Amazon has closed 340 online stores of one of its largest Chinese retailers in the first half of this year, as the US-based ecommerce giant ramps up its crackdown against paid reviews and other violations.
The action was taken against stores run by Shenzhen Youkeshu Technology for allegedly violating Amazon’s rules, its Shenzhen-listed parent company, Tiza Information Industry revealed in a statement this week without giving any details.
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The affected stores – the operations of which Amazon had either banned or frozen – made up 30% of Youkeshu’s total retail presence on the platform, according to Tiza. It said more than 130m yuan ($20.08m) of Youkeshu’s funds have been frozen and estimated the retailer’s first-half sales this year to be reduced by 40 to 60%.
Youkeshu’s case marks the latest blow to the “made in China, sold on Amazon” community, comprising mainland retailers that have flocked to the US platform in a bid to reach international customers.
Many of the brands affected offered products that were extremely popular on the platform, regularly appearing in bestseller lists and bearing the Amazon’s Choice badge.
The move follows the Competition and Markets Authority (CMA) launching a formal investigation into Amazon and Google over concerns that neither is doing enough to tackle fake reviews and to determine whether the two sites have broken consumer law.
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By GlobalData“Our worry is that millions of online shoppers could be misled by reading fake reviews and then spending their money based on those recommendations,” said Andrea Coscelli, chief executive at the CMA.
While Amazon has automation in place to detect fake reviews, the suspended Chinese sellers allegedly tricked the platform. They did so by adding product inserts with gift cards in exchange for reviews. Some were also part of discount groups on social networks.
The battle over fake reviews from Chinese vendors is not a new one. In June, Amazon banned three consumer brands under another Shenzhen-based electrics company – Sunvalley Group – for offering gift cards to customers willing to write positive reviews about their purchases. Several weeks prior to that, Amazon blocked listings from electronics vendors Aukey and Mpow for “suspicious behaviour,” according to the South China Morning Post.
Offering gift vouchers or cashback in exchange for positive reviews is a common practice on Chinese ecommerce websites such as Taobao or JD.com.
In 2020, Amazon stopped more than 200 million suspected fake reviews before they were seen by a customer, and 99% of the fake reviews were spotted by the platform’s own detection, according to the company.
In hopes of reaching consumers beyond their home market, Chinese merchants have increasingly turned to larger international ecommerce platforms, including eBay and Amazon.
China-based vendors represented 75% of all new merchants on Amazon in January, according to a report by consultancy Marketplace Pulse. The share of these mainland sellers on Amazon’s US site has surged to 63% this year, up from 28% in 2019.
Beijing has been promoting the development of cross-border ecommerce as a new model to advance foreign trade, with supporting policies including a faster clearance system.
