New regulations have come to Amazon! Do all US stores need to be re-evaluated?

Do US stores on Amazon need to be re-evaluated due to new regulations?

Industry News

New Amazon regulations have arrived! Do all American stores need to be re-evaluated?

Many Amazon sellers have received notifications to re-verify their accounts, requiring “high-sales” sellers to complete relevant information verification. The wide scope of “high-sales” coverage has made almost every Amazon seller worried. In the future, seller accounts may face annual reviews, and purchased accounts should be trembling!

The platform requires sellers to complete relevant verifications within a designated time limit, otherwise their selling accounts will be suspended. Some sellers have already been affected, and their sales services have been restricted. Subsequently, old sellers shared clearance methods and based on this, their stores have been restored.

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A large number of seller accounts have been re-evaluated and have erupted collectively

On May 11th, a large number of sellers received emails from Amazon requesting account re-verification.

The general content of the email is: The “Consumer Notification Act” will take effect in the United States on June 27, 2023. This law stipulates that high-sales third-party sellers have an obligation to provide their business information, and Amazon has an obligation to collect, verify, and disclose this information.

This new law requires Amazon to verify the relevant information of high-sales sellers. In addition, sellers must prove that their information is up-to-date every year. Amazon also requires that sellers complete verification within a designated time limit, otherwise their accounts will be suspended. If sellers have already completed the required information verification, there is no need to submit it again.

Many big sellers have expressed:

– Today, our account received an email as soon as we logged in;

– Our company’s two main accounts may need to be explained, so we will first discuss with the boss;

– We also received one today, which was registered under a personal account and it’s difficult to find that person.

Everything that should come has come, and not a single one is missing. The number of visitors trying to set up their account information in the morning was so high that the system crashed.”

Wait a minute…

According to informed sources, Amazon will release a notice to carry out a secondary verification for accounts (primarily in the US) before 2022, and all US stores before 2022 will need to be audited again.

It has already been confirmed by someone claiming to be an Amazon merchant manager in a seller group.

Amazon has new regulations and seller accounts will be audited every year

Before sending the verification emails to sellers, Amazon has already released an announcement with the same content as the email. This has caused a great uproar among sellers. The following are the most concerned issues:

1. Scope of audit. The scope of the audit includes two elements, first, the seller’s sales volume has reached (or exceeded) 200 units for 12 consecutive months in the past 24 months; second, the seller’s total transaction amount exceeds $5,000. This range is very broad.

According to this standard, almost all sellers will be audited.

2. Audit materials. Amazon requires the submission of materials including: seller’s identity information, government-issued identity proof documents, company address, bank account information, work email address, work phone number, and taxpayer identification number. The above information must be for the seller’s company name or the authorized representative of the seller.

Many sellers are troubled by issues such as changes in business license holders and inconsistencies between the submitted account address and the actual office address. Many peers believe that those who buy accounts will suffer this time!

3. Audit timing. Amazon requires sellers to verify every year, which means that seller accounts will face audits every year in the future.

An experienced seller analyzed that according to the new regulations, Amazon seller accounts will face: audits by individuals and annual audits, and if failed, they will be blocked. The basis for this is the “Consumer Notification Law”. However, there should be fewer buying and selling accounts in the future, which also has a certain positive significance.

How should sellers pass the audit?

Some sellers have received notices from Amazon Sales Services that their access is restricted.

The notification prompts sellers to provide information about their business, identity, government-issued photo ID, bank account or credit card statement, business license, etc. within 60 days.

How to deal with the new round of audits? The seller “Amazon Fifth Master” provides solutions based on different situations:

1. The company information corresponding to the account is normal, and the information is complete. If the Amazon account is registered in the name of the company, the business license has not been cancelled, and the legal person is willing to cooperate, the information can be submitted as required, and the audit can be passed quickly.

2. The company address or legal person has changed, and the information is complete. When filling in the information, fill in the latest address and legal person information, and submit new business license pictures and legal person information.

3. The company has been cancelled, but the legal person can be contacted.

4. The legal person cannot be contacted, and the information of the purchased account is incomplete. Replace the old information with new business license and information, and use a completely different set of information to pass the audit. Method: First, update the company and address in the tax information department, and then submit new information as in situation 1. (The steps in the tax information should not be changed, but it is recommended to modify them first.)

5. Individual account sellers. Solution: (1) Open a case and tell the customer service that it is a personal account, and ask the customer service to provide a link for personal information audit, and submit an ID card and credit card statement. (2) First register the business license, and then follow the process in situation 1.

Are there alternative options for account verification?

What is the “Consumer Notification Act” that triggered Amazon seller account verification? How are the related requirements for platforms and third-party sellers specified?

It is understood that the U.S. “Consumer Notification Act” was passed on December 29, 2022, and defined the responsibility of online platforms. It aims to “prevent anonymous sellers from selling counterfeit goods online, and prevent organized retail criminal groups from stealing goods from stores and reselling them online in bulk.”

According to the information in the bill, platforms need to verify sellers, and Amazon’s requirements have also been clarified. The information in the bill states that:

If a seller cannot provide verification information, there are exceptions and alternative options.

– If the seller has a separate return address, the platform does not need to require the seller to provide the actual business address;

– If the seller does not have a business address, or has a residential and business address, the platform only needs to disclose the seller’s country or state of residence, and recommend that consumers contact the seller through other means provided on the platform;

– If the seller does not have a separate business phone number, the platform also does not need to disclose the seller’s phone number, and can notify consumers to contact the seller through other means, such as the platform’s messaging system.

However, these exceptions also have some limitations. If the platform discovers that a large number of sellers have provided false information, and the seller has not corrected the information or responded to consumer inquiries within 10 days of receiving notification from the platform, the seller’s sales activity must be suspended until these issues are resolved.

Whether these exceptions are effective depends on the specific actions of the platform. In addition, the bill stipulates that states may not enact regulations that conflict with the terms of the bill, but does not explicitly prohibit the enactment of additional requirements. The bill imposes a fine of $46,517 for each violation. Therefore, platforms will take this matter seriously.

It is worth noting that the impact of the bill is not only on Amazon, but also on multiple online platforms and numerous third-party sellers such as Walmart and eBay. Cross-border sellers need to make corresponding preparations in the future.

The opening time of TikTok’s US shopping platform has been postponed to June

On May 10th, the Wall Street Journal reported, citing people familiar with the matter, that ByteDance, the parent company of TikTok, has postponed its plan to open TikTok Shop to the whole of the United States this spring until at least June. However, a TikTok spokesperson denied this in a statement to Fortune on the same day. The spokesperson said, “The launch of TikTok Shop in the United States has not been delayed. We are constantly testing and improving, and will continue to expand testing in the United States and invite more merchants to join because consumer interest in TikTok Shop is increasing.” In fact, with the Biden administration suggesting that TikTok may need to sell its US business to continue operating in the United States, not only TikTok, but many Chinese e-commerce companies that have entered the US have been affected by risks such as intensified geopolitical tensions between China and the US, and Shein and Temu have been accused in the United States. Under various factors, the number of US merchants joining TikTok Shop is not large. According to The Information, when TikTok Shop was launched in the US last November, there were hundreds of sellers who joined to sell, but as of March this year, the number of sellers who actually sold in TikTok’s US store was less than 100. This means that some merchants chose to withdraw from the operation, and US technology media The Information previously reported that US merchants’ acceptance of the TikTok Shop model was low. At the same time, insiders also revealed that ByteDance is reducing its team to help Chinese merchants sell on TikTok Shop, and is committed to localizing the management and employee team to attract more high-quality local sellers. In order to prevent TikTok from being banned in the US, ByteDance has also launched other applications in the US, such as Lemon8, which is currently popular. However, as GaryWa, a consultant at the Boston Consulting Group, said, if TikTok is banned in the US, customers will also be concerned about using other products from ByteDance.

It is reported that in 2022, ByteDance’s annual profit reached $25 billion, surpassing Alibaba and Tencent for the first time, but the rapidly growing TikTok business department still has continuous losses. Despite the difficulties, developing e-commerce business using TikTok in the United States is still an urgent task for ByteDance, especially since e-commerce is another leg of ByteDance’s business in the United States, as digital advertising in the United States has slowed down.

Did Shopify and Amazon lose their fight?

Since 2019, Shopify has enjoyed the scale growth brought by the global e-commerce boom and ambitiously began building a logistics and fulfillment network to seize the advantages of e-commerce platform giant Amazon. Now, Shopify has announced the suspension of the “supporting task” of building logistics, and the battle can be said to have ended in a disappointing manner.

In February, Shopify announced Logistics by Shopify at the Winter ’23 Edition conference. According to their official statement, “Through a network of 20+ distribution and operations centers across the United States, the Shopify logistics network provides a one-stop solution and logistics services from the port to the doorstep for businesses of any size.”

It is worth mentioning that on April 20th, Sally, the head of the Shopify logistics market in China, introduced the business in a public speech. Unexpectedly, half a month later, this business was sold to Flexport.

Source: Shopify Logistics Technology Logistics Service

Xia Guang She learned that Shopify’s logistics network is composed of the Shopify Fulfillment Network (SFN), Deliverr, and 6 River Systems (6RS), which allow merchants to track shipments. In addition to selling Deliverr, Shopify also sold warehouse automation company 6RS to British grocery delivery company Ocado Group.

Shopify is trying to establish its own logistics and fulfillment network, driven by anxiety caused by its competitor Amazon. Shopify aims to complete its e-commerce omni-channel management service.

Chen Hong, the manager of Shopify’s independent station, told Xiaguang Society that there are three main ways to handle logistics when setting up a shop using Shopify’s independent station. The first method is to use dropshipping to synchronize logistics information to the background, such as using Amazon’s Fulfillment By Amazon (FBA); the second method is to use SFN standardized logistics, which usually incurs higher costs; the third method is for the merchant to arrange logistics themselves, such as small merchants using international small package direct mail.

In fact, in terms of logistics distribution capabilities, Shopify has always wanted to compete with Amazon’s FBA. Without logistics infrastructure, Shopify hopes to make up for its shortcomings through acquisitions.

In June 2019, Shopify announced that it would invest $1 billion to establish its own first-party fulfillment service, SFN. In October 2019, Shopify officially began competing with Amazon FBA by acquiring 6RS for $450 million.

In May 2022, Shopify announced that it had reached an agreement to acquire US logistics service provider Deliverr for $2.1 billion. After the acquisition, SFN and Deliverr will merge to improve Shopify’s one-stop logistics service capabilities. Most products sold by sellers within the US and Canada can be delivered within two days.

However, everything is not so rosy. With North America and Europe relaxing pandemic control measures, as well as a global economic downturn, Shopify’s performance and stock prices have plummeted. According to its financial report, in Q4 2021, Shopify’s revenue was $1.38 billion, a year-on-year increase of 41%, but it incurred a net loss of $371 million. In response, Shopify stated that “the e-commerce industry bonus brought about by the pandemic will only last until the first half of 2021.”

The difference between the independent website model, such as Shopify, and third-party e-commerce platforms lies in the fact that merchants can manage their brand well and have control over their customers, which is also known as the DTC (Direct-To-Consumer) model in the cross-border e-commerce industry. However, as an independent website, this model requires merchants to be able to obtain traffic and customers themselves, as it does not have the “built-in traffic” of e-commerce platforms.

Berry pointed out to Xiaguangshe that, focusing on customizing and designing Shopify websites, Shangrui’s Shopify independent website brand has more than 100 3C electronic product brands. According to her understanding, for many brand merchants, the goal of creating an independent website is not primarily for profit, but for brand building, such as the ability to directly implement brand activities, which is difficult to achieve on e-commerce platforms like Amazon.

“For brands, sales on Amazon are definitely higher, but the advantage of independent websites lies in brand effect, and the sales of independent websites are also increasing,” she said. Consumers go to Amazon like they are going to a supermarket, while the official website is a brand experience. Most merchants will start with sales on Amazon and then shape their brand through their independent website. More than 80% of overseas brands operate on both Amazon and independent websites at the same time.

Obviously, the relatively low cost of using Shopify to open a store is an important reason why many merchants choose it, but this also means that as a SaaS website building platform, Shopify’s profit advantage is not as obvious as that of e-commerce platforms like Amazon.

From the financial report, Shopify’s revenue mainly comes from the value-added service revenue of the Shopify merchant solution, such as the extracted GMV commission and Shopify Payments payment processing fees, as well as subscription solution revenue. In the first quarter of 2023, the revenue from the Shopify merchant solution increased by 31% to $1.1 billion from the previous year, which is its main source of revenue.

In terms of scale, Amazon and Shopify are not in the same league.

Shopify wants to compete with Amazon’s FBA business, and Amazon does not underestimate Shopify, especially in its desire to attract a massive number of high-quality brand merchants. According to the latest data released by Shopify statistics in May, more than 4.39 million e-commerce websites are built using Shopify. Shopify is used by online sellers in over 175 countries/regions worldwide, with approximately 63% of Shopify stores located in the United States.

In April 2022, Amazon launched the heavyweight service Buy with Prime, allowing sellers to use a range of services, including free delivery and seamless checkout experiences, to set up their third-party stores on Amazon.

Image source: Amazon official website

It is reported that Amazon and Shopify are trying to collaborate, and negotiations are underway on how to integrate Buy With Prime.

However, in September 2022, Shopify sent a warning email to sellers emphasizing that “orders using Amazon Buy with Prime on Shopify will not be protected against fraud, which could lead to customer data being stolen.” This “handshake reconciliation” that the world thought was possible seems unlikely.

As we enter 2023, Shopify’s attitude has changed somewhat. In February 2023, during Shopify’s fourth-quarter earnings conference call, several Shopify executives expressed optimism about Amazon’s Buy with Prime feature and began accepting the addition of the “Buy with Prime” feature to their website.

“We believe that it is a good thing for any company to provide merchants with infrastructure to sell more products. Therefore, we are currently ‘negotiating’ with Amazon to discuss integrating the Prime purchase service into our platform, and we will continue to work hard to create a better experience for our merchants in the future.” Accepting Buy with Prime may also be a compromise for Shopify because it cannot provide sellers with complete logistics services on its own.

However, the report shows that since Amazon officially launched the Buy with Prime service in 2022, only a few brands have chosen to adopt Buy with Prime.

However, Shopify may not have given up the battle with Amazon. Shopify has handed over the logistics battle with Amazon to Flexport. In fact, in February 2022, Shopify participated in Flexport’s E-round financing with USD 935 million.

In today’s economic environment, Shopify can only step back and give up the direct confrontation with Amazon’s logistics. Shopify’s brand moat is also an advantage area that Amazon is currently unable to defeat. The two may continue to compete with each other.

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