Another ‘Made in China, sold on Amazon’ merchant loses 54 stores, with US$6 million frozen by the e-commerce giant

The parent company of Shenzhen-based Tomtop Technology said many of its Amazon shops have been down since July, possibly because of ‘inappropriate reviews’
Amazon has removed several Chinese merchants this year over incentivised reviews, an unprecedented move that has bruised Chinese cross-border e-commerce

Amazon

Iris Deng

Published: 12:40pm, 6 Aug 2021

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Amazon.com has removed dozens of stores from yet another large Chinese company using the platform to sell overseas, with millions of dollars having been frozen since late July amid a continuing crackdown from the US e-commerce giant on violations of its product review policies.

A total of 54 Amazon stores operated by Tomtop Technology, founded in Shenzhen in 2004, have gone dark, and Amazon has frozen more than 41 million yuan (US$6.3 million) in funds, parent company Yiwu Huading Nylon Co said in a corporate filing on Thursday.

“The reason could be the inappropriate reviews for some of the products, which is allegedly in violation of Amazon’s platform rules,” Yiwu Huading Nylon Co said.

Banned from Amazon, Chinese sellers weigh legal options

Tomtop is now one of several Chinese merchants to be caught up in a campaign from Amazon to weed out violations of its terms of service, especially incentivised reviews. Using what’s been dubbed the “made in China, sold on Amazon” model, Chinese manufacturers have seen booming cross-border e-commerce sales by selling on Amazon during the pandemic. The platform’s crackdown on review abuse, though, has been a huge blow to the industry.

Amazon is Tomtop’s biggest sales platform, according to the company, and the suspended stores accounted for 18 per cent of its total sales in the first half of 2021. The company sells “hundreds of thousands” of products, from gaming gadgets to garments, to overseas consumers through different channels, according to its website.

Tomtop has filed an appeal to the Seattle-based online retailer to restore the stores and to unfreeze its funds, and it has hired lawyers to prepare for an arbitration with the platform. The merchant also plans to expand its business through its own website, eBay, AliExpress and Lazada, it said.

AliExpress and Lazada are operations of e-commerce giant Alibaba Group Holding, owner of the South China Morning Post.

Tomtop did not immediately respond to requests for comment.

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While questionable practices like paying for positive reviews often go unchecked on Chinese e-commerce platforms, Amazon kicked off an extensive clean-up campaign targeting such activities in May this year.

Amazon officially banned incentivised reviews in 2016, and it has regularly taken action against them. However, the scale of the current crackdown is unprecedented. At least 50,000 Chinese seller accounts have been affected, causing a loss of more than 100 billion yuan for the industry, according to a report by Shenzhen Cross-Border E-commerce Association in July.

Amazon’s campaign has hit some of the biggest Chinese brands on its platform, including Aukey, Mpow and 340 stores owned by Shenzhen Youkeshu Technology Co. Youkeshu said more than 130 million yuan of its funds have been frozen by the e-commerce giant.

“To help earn the trust of customers, we devote significant resources to preventing fake or incentivised reviews from appearing in our store,” Amazon said in a statement in June explaining the sweeping removal of third-party sellers.

Banned from Amazon, Chinese sellers face ‘growing pains’, says Beijing

The affected merchants have been scrambling to minimise their losses. Some sellers attempted to jointly file a lawsuit against Amazon, but they later shelved the plan when they failed to reach an agreement on their strategy and demands.

The extensive clampdown is also a blow to Beijing’s ambition to promote cross-border e-commerce as a new model for trade. Last month, Li Xingqian, director of the Foreign Trade Department at the Ministry of Commerce, said the cross-border e-commerce industry is “going through some growing pains” as a result of Amazon’s decision, but he added that China would help its companies comply with international standards and protect their “legitimate rights and interests”.

In recent years, China-based merchants have become a significant presence on Amazon. In January, they represented 75 per cent of all new merchants on the platform, according to a report by consultancy Marketplace Pulse. The share of these sellers on Amazon’s US site has surged to 63 per cent this year, up from 28 per cent in 2019.