This article covers China’s domination of eCommerce, Amazon’s struggle with Chinese sellers and what you can learn from the giant’s mistakes and finally, how to verify legitimate Chinese suppliers.
44% of global eCommerce is owned by four Chinese companies, putting China at the top of the table when it comes to eCommerce market size. Along with the US, China is expected to generate over 60% of global eCommerce sales in 2021.
On Amazon and other marketplaces, Chinese retailers are dominating with over 200,000 Chinese businesses selling on Amazon and rising. This can be challenging for marketplaces. International regions such as China come with unfamiliar business practices, laws and language barriers. Company data can be patchy too.
China-based suppliers represented 75% of new sellers on Amazon in January 2021
First, to Amazon.
Recently, Amazon revealed that it was struggling to maintain quality amongst its Chinese sellers. As part of a retrospective fix, the marketplace started cracking down in May 2021.
As of September 2021, it has so far permanently banned over 600 Chinese brands across 3,000 different seller accounts from its platform.
This action was in response to fraudulent activity, policy violation and malpractice with things like fake and incentivised reviews.
The ban on fraudulent Chinese suppliers on Amazon was a long time coming. There are
several malicious selling strategies and malpractice being used by sellers including
using and paying for fake reviews to mislead buyers.
Reviews are commonly used by buyers as a way to verify the legitimacy of a seller or a
product. But with a rise in fake and misleading reviews being posted, reviews just aren’t
Improper use of review systems and soliciting fake reviews from consumers by offering
compensation, gift cards and incentives for both positive and negative false reviews is rife.
Amazon banned the practice of incentivised reviews in 2016, but increasingly sophisticated
tactics were used to get around this.
The crackdown and ban on Chinese sellers that were using fake reviews on Amazon came after the Competition and Markets Authority (CMA) launched a formal investigation into Google and Amazon to address concerns that the two were not doing enough to tackle fake reviews.
Attracting new sellers, and the right kinds of sellers, is key to maintaining the
reputation of your marketplace and minimising financial risk. Here's where you need
to take action:
1. Seller verification
Growing marketplaces can't ignore seller verification anymore. It’s crucial for
marketplaces to present buyers with trustworthy sellers, whose business status, legal
and financial integrity has been verified.
This is to avoid onboarding fraudulent sellers, as well as comply with Know Your
Company (KYC) and Know Your Business (KYB) practices and other regulations.
The marketplace operator has an obligation to collect this information and all relevant
supporting documents, whether to integrate with a Payment Service Provider (PSP),
when operating with a payments license or through self-governance as an exempt
2. Streamlined onboarding
When attracting new sellers onto global marketplaces, the challenge often lies in onboarding. This is where many potential trade relationships struggle.
Without a streamlined onboarding process, marketplaces can lose the interest of retailers keen to list their products available for sale.
Marketplaces need a way to facilitate the seller registration process easily, to ensure a seamless, streamlined and simple onboarding process on both sides.
When selecting a KYC/KYB friendly onboarding platform, it is important to consider your future growth opportunities.
Many supplier verification services are regional, so you could be in danger of limiting your company data access, or having to use multiple suppliers. At Detected, we can find and verify any company in the world.
3. Increasing regulation
Marketplaces also need to be aware of how the regulatory environment is changing and what is expected of them, and need to take seller data seriously.
There are a number of growing pressures and responsibilities on marketplaces to collect and report data on sellers, in order to comply with regulations and best practice.
For example, the Anti-Money Laundering standard (AML5) for the prevention of money laundering came into effect in January 2020. This requires businesses to follow KYC (Know Your Customer) processes to verify the identity of those they deal with.
Another example is from global tax authorities. The Organisation for Economic Cooperation and Development (OECD) has published the Model Rules for Reporting framework to address compliance and tax collection challenges.
This means that the burden of reporting seller income to the tax authority will soon lie with the “platform operator” – i.e. a marketplace. Marketplaces must share this data with their sellers too.
We built our Connected Compliance API to offer better seller verification for marketplaces worldwide. To match your marketplace sellers with verified company information, director,
credit and financial data no matter where in the world you operate.
During seller onboarding, Detected enables you to:
Detected is connected to the leading data providers, creating a network of company data sources that allow us to find any company on earth.
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