Entrepreneurship in China is strong – it’s a large part of why China has grown so rapidly in the last three decades. For many Chinese entrepreneurs, the allure of selling on Amazon is their gateway to riches. In fact, professionals estimate that there are over 200,000 Chinese businesses currently selling on Amazon and this number is only expected to rise.
With this chase of seemingly easy money also comes the inevitable tip-toeing into unethical business behavior. In this article, I’m going to show how Chinese sellers are using everything from fake reviews and zombie buying accounts to stolen data from Amazon employees to manipulate Amazon. And this isn’t a victimless act – consumers pay the ultimate price as they’re deceived into believing that garlic press with an Amazon Choice badge truly is the best garlic crusher available, when in fact it may just be the one with the most number of fake reviews.
I should say that, by virtue of having a Chinese wife, I’m obligated to point out that I am not xenophobic and the strategies I describe herein are not exclusive to Chinese sellers. Sellers of nearly every nationality are using similar tactics. However, there’s little doubt that China is often the innovator and at the forefront of many of the strategies I’m about to discuss.
Why Manipulation from Amazon Sellers is Rampant
This article begins with a short love story of two maniacal lovers who can’t escape one another. Amazon is in love with Chinese entrepreneurs and Chinese entrepreneurs are in love with Amazon.
Amazon’s mission is to provide customers with the lowest prices possible. Part of the way to achieve this is to deliver the flattest supply chain, and that means getting sellers as close to Chinese factories as possible. Amazon routinely holds summits in Mainland China and aggressively tries to attract more Chinese sellers. At the same time, the Chinese government is hungry for anything cross-border commerce and actively supports anyone that helps satisfy that thirst. In Shenzhen, the Silicon Valley of China, the Chinese government has helped to develop numerous industrial parts, like the company China South City (华南城) devoted almost entirely to ecommerce sellers.
The result of this infatuation is that Chinese sellers are eager to chase the dream of Amazon riches at almost any cost and Amazon themselves are apt to ignore certain pernicious activities from Chinese sellers.
Using Fake Reviews to Mislead Buyers
It’s no secret that Amazon customer reviews are one of the most important factors affecting a customer’s purchase decision on Amazon. So it should come as no surprise this is also one of the most frequently abused tactics by Chinese sellers. Zach Franklin of AMZKungfu is originally from Detroit but now lives in Shenzhen, China and is a popular non-Chinese Amazon consultant for Chinese sellers. He explained to me that in his experience at least 50% of Chinese sellers are using some form of review strategy against Amazon’s terms of service. As Zach described to me, “To many Chinese Amazon sellers, the question of how to succeed on Amazon has a simple answer: reviews equal sales”.
A Chinese seller’s review strategy can come in one of two varieties: compensating/reimbursing real customers for leaving a positive review or the more extreme technique of making fake orders and leaving positive reviews through zombie Amazon accounts.
Here’s how sellers use these so-called zombie accounts: fake review companies (almost always in China) open hundreds or thousands of fake Amazon accounts. They then emulate “real” customer browsing behavior so as not to arouse Amazon’s suspicions. They even go so far as to use real shipping addresses by contacting real individuals in America (sometimes through stolen customer information from Amazon’s databases) in exchange for compensation and/or free products. According to one Chinese selling consultant, who wished to remain anonymous, fake reviews generally start at $3-5 depending on how likely or not these fake reviews are to be detected by Amazon.
Of course, outright fake reviews aren’t the only way reviews are manipulated. While Amazon banned incentivized reviews in 2016 the practice still exists in various forms, everything from “rebate clubs” where consumers get rebates (often for a 100% rebate of the purchase price) to compensating consumers for leaving positive reviews through extended warranties and future discounts.
Stolen Competitor Information from Amazon Employees
Chinese sellers aren’t the only one employing malicious selling activities to game Amazon. Amazon has thousands of employees working for it within China and some of these employees are stealing seller information internally from Amazon’s databases and reselling it to other sellers and service providers. If a seller can find out certain information about a competitor’s product, such as their sales and page view history, it can be extremely valuable.
This is how it works: mid to senior ranking employees within Amazon China have direct access to Amazon’s internal network that allows them to access private information related to all sellers. Corrupt Amazon employees will steal a business report of any desired competitor showing information such as how many times a product was viewed over a period, how many times a product was purchased, and the total sales of those items.
Sellers can even request an ASIN report that shows exactly what keywords were most likely to lead to a customer purchasing their item. Prices for these reports range widely (invariably the reports are cheaper from Chinese only websites) but one service provider charges $399 for two ASIN reports and a few other reports. Seeing this data can be valuable both for a competitor’s products and a seller’s own products, however, sellers cannot see this data for even their own products – they have to purchase a stolen report from an Amazon employee.
As one Chinese reseller of this information described to me (he wished to remain anonymous) these corrupt Amazon employees leak these reports for around $20 per report, but the price will depend on the riskiness of that employee accessing that information (i.e. the chances of them getting fired).
Stolen Buyer Information
Amazon’s customer database is something that they go to great lengths to protect. They do not reveal to sellers the customer’s email address and recently even removed the seller’s ability to see the customer’s phone number. But for unscrupulous sellers, this information is available – for a cost.
The same employees within Amazon’s China office who are stealing competitor business reports will also steal customer information. All that these corrupt Amazon employees need is the Order Number for a customer order or a link to a product review the customer used. This information can be used in a variety of ways, everything from privately contacting a customer to ask them to remove a negative review in exchange for some type of payoff all the way up to running advertising campaigns to that customer either directly through email or indirectly through a Facebook remarketing campaign. An anonymous service provider who buys this information told me that Amazon employees charge around $3 to get this data.
Secret Amazon Selling Accounts
As I just discussed, Amazon does drop the hammer on unscrupulous sellers that compromise the Amazon marketplace, such as sellers who abuse fake reviews. And when Amazon drops the hammer and suspends a seller, the consequences can be dire – not only does that seller lose their ability to sell on Amazon, they lose the ability to sell potentially hundreds of thousands of dollars or even millions of dollars in inventory. Given these risks, many Chinese sellers secretly open several Amazon Seller Central accounts, despite this being strictly against Amazon’s terms of service. Having multiple selling accounts gives sellers the ability to take higher risks.
Amazon is very good at detecting multiple selling accounts from a single seller and sellers subsequently go to great lengths to hide the identity of these accounts – many Chinese sellers require their staff to open accounts under their names but under control of their company. These accounts are often even used with separate internet service providers to avoid Amazon detecting any IP sharing.
An associate of mine who previously worked for a large Chinese Amazon seller in the pet industry described it to me this way “In our company we literally needed a diagram detailing all of our selling accounts so our staff could keep track of these accounts”.
Sales Tax Evasion & Product Safety
There’s one final area where foreign sellers, including Chinese sellers, are able to gain an upper-hand: sales tax and product safety.
Currently, the issue of whether Amazon or the sellers themselves are responsible for collecting and remitting sales tax lives in a bit of limbo. Amazon now collects sales tax in Washington State and Pennsylvania on behalf of sellers but the Supreme Court in June ruled, more or less, that sellers could be held liable for collecting sales tax. It doesn’t take a CPA to realize that a foreign seller, especially a seller that’s residing in China, is going to have much better-protected assets than his American counterparts.
Amazon similarly puts the onus of product liability on sellers (and courts have frequently upheld the opinion that Amazon bears no liability in defective items). While Amazon has a requirement for sellers to hold at least $1million in product liability insurance it’s little secret that Amazon does not enforce this requirement. And once again, it does not take a law degree to realize that an American business with domestic assets is going to be a lot more susceptible to product liability lawsuits than a foreign business, especially a Chinese one. Does this mean that Chinese sellers are deliberately selling unsafe goods? No. But they are afforded some protection from compensating consumers, that American businesses are not, in the event they do sell unsafe products.
It’s important at this juncture to point out that gaming Amazon is not a tactic exclusive to Chinese sellers. Anyone who has sold on Amazon long enough realizes that sellers employing questionable selling tactics bear all types of passports. I’ve personally met many of them from nearly every continent in the world. As Zach Franklin emphasized, “Most [Chinese] sellers I know just want to build a real, defensible brand. They’re hiring better designers and copywriters, building a real presence off of Amazon, trying out influencer marketing, Adwords, and Facebook. They want to do things in the right way and they’re working from 9 am – 9 pm, 6 days a week to do it”.
If anyone deserves blame, it’s Amazon themselves. The fake reviews that are proliferating in Amazon are one that I believe Amazon is legitimately trying to stamp out as they recognize it’s a giant threat to their trust as a marketplace. However, in my personal experience as a seller, Amazon seemingly allows nearly any selling strategy to slide until a wave of negative press arrives that threatens its revenues. As one Chinese service provider described to me, “Amazon turns a blind eye to the leaking of competitor data from employees. It doesn’t hurt them”. Amazon bills itself as “Earth’s Most Customer- centric Company”. The reality is that Amazon is like nearly every large corporation and only cares about one thing- Amazon.