Amazon's agency operation company was investigated, the amount of fraud was 160 million

In the cross-border circle, the reputation of agency operation is not good. Not long ago, the dispute between Shenzhen seller * Ze and Internet celebrity "Xi *" pushed it further into the abyss.

Due to lack of experience, many cross-border e-commerce novices will choose to operate on their behalf. Their original intention is to do their business better. They generally believe that these agencies are very professional and will help them realize profits quickly, but they did not expect to step into a deep pit.

The routine of these agency operators is usually to show their profits and strength to attract new inquiries, and then make sales commitments and say that a full refund will be given if they fail to do so. Many people will easily sign a cooperation agreement for this reason.

In the conventional Amazon agency operation model, the agency will be responsible for store registration, product selection and store operation, while the seller needs to pay for product procurement funds, logistics and operation and promotion costs, and the final profit will be divided according to a certain ratio. In simple terms, one provides money and the other provides technology. It is a win-win cooperation model, but many people have suffered a great loss here.

Why is this so? A senior seller with five years of cross-border e-commerce experience once said that if an agency helps select products and also takes commissions based on sales, it is a pitfall. He said that since the promotion costs are paid by the seller, the agency can choose a popular product and then use advertising to increase sales. This is always a sure-win business for the agency, but the seller loses money.

Because of this, when industry insiders talk about agency operations, most of them regard it as "cutting leeks."

In fact, there is nothing wrong with the business model of agency operation. It exists in many industries, such as self-media. In the cross-border e-commerce industry, the strong feedback from the demand side also shows that agency operation has its significance. Therefore, perhaps what we should think about now is how to make it more standardized, or what kind of agency operation model is feasible?

Now, government agencies are also trying to regulate the agency operation market. For example, on March 15 this year, the domestic public security organs cracked down on two agency operation companies in Henan that were suspected of fraud. Recently, the United States also took action. According to foreign media reports, the Federal Trade Commission (FTC) of the United States recently sued a bad agency operation company, and the court issued a temporary restraining order against it on August 11.

The agency was sued for defrauding 160 million yuan

I believe many cross-border e-commerce sellers are very familiar with the routines of this foreign agency operation company (Empire), because it is exactly the same as those used by many similar companies in China.

It is understood that the two heads of the company, John and Roman, posed as e-commerce experts, taught people on social media how to do Amazon and Walmart, and showed off their luxury cars and luxurious vacation life to create an image of successful people.

Not only that, they also carefully "packaged" themselves and Empire as follows:

"Beautiful" personal background. They claim to be Amazon sellers with annual sales of 8 figures and have helped many sellers make money; second, inflated promises. Including continuous profits of US$4,000 to US$6,000 per month, and making US$200,000 a month, with a 100% return on investment within 8 months. Third, case endorsement. For example, a so-called "seller" said on social media that his store was operating very successfully. Fourth, it has been successfully connected with artificial intelligence. They claim that "artificial intelligence machine learning" can be used to maximize revenue, such as "We recently discovered how to use artificial intelligence tools for our Amazon 1-on-1 coaching program to help students achieve sales of more than US$10,000 per month!" Fifth, venture capital support. They claim that Empire has received investment from "venture capital."

With such a brilliant resume, a large number of people who were unaware of the truth were attracted. Later, the two men told these people that their company could provide Amazon and Walmart operation services, from product selection to order fulfillment. Users only need to pay an initial fee of US$10,000 to US$125,000, and an operating fee of US$15,000 to US$80,000, as well as 35% of the store's profits.

However, those who dreamed of traveling in luxury cars and taking a leisurely vacation one day were soon awakened.

The FTC investigation showed that less than 10% of the stores managed by Empire generated sales. Due to copyright infringement and violation of some platform policies, by October 2022, most Amazon stores had been blocked or suspended. What's more serious is that most stores on Walmart have either never been activated or have been blocked for violating platform policies.

The FTC said in its complaint that most Empire customers lost money and few made the amount they advertised. And because Empire typically asked sellers to charge credit cards to stock up, the halt in sales left many sellers deeply in debt.

John and Roman made more than $22 million (about 160 million yuan) from these sellers, which they used to buy luxury cars, vacations, and hold lavish weddings.

As if sensing danger, John and Roman sold the business before being sued by the FTC. In October 2022, they approached Daniel to discuss the acquisition. Considering the high profitability of the agency business (they were told that there was a profit of up to 50%) and that Empire had no lawsuits or major problems, Daniel agreed to the acquisition and remitted $100,000 the next day.

However, two days later he was told that Empire, which had a clean background, was facing five legal disputes and had dozens of complaint emails in his mailbox.

One seller said that he was defrauded of more than $525,000 by John and Roman in total, including the establishment/fees of a limited liability company, credit card top-ups, virtual store fees, and the purchase of the so-called software they recommended that could push the store to the top.

Another seller also said that he spent $65,000 to buy a store, but since the store opened, the performance has been far from expectations, "and now the store has been suspended. I want to know why and what happened."

The agency has been cheating for many years and many sellers have been victimized. Why didn’t it go bankrupt? Because when sellers complain, they usually provide new stores on different platforms as compensation, and put pressure on sellers to sign a "non-disparagement agreement" to prevent negative reviews from spreading.

Now John and Roman not only face a lawsuit from the FTC, but Daniel is also taking them to court.

Online shopping has become a way of life for modern people. Online shopping platforms such as Amazon and Walmart have flourished, and agency operators have emerged. However, agency operators have a bad reputation now, and are often associated with "scamming". In the cross-border e-commerce industry, is the agency operation model really unreliable?

There is an inherent conflict between agency operators and sellers, and it is impossible for both parties to win?

The so-called agent operation refers to the process in which a company/institution/individual with professional knowledge and technical background helps sellers complete online store operation tasks. During this period, sellers can entrust the tasks, affairs, and functions on the platform to the agent operation, including product listing, inventory management, product selection, customer service, etc.

This model is more suitable for traditional factories without any experience. The factory has products but lacks cross-border e-commerce operation experience, which is a perfect complement to the agency operation company that has mastered the operation technology. Its advantages mainly include: 1. It can help the factory quickly run the business process of cross-border e-commerce B2C; 2. It reduces the factory's operation risk and trial and error costs; 3. The factory can gradually establish and cultivate its own operation team through agency operation cooperation. In general, it saves time, effort and money.

Of course, the disadvantages are also obvious. That is, the quality of the agency operators in the market varies. For example, Empire mentioned above usually uses fraud, false propaganda and other means to attract sellers, and then makes profits by raising service fees and collecting high deposits. Some agency operators collect money but do not manage the store carefully. In the end, the agency operator makes a lot of money, but the seller's investment is wasted.

A seller once said that his supplier found an agency to do business on Amazon. It cost more than 300,000 yuan to make a mold and sent several cabinets of goods to Europe. However, the goods were kept in the warehouse for four months and were not sold at all. The other party said that there was a problem with the account and that advertising could not be run, and then they just walked away.

Previously, a factory also shared how it was badly cheated by an agent. "We are engaged in kitchen utensils. We have advantages in product supply, but we don't know how to operate Amazon. At that time, we wanted to find a professional team to help us operate. After the store opened, the agent prepared 6,000 pieces of goods, but one month after the product started selling, we found that we only sold 2-3 a day, and sometimes there were no orders for a whole day. The other party said it was normal and it usually takes three months to see improvement. After a while, after learning some Amazon-related knowledge on our own, we found that the agent was simply fooling us. But at this time, after accounting, we had invested nearly 200,000 yuan."

A senior cross-border e-commerce insider said that there is an inherent contradiction between agency companies and sellers. Sellers want profits, while agency companies want service fees and sales revenue sharing. Therefore, this is not a viable business model. But in fact, there must be a reason for the agency to develop to its current scale. It is undeniable that there are indeed many problems in this industry, but there are also many agency companies that really want to help sellers achieve excellent results. We cannot generalize.

At present, some big sellers in the industry, such as Anker Innovations and Tongtuo Technology, will also expand their agency business when their own businesses are doing very well. These big sellers are not lacking in operation talents, overseas experience and resources. Obviously, they are more credible in the agency market and are more likely to help sellers achieve profitability.

Therefore, for companies that have agency operation needs, what they should do is learn to identify whether an agency operation company is reliable.

First of all, I want to emphasize that companies that want to cooperate with an agent need to recognize a reality, that is, no matter how strong an agent is, it cannot guarantee that the business it operates will be 100% profitable. If it can, it is a pure liar. Or from another perspective, if it can really guarantee 100% profit, why doesn't it do it itself, but share a piece with you? Therefore, you must be rational when choosing an agent, and you can't be blinded by some "gorgeous" promises and false propaganda, otherwise it is easy to be deceived.

In this regard, a seller who used to work as an agent operator also said: "Generally, the factory's own supply chain is combined with the agent's strong promotion ability. The factory builds a shipping channel through the agent, and then takes the link back to operate it by itself after success. Only then can there be relatively good results. If you just throw money in and expect the agent to help you make money, it's basically impossible."

With this psychological preparation, you can be more rational when looking for an agent. So how do you choose a reliable agent?

The first is to do a good background check, including company registration information, any bad records (litigation, administrative penalties, etc.), main business, successful cases, etc., and also to inquire about its word-of-mouth evaluation on social media and cross-border circles to see its reputation and customer satisfaction.

Second, be wary of low prices. This does not mean that you must choose a high price, but if the price is too low, you should be careful because the labor cost is here. According to Zhiyouji data, nationwide, the most Amazon operators earn 6-8K. If you only look at first-tier cities such as Beijing, Shanghai, Guangzhou and Shenzhen, it will be more expensive. For example, in Shenzhen, where cross-border e-commerce is concentrated, the salary can rise to 10-15K. For the salary of just one operator, the agency must invest at least 72,000 yuan. So when an agency offers a price that is much lower than the market price, it either hires operators who do not have high salary requirements and lack experience, or one operator manages multiple stores.

Not long ago, an employee of an agency company revealed that at most they needed to be responsible for products from six factories, but their energy was only enough to manage the store of one factory, and they had no energy to manage the other five.

The third is to understand the personnel structure. There are several aspects that need to be paid attention to during the process. The first is to look at the ratio of sales staff to operations staff. If a company has more sales staff than operations staff, it is likely to be unreliable. The second is to look at the operation experience. Operation is the cornerstone of the agency operation company. Experienced operations can help sellers better manage their stores and achieve higher performance.

However, Chen Heming, founder of Tiannuoxi Overseas, also said that to judge whether an agency operation company is reliable, you should not look at what it says, but what it does. So in the final analysis, there are three main things that sellers should pay attention to: First, the marketability of the product, that is, whether the product is suitable for online market sales and which online channel it is suitable for sales; second, the profit margin. If the profit margin is not 20%, and the agency operation company keeps encouraging it, there must be a problem; third, the investment return cycle. The agency operation company should clearly inform customers how much money to invest, how much the marketing cost is, and how long it will take to pay back and make a profit. If these data cannot be given, it is obviously a muddled account, and problems are only a matter of time. A good agency operation company will pursue benign and long-term cooperation, so before cooperation, it will definitely give customers enough information to help them make decisions and judgments.

However, after this series of screening, sellers often find that there are not many agency companies that can eventually cooperate and achieve a win-win situation. In addition, there are too many pitfalls in this industry and disputes occur frequently, so another agency operation model came into being: private agency operation.

For example, some factories will look for operators who have many years of operating experience in cross-border e-commerce companies, and ask them to help with part-time operations after get off work or on weekends, but leave product selection, logistics, procurement, and advertising to others. In comparison, this method is flexible, low-cost, and more suitable for small and medium-sized enterprises.

Private agency operation becomes one of the options, and the part-time market is getting hotter

Now more and more factories are developing towards the integration of industry and trade, and export has become a consensus among many traditional factories. However, it is no secret that factories are being exploited by bad agency companies. Considering that the risk of full-service agency operation is too high, many factories that dare not take risks but want to get a share of the cross-border e-commerce market have adopted the relatively safe model of private agency operation.

This model has three advantages: First, the initiative is still in your hands, and you can promptly learn about any problems or stop losses in a timely manner; second, the cost is relatively low; third, to a certain extent, it can prevent the situation mentioned in the previous article where sellers choose red ocean products and then use advertising to pile up sales and get a share of the profits.

Not only factories, but also some sellers will consider private operation. They do this for many reasons. Someone who recently hired someone to operate an Amazon store said that he was in a small city and it was difficult to recruit people, and he couldn't keep them, so he considered using the agency operation method to solve the problem.

For example, an Amazon operator with three years of experience said that he recently received a cooperation request from a traditional foreign trade factory. The other party expressed willingness to invest in Amazon, and he only needs to be responsible for the store operation.

Another Amazon operator with five years of boutique experience also said that a factory was looking for him to operate a product on its behalf. "I am only responsible for the operation. The image processing is outsourced to other factories. The net profit is split 50-50 between the two parties."

Against this background, private agency operations have gradually emerged.

Amazon is a mainstream platform for Chinese cross-border e-commerce sellers to go overseas, with its large scale, high-quality users, strong freight logistics management system and considerable profits. Therefore, part-time Amazon operation posts are not uncommon in the cross-border circle.

An Amazon operator posted that he had three years of experience in operating the US site and one year of experience in operating the European site, but had resigned and now wanted to work full-time as a private agent. At the same time, he also said that he had certain resources and could help with product selection, and that if there was no profit within two months after delivery, he could terminate the cooperation agreement.

Now with the addition of human chat GPT, many basic operational tasks have been replaced by technology, and a lot of operational energy has been released, so this phenomenon of "seeking part-time jobs" has become more common. Some factories are also willing to find this type of private operation, but this situation is obviously not welcomed by the boss. The reason is not just that they may do other work during working hours, but it involves commercial secrets. For example, it may be a competitor of the company, doing the same category, etc. Not long ago, the head of a company said with great distress that he had discovered that his employees were working part-time outside and was struggling with how to deal with it. Most of the advice given by some peers is "directly fire them."

Of course, private agency operations also have disadvantages, such as weak professional capabilities and the inability to have the support of a full team of resources like an agency operation company when encountering problems.

Now many cross-border e-commerce giants have launched a full hosting model. In a sense, these platforms are the largest agent operations. It can be seen that agent operation has become a trend, but it is also an undeniable fact that there are many pitfalls in this model. If you want to find a reliable agent operation company, sellers need to spend more time and pay attention to identification.

Amazon operation