Selling on Amazon is HUGE in China. In fact, by our own research, Chinese sellers make up over 63% of all third-party sellers on Amazon.
In this article, we’ll look at how many Chinese sellers there are more closely and the tactics being used by Chinese Amazon sellers in 2022 to manipulate the platform. We’ll also re-explore some of the old tricks they’ve been using for some time now.
How Many Chinese Amazon Sellers Are There?
According to our research that we collected (see our related article Amazon Third Party Seller Breakdown by Country) over 63% of third party sellers are from either mainland China or Hong Kong.
Sellers from the United States by comparison makes up just 34.8% of all third party sellers.
It’s also estimated that there are 1,500,000 active sellers on Amazon. So by doing some simple math, there are likely close to a million Chinese third party sellers on Amazon.
How Do You Identify a Chinese Seller on Amazon?
Amazon has made it very easy to see just who is a Chinese seller. In 2020 they started revealing every seller’s address information so all you need to do is to click a Third Party Seller’s name and it will bring up that Seller’s address.
Why Are There So Many Chinese Sellers?
Let’s start off with a love triangle: Amazon is in love with Chinese entrepreneurs, Chinese entrepreneurs are in love with Amazon, and the Chinese government is in love with Amazon. Let’s examine why the love affair exists and also how many Chinese sellers there are.
Why Chinese Entrepreneurs Love Amazon
There are arguably a few other countries as comfortable with ecommerce as China. The two largest sites in China, JD.com and Taobao.com have, respectively, $67 billion and $40 billion in revenue (which, when combined, is over 40% more than Amazon’s revenue). When you combine this with China’s rich manufacturing background, it’s no wonder the dream of ‘selling on Amazon’ is huge.
There is also no shortage of online marketers selling this dream. One popular Chinese e-learning website has dozens of courses covering every selling on Amazon topic imaginable at prices ranging from $5 to $100.
Why Amazon Loves Chinese Sellers
Amazon’s mission is to provide customers with the lowest priced products 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.
One of the ways Amazon actively recruits more sellers is by routinely holding summits in Mainland China. These conferences are now held in several cities across the country each year and attract thousands of people, both those already selling on Amazon and those looking to sell on Amazon.
Just How Much Are Your Competitors Importing from China?
It’s not just Chinese sellers—your US-based competitors are selling products from China, too.
Custom import records are public information in the United States, and there are multiple tools that allow you to simply search for a company name and see exactly how much these companies are importing from China.
My favorite tool for this is Jungle Scout’s Supplier Database tool which costs less than $50 a month (other more expensive options include Import Genius and Panjiva). These tools will neatly summarize all the information included on a particular company’s Bill of Lading information such as product type, quantity, and supplier name/address.
Why the Chinese Government Loves Amazon
At the same time, the Chinese government is hungry for anything cross-border ecommerce. Why? Cross-border ecommerce means exports, something the Chinese government is desperate for, especially in the midst of a trade war with the U.S.
In Shenzhen, the Silicon Valley of China, the Chinese government has helped develop numerous industrial parks such as China South City (华南城) devoted almost entirely to ecommerce sellers. Provincial governments have also gotten onboard like Zhejiang who has developed “Cross-border E-Commerce Experimental Zones” focused on promoting cross-border ecommerce to local manufacturers and sellers (Zhejiang claimed to have over roughly 80,000 cross border sellers).
What (Malicious) Tactics are Chinese Sellers Using to Get Ahead?
There are several malicious selling strategies being used by Chinese sellers including:
- Fake reviews
- Counterfeit products
- Sabotaging competitors’ product listings
- Variation abuse
- Stealing internal Amazon data
I’ll review how each of these tactics is employed below.
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’s no surprise that it’s 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. Both of these practices of getting reviews were frequent in 2018 and continue in 2019.
Fake review companies (almost always in China) open hundreds or thousands of fake Amazon accounts known as “zombie accounts”. They then emulate “real” customer browsing behavior so as not to arouse Amazon’s suspicions. According to one Chinese selling consultant, who wished to remain anonymous, fake reviews generally start at $3 to $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 in the form of extended warranties and future discounts.
Amazon has taken measures to fight fake reviews by blocking products from receiving any new reviews after they have received a suspicious influx of positive reviews. However, fake reviews continue to be a problem plaguing the platform.
Counterfeit Products and Listing Hijacking
The next malicious way in which Chinese sellers are getting ahead is through offering counterfeit products.
Amazon has a GIANT counterfeit product problem. In it’s earning report earlier in the year, Amazon admitted as much stating “We also may be unable to prevent sellers in our stores or through other stores from selling unlawful, counterfeit, pirated, or stolen goods, selling goods in an unlawful or unethical manner, violating the proprietary rights of others, or otherwise violating our policies….In addition…we could face civil or criminal liability for unlawful activities by our sellers.”
The problem largely circles back to the fact that Amazon is a marketplace like eBay that allows multiple sellers to sell the same item. Amazon does not actively audit items sent into its warehouses to determine if they are genuine products or not. Instead, it rests strictly on whether the item has the correct UPC barcode or not. A malicious seller can simply print a fake UPC bar code, apply it to their counterfeit item, and Amazon will deem it to be a genuine product.
This is an issue that we at EcomCrew, as sellers, have experienced firsthand. It’s also one of the problems many members of EcomCrew Premium have experienced as well. One member, Joe Cochran, posted in our private community recently “We’ve battled counterfeit sellers every year since we developed our brand and have lost tens of thousands battling them”.
The issue of counterfeit products, along with fake reviews, is one of the greatest threats to Amazon and they have taken several measures to counter the prevalence of fake products. Amazon implemented the Transparency program in 2018 that gives sellers exclusive and trackable barcodes for its items. Earlier in the year they also rolled out Project Zero which gives sellers greater ability to remove counterfeit sellers from their listings.
While both the Transparency and Project Zero programs are positive steps in the right direction, it does not remove the problem of counterfeits entirely. The onus is still on sellers to monitor their listings and all of the Amazon marketplace to ensure no counterfeiters exist.
Competitor listing sabotage is a frequent strategy used by Chinese sellers.
Because of the way Amazon’s marketplace works (it allows many sellers to use the same listing), it works under a “community contribution” principle (not dissimilar from Wikipedia) where any seller can potentially edit a listing. The premise is that the community will decide the best pictures to describe a product, the description, etc.. Community contributions work most of the time but sometimes malicious actors get out of hand, like when The North Face altered dozens of Wikipedia pages to plug its gear. The same thing happens with Amazon.
For instance, during Christmas 2018, a malicious competitor altered nearly every listing of yoga balls on the first page of Amazon’s search results to show a picture of a PlayStation 4 instead of yoga balls. The consequence? Confused customers either chose not to buy the yoga balls at all or, worse, they bought what they thought were PlayStation 4s and received yoga balls instead.
Amazon has a complicated hierarchy for determining what suggested changes are implemented and which are not. Malicious sellers have figured out that Vendor Central clients, i.e. vendors who sell products to Amazon as opposed to on Amazon, have the highest priority. Subsequently, phony Vendor Central accounts are a hot commodity in the world of black market Amazon services selling.
On Amazon, a product may have several variations. For example, a shirt may come in several different colors or an Instant Pot may come in different sizes.
Again, based on the community contribution model, any seller may potentially add a variation to an existing product. This works fine when a seller adds a variation as a customer would expect, such as a different size or color. Where clever sellers are gaming the system is to add a completely different product to ‘absorb the review juice’ from the existing listing.
For example, if I decided to start selling kitchen spatulas I could potentially add my spatula as a different variation to the Instant Pot listing above and it would appear as though my brand new kitchen spatula had 37,970 reviews as, in most cases, Amazon pools reviews across all variations.
Often though, adding a completely different product as a variation to a popular product gets noticed by Amazon and customers pretty quickly. So clever sellers are going so far as to search for discontinued products in Amazon’s catalog with lots of reviews and add their items as variations to these listings so as not to raise any suspicion.
Leaked Competitor Information from Amazon Employees
It became big news in 2018 that Amazon employees in China were selling stolen internal competitor information to other sellers.
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.
Chinese employees will also resell Amazon customer information. 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 directed towards those customers.
Prices for these reports range widely (invariably the reports are cheaper from Chinese-only websites). A stolen report can start at $20 per piece while individual customer records can go for $3. As one Chinese reseller of this information described to me (he wished to remain anonymous), the price will depend on the riskiness of that employee accessing that information (i.e. the chances of them getting fired).
After EcomCrew broke the news last year, several mainstream media outlets, including the Wall Street Journal, picked up the story and Amazon insisted they would crack down on such leaks, “We hold our employees to a high ethical standard and anyone in violation of our code faces discipline, including termination and potential legal and criminal penalties”. However, Amazon has not closed the leaks. Numerous resellers still offer this service, as seen on the screenshot above.
Secret “Stealth” Amazon Selling Accounts
Amazon is quick to suspend sellers when it detects behavior that goes against its terms of service. Not only do those sellers lose their ability to sell on Amazon, but they also 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, called “Stealth 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, were able to gain an upper-hand in 2018: sales tax and product safety.
In June 2018 the Supreme Court ruled, more or less, that sellers could be held liable for collecting sales tax. The ruling seemed to give the green light for Chinese sellers to gain a competitive advantage over their American competitors, by having a lot more flexibility in NOT collecting sales tax (the premise being that enforcing tax collection on Chinese and other international sellers is infinitely more difficult than on American sellers). However, as of this writing, over twenty states have now enacted marketplace facilitator laws putting the burden of collecting sales tax on marketplaces like Amazon. The result is that American sellers are now, more or less, put on a level playing field.
In terms of product liability, Amazon puts the onus on sellers. 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 no 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.
Amazon has been making some headway in regards to product liability as well. They have now restricted certain categories, most significantly any pesticide-related category, to American sellers only. However, the vast majority of product categories still have no product safety requirements from Amazon.
What Can Amazon Do?
Amazon is largely a victim of its own success. It has provided a platform for tens of thousands of entrepreneurs to make a lot of money off of. And with that surge of cash and opportunity comes the inevitable wave of ill-willed actors.
There are several actionable things that, in my opinion, Amazon could do to help eradicate many of the problems addressed in this article:
- Institute Project Zero for all Brand Registered sellers
- Allow more frequent brand-gating for Brand Registered sellers who experience high rates of counterfeit sellers
- Give sellers more insight into search history and product performance to eliminate the black market for stolen reports
- Do not allow listing contributions from anyone but the Brand Registered owners of products
- Remove the expensive Trademark requirement for Brand Registry to allow smaller brands to more affordably protect their brand
These are five steps that can be implemented relatively easily, which would not only give non-Chinese sellers a more level playing field but also improve the customer experience.
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 knows 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”.
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” which often comes at the expense of sellers. However, seller interests and customers are also frequently aligned. Unscrupulous sellers employing fake reviews and selling counterfeit products help neither customers or well-behaved sellers.
If you’re a seller, have you been a victim of any of the strategies discussed here? If you’re an Amazon customer, have you ever experienced fake reviews or counterfeit products?