dominance . The Changsha Intermediate People's Court officially accepted the case on January 24 this year and sent a response notice to the defendant Amazon. The case number is (2023) Hunan 01 Minchu 828, and the amount involved is as high as 7.7951 million yuan .

This is not the first case this year.

For the same reason, Youkeshu sued Amazon again. On March 8, the Changsha Intermediate People's Court accepted the case and issued a court summons to Amazon. The case number was (2024) Hunan 01 Minchu No. 48. The amount involved in this case was 823,800 yuan.

In other words, Youkeshu, as the plaintiff, has two cases with Amazon involving financial disputes of nearly 8.62 million yuan .

"Abuse of market dominance" is very simple. It refers to the behavior of a business operator with market dominance abusing its market dominance to exclude or restrict competition.

According to the Anti-Monopoly Law, market dominance refers to the market position of an operator that can control the price, quantity or other transaction conditions of goods in the relevant market, or can hinder or affect the ability of other operators to enter the relevant market .

Judging from this interpretation, these two cases may be related to Amazon’s account blocking trend.

In 2021, Amazon launched a drastic rectification against behaviors that did not comply with platform regulations, such as fake reviews, infringing follow-up sales, and account association. The platform's wholesale sellers became the first to be rectified. Among them, Youkeshu, which became one of the "Four Young Masters of South China City" by relying on the wholesale model, was the first to suffer the turmoil.

Data shows that as of July 2021, Youkeshu had 340 newly blocked or frozen Amazon stores, accounting for about 30% of its total Amazon stores. According to Youkeshu’s previous announcement, during the entire “account blocking wave”, about 400 of its sites were blocked on Amazon , and the funds of the frozen stores reached 128 million yuan.

A tree felled by the Amazon

In 2020, an epidemic brought online shopping to overseas markets, and many cross-border e-commerce companies ushered in the good news of a surge in revenue.

Youkeshu is no exception. In 2020, the total revenue of its parent company (then called "Tianze Information") reached 5.027 billion yuan, but the cross-border e-commerce export business revenue of Youkeshu reached 4.749 billion yuan, an increase of 20.16% over the same period in 2019; operating profit was 499 million yuan, an increase of 33.01% over the same period in 2019; total profit was 486 million yuan, a year-on-year increase of 31.90%; net profit attributable to shareholders of listed companies was 416 million yuan, a year-on-year increase of 27.95%.

Youkeshu alone contributed 94.48% of Tianze Information's total revenue . In terms of net profit, Tianze Information lost 871 million yuan in 2020, which means that its original loss was around 1.3 billion yuan, and Youkeshu made up for the shortfall of 400 million yuan.

It can also be seen from the financial report information of that year that Youkeshu’s annual sales volume was 48.6 million units in 2019, and it increased by 76.28% in 2020 to 85.67 million units .

It is under such optimistic circumstances that Youkeshu takes a bigger step.

In 2020 alone , Youkeshu has laid out more than one million SKUs in seven major categories , including home furnishings, electronics, accessories, and sports, and has more than 8,000 active cooperating suppliers .

Although Youkeshu is also expanding into platforms such as eBay, AliExpress, Wish, Shopify, Shopee, and Lazada in addition to Amazon, its financial report shows its dependence on Amazon.

In 2020, Amazon alone brought Youkeshu 1.525 billion yuan in revenue , accounting for 32.12%, while in 2019 it was only 1.088 billion yuan, a year-on-year increase of 40.26%.

Because of this, it continues to invest heavily in Amazon, and its inventory on Amazon continues to grow, but this investment has not brought a bright future for Youkeshu.

In 2021, Amazon launched a massive account blocking campaign that hit Youkeshu hard.

That year, Youkeshu's parent company's revenue dropped 65% to only 1.764 billion yuan, and its net loss reached a staggering 2.676 billion yuan. And due to the impact of Amazon's account suspension, the revenue of Youkeshu's cross-border e-commerce business segment dropped 66.55% directly, from 4.749 billion yuan in 2020 to 1.588 billion yuan in 2021 .

At the same time, due to factors such as the freezing of funds by the Amazon platform, Youkeshu's provision for bad debts reached 104 million yuan in 2021 .

It was from this time that the tree began to slide down uncontrollably.

The myth ends, the brakes are put on

As one of the former "Four Young Masters of South China City", Youkeshu's myth seems to have ended in the summer of 2021.

As mentioned above, Youkeshu's cross-border e-commerce business revenue plummeted by 67% in 2021. Specifically, its revenue on Amazon channels dropped from 1.525 billion yuan to 521 million yuan, a drop of 65.86% , and the revenue of other third-party platforms (except Amazon and AliExpress) fell by 68.80%.

In the same year, the number of Youkeshu product SKUs dropped sharply from over one million to 350,000, and sales also plummeted by 56.75% , from 85.67 million pieces in 2020 to 37.05 million pieces in 2021.

Thereafter , in 2022 and 2023, the revenue of Youkeshu's parent company continued to decline, leaving 774 million yuan and 464 million yuan respectively, and the net loss began to increase again, reaching 367 million yuan and 485 million yuan respectively.

During the same period, Youkeshu's cross-border e-commerce business revenue was 634 million yuan and 345 million yuan, which is still declining. In the Amazon channel, it brought in 202 million yuan and 106 million yuan in revenue, down 47.24%.

The 2022 annual financial report shows that the 104 million yuan frozen by Amazon for Youkeshu has not yet been unfrozen, and in the 2023 financial report, Youkeshu's bad debt provision on Amazon has reached 113 million yuan .

Years of losses have put Youkeshu’s cash flow into crisis. The huge sums of money borrowed to expand the market during its peak period have now become huge mountains for Youkeshu.

Youkeshu has repeatedly issued loan overdue notices, and has even been applied for reorganization by creditors because of its inability to repay debts. For example, it borrowed 30 million yuan from the Nanjing Branch of China Everbright Bank in 2019, and after four years of repayment, 26.4 million yuan is still overdue.

As of the first quarter of this year, the remaining principal amount of Youkeshu's bank loans (including guarantees) was 306 million yuan, all of which were overdue .

As of the end of 2023, Youkeshu's current liabilities, including short-term loans and contractual liabilities, reached 743 million yuan, while non-liquid liabilities, including long-term loans and lease liabilities, reached 176,300 yuan, with a total liability of 761 million yuan .

Some people say that the distribution of goods is the original sin of Youkeshu, and that Youkeshu is the culprit that trapped itself in the market. The former king of distribution of goods was galloping in the market with high spirits, but suddenly the brakes were pressed. Today, Youkeshu has a difficult problem in getting out of the quagmire, let alone catching up with its competitors.

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