Amazon achievement center in Eastvale, California on Tuesday, Aug. 31, 2021.
MediaNews Group | The Riverside Press-Enterprise via Getty Images
Of the numerous acts that may get an Amazon merchant kicked off the positioning, few are as devastating as selling stolen goods. Amazon calls the behavior “illegal and strictly prohibited,” and people accused of such activity might be permanently suspended.
Dozens of small businesses have been booted from Amazon in recent months for purportedly hawking stolen goods from home appliance brands reminiscent of Breville, Keurig, Levoit and SharkNinja. But suspended sellers, who spent years constructing their businesses on Amazon, told CNBC they’d no idea they were selling stolen products.
Amazon has provided limited evidence to back up its claims, sellers said, leaving them scrambling to search out the problematic merchandise. To attempt to get reinstated and save their million-dollar business from potential collapse, they’ve taken it upon themselves to find in the event that they unsuspectingly bought stolen goods from considered one of the numerous wholesalers, closeout businesses and distributors that offer their Amazon inventory.
Amazon’s marketplace of independent sellers accounts for over 60% of products sold on the platform. It’s such a dominant force in e-commerce that it’s often the first and even sole income for third-party sellers. Over the past decade, the rapid growth of the marketplace has fueled a parallel boom in counterfeiters and spammers attempting to game the system, pushing Amazon to ramp up enforcement.
Retailers, lawmakers and trade groups have repeatedly called attention to the expansion of organized retail crime, saying that online marketplaces have contributed to the issue. Amazon’s recent crackdown serves as acknowledgment by the corporate that criminals are trying to make use of the positioning as an outlet for illicitly obtained products.
While sellers can get suspended for any variety of behaviors, from promoting unsafe or expired goods to providing bad customer experience and using inaccurate product descriptions, no allegation is harder to beat than being labeled a seller of stolen items. Those merchants say Amazon has little interest in offering them second possibilities or much of a chance to defend themselves.
CNBC spoke with six sellers who were recently suspended. Each provided us with the names of their suppliers. A review of their invoices, communications with suppliers and other documentation revealed a convoluted web of wholesale and liquidation firms that steadily overlapped, and advertised similar products, including espresso machines from Breville, Keurig coffee makers, Levoit humidifiers, LG computer monitors, Shark mops and vacuums, and Ninja appliances.
In an email to CNBC, Amazon said it’s working with authorities and doesn’t comment “on matters which might be the topic of energetic law enforcement investigations.”
“Amazon doesn’t allow independent sellers to list stolen goods in our store, and we work closely with law enforcement, retailers, and types to stop bad actors and hold them accountable, including withholding funds, terminating accounts, and making law enforcement referrals,” the corporate said.
Buying from the ‘youngest Amazon millionaire’
Two years ago, an Amazon seller — we’ll call him Frank — shifted from selling home goods under his own brand to running a wholesale business. With a lot competition within the marketplace, he viewed it as safer to sell products consumers know and trust somewhat than promoting an unfamiliar brand.
On March 14, his thriving three-year-old Amazon business got here to a screeching halt. Frank, who asked that we not use his real name out of fear of retribution from Amazon and his suppliers, said that is the day Amazon told him his account had been suspended for selling stolen goods.
Frank said Amazon didn’t tell him which of his legions of products were allegedly stolen or offer any details that might help him track down the offenders. If he wanted any shot of appealing the suspension and saving his company, Frank would need to figure all of it out himself.
Amazon would not comment on Frank’s case or another specific sellers, but the corporate said in an announcement that it usually requests “invoices, purchase orders, or other proofs of sourcing” if it has concerns a few seller, and has an appeals process for merchants who consider enforcement decisions were erroneous.
Certainly one of Frank’s suppliers, in response to documents he provided to CNBC, was KZ International, a big wholesale and distribution company owned by Kenzo Sobrie, a successful entrepreneur who has been described as “the youngest Amazon millionaire.”
When Frank contacted Amazon about his suspension, an account health representative told him that KZ had been placed on an internal list of “dangerous suppliers.” Amazon declined to say if such an inventory exists.
In December, KZ’s warehouse in Huntington Beach, California, was raided by the California Highway Patrol, which seized pallets of Dyson vacuums, TP-Link routers, Ninja blenders and Breville espresso machines. Just a few weeks later, law enforcement carried out the same raid on the warehouse of considered one of KZ’s clients.
KZ sued two of its suppliers in March, claiming they provided the business with stolen goods. CHP ultimately recovered nearly $4 million value of products that it determined was “stolen cargo,” in response to KZ’s grievance. Individually, Amazon said it shared information and intelligence with CHP in support of the investigation dubbed “Operation Overloaded.”
Frank still is not certain if his suspension was tied to products from KZ. His store has been offline for nearly 4 months. 4 other merchants suffered the same fate right around the identical time, in response to information provided to CNBC. All of them said they’d never been notified of selling stolen goods of their years on Amazon, and had no idea which of their products had been flagged or the suppliers who may very well be responsible.
Cutthroat competition
Thousands and thousands of sellers from across the globe now make up Amazon’s third-party marketplace. Some go the private label route, selling household goods, clothing or exercise equipment under an independent brand. Others prefer to act as retailers, reselling a whole lot or 1000’s of various products from well-known brands.
Either way, it is a cutthroat, low-margin business that typically involves paying hefty fees to Amazon for warehousing and shipping products in addition to for customer support and promoting. None of that shields a seller from getting duped by a wholesaler which may be providing them with stolen or counterfeit products, and being suddenly shut down.
While Amazon offers a free program called account health assurance, which is meant to guard merchants from getting summarily suspended, Amazon’s seller central site says accounts might be deactivated immediately “if we consider you’ve engaged in fraudulent, deceptive, illegal, or otherwise harmful activity.”
Joe Quinlivan, vp of worldwide robotics, achievement and knowledge technology at Amazon.com Inc., speaks through the Delivering the Future event on the Amazon Robotics Innovation Hub in Westborough, Massachusetts, US, on Thursday, Nov. 10, 2022.
Bloomberg | Bloomberg | Getty Images
Amazon uses technology to trace products from the moment it enters a achievement center, scanning for fraud and counterfeits. When it identifies potential problems, the corporate refers products to investigators and refers cases to law enforcement. For organized retail crime, the corporate has an internal group called the ORC Engagement Team, consisting of law enforcement professionals.
Amazon’s aggressive recent actions coincide with calls from lawmakers and government agencies to root out stolen goods on the positioning after an increase in organized shoplifting, which allegedly led to more stolen items on e-commerce platforms. Recent laws requires online marketplaces to confirm the identity of high-volume sellers with a purpose to prevent fraud.
Suspensions on Amazon are notoriously difficult to beat. Sellers told CNBC that they have been given the possibility to appeal their suspension in a judgment day-style video interview with an Amazon representative, where they’ll make their case for reinstatement. But it surely’s a longshot.
The interview typically lasts about 45 minutes, and sellers are required to supply copies of their driver’s license, tax ID number, invoices, and bank statements, amongst other documents. Amazon is imagined to notify sellers whether or not they cleared the interview inside five business days. But some merchants say they’re still waiting for a solution weeks after their interview date.
“You begin from a guilty-until-proven-innocent standpoint, after which in the event you can prove that it is a mistake, it’s possible to get reinstated,” said Chris McCabe, a former Amazon worker who has spent the past nine years helping suspended sellers get back up and running. “These people cannot produce proof, since the items are stolen or the suppliers won’t cooperate and provides them proof.”
‘It has been devastating’
Amazon sellers are imagined to vet suppliers before they work with them. Nevertheless, unraveling where the products got here from might be difficult, as it is common for resold items to be bought and sold by several parties before being purchased by a merchant and listed on Amazon.
Beyond providing Amazon with receipts and documentation, the sellers say there’s little they’ll do to resolve the situation. Within the meantime, their accounts remain locked, forcing some to put off their employees and even file for bankruptcy.
“It has been devastating to us, truthfully,” said Ricky Sala, who co-owns Oregon Prep Center, which launches and operates Amazon businesses for other firms. “We’re terrified to purchase any wholesale products for patrons straight away because we do not know what’s stolen, what’s not stolen, or what Amazon goes to say is stolen, even when it is not stolen.”
Several of the accounts Sala oversees were suspended in recent months, which has cost his business some clients.
Certainly one of the principal ways suspended sellers from across the country have gotten to know one another and swap stories is thru discussion groups. They found one another through forums, social media and mutual connections. In June, while sharing details of their suspensions with each other, several of them discovered that they’d purchased goods from the identical suppliers.
The Los Angeles area, home to 2 of the busiest trade ports within the country, has emerged as a hotbed for apparent organized retail criminal activity, based on the data provided by suspended sellers.
Several sellers told CNBC that the strategy of sourcing inventory modified through the Covid pandemic. Due to travel restrictions, they were unable to to satisfy prospective suppliers at trade shows or at their warehouses, in order that they would connect over social networks reminiscent of Instagram and Facebook, where they resorted to getting virtual tours of inventory.
Suppliers would nudge sellers to subscribe to their Telegram channel, where they advertise which products they’ve in stock, and the way much they cost. The channels have names like “Amazon wholesales,” “Bulk sales” and “Amazon deals.”
Sala, 28, said plenty of the suppliers he knows who use Telegram’s messaging service are in his age bracket, and like blasting notes to their large groups somewhat than sending mass emails.
“They wish to communicate fully on their phone,” Sala said.
Sellers are encouraged to act fast because the groups can have 1000’s of members and the offers typically get snapped up quickly.
A CNBC review of greater than a half-dozen such Telegram groups showed consumer electronics and small kitchen appliances were a few of the hottest products. Sellers told CNBC they’d often order a whole lot of 1000’s of dollars value of products through these groups.
Regardless that travel reopened because the pandemic eased, much of the method remained virtual. Sellers who desired to visit a supplier’s warehouse to ascertain out inventory might find themselves unable to get hot products because competitors would snatch them up. They couldn’t afford to attend.
To administer costs, sellers rarely touch the merchandise. As an alternative, they depend on distributors to ship products into Amazon’s warehouses, where the e-retailer handles the sorting, packing and preparing of things for delivery through a well-liked program referred to as Success by Amazon, or FBA.
A seller in Miami said in an interview that within the back half of last yr, he began working with a handful of latest suppliers he’d found on Instagram, hoping to expand into the favored home appliances category.
The merchant, who asked to stay anonymous, paid over half 1,000,000 dollars for pallets of air fryers, food processors, and espresso machines, in response to invoices and bank statements reviewed by CNBC.
The documents showed that several of the suppliers claimed to have purchased the items directly from brands or liquidators. The Miami merchant said the suppliers offered the products at “regular wholesale” prices.
On March 17, Amazon suspended his account for allegedly selling stolen items. In correspondence between the vendor and Amazon, the corporate refused to say which products were in violation.
He contacted the FBI, hoping law enforcement might find a way to assist. Officials opened a report, but said there was little they may do without knowing which products were stolen.
One Recent York-based merchant said that on May 6, Amazon froze $17,000 value of “unsuitable inventory,” which an account rep told him signified it was stolen goods. Amazon sent over an inventory of dozens of products that had violated its policies.
“Now we have taken this measure because we consider that your account is offering items which might be unsuitable and can have been used to have interaction in deceptive or criminal activity that harms our customers, other selling partners, and our store,” in response to a duplicate of the notice, which was viewed by CNBC.
The vendor tracked down the products and provided as many invoices as he could to Amazon as a part of his appeal interview on June 1. He was never suspended, however the inventory stays frozen greater than a month later.
Several sellers said they reached out to the attorney general’s office in Amazon’s home state of Washington to boost awareness about what was happening. The attorney general’s office contacted the corporate in June in regards to the suspensions, sources told CNBC.
Amazon confirmed that it’s involved with the Washington State Office of the Attorney General on the subject of organized retail crime but didn’t provide details. A spokesperson for the attorney general’s office said it communicates with Amazon on issue, but declined to comment on specific investigations.
Tracing the stolen goods supply chain
In tracing the provision chain for suspended sellers, some patterns began to emerge.
Not less than three sellers purchased computer monitors, air fryers and other goods from Ngo Wholesale Distributors, also referred to as Ngo Trading Co., which has addresses in Santa Fe Springs, a part of Los Angeles County, and Garden Grove, just south in Orange County.
Tien Ngo, the corporate’s owner, told CNBC in an interview that he has purchased products from other southern California suppliers, including an organization named Stride Trading, which relies outside of Los Angeles.
“They said they weren’t stolen goods, but I never looked into their supply chain,” Ngo said, regarding his conversations with the suppliers. “I didn’t wish to jeopardize the prevailing relationship.”
Stride was listed as a supplier for other suspended sellers who spoke to CNBC. Because Amazon doesn’t provide details on the suppliers, CNBC couldn’t determine if its name has come up repeatedly by coincidence. Stride didn’t reply to multiple requests for comment.
A Keurig Green Mountain machine
Daniel Acker | Bloomberg | Getty Images
One seller said he was told by a Ngo worker that the suspensions were because of the recent CHP crackdown. The worker sent the vendor a link to a news report about CHP’s “Operation Overloaded,” during which officers in May arrested greater than 40 suspects, and recovered roughly $50 million in stolen merchandise, in addition to 20 stolen cargo trailers, multiple firearms and 13 gold bars.
“Chances are high stolen goods or similar ASINs/serial numbers are being bled in to each supply line,” the worker wrote. ASINs refers back to the 10-digit code used to look up products on Amazon’s website.
Complaints filed by KZ, the wholesaler and distributor in Huntington Beach, provide the clearest picture of what happened within the lead-up to the suspensions.
In late March, KZ sued TV Wholesale Outlet, owned by Los Angeles resident Armen Babayan, alleging it sold the corporate $3.8 million value of “illicitly obtained” goods. KZ said it learned the products were stolen following raids by CHP of its facility. Now KZ shouldn’t be only unable to sell the products but can also be incurring “over $376,000 in shipping and storage fees, removal fees, and reserved inventory charges,” it said.
Moreover, KZ said it “has since grow to be the topic of diverse claims by third-parties whose storefronts have been closed or frozen by Amazon due to ‘stolen cargo.'”
Babayan filed a motion to dismiss the grievance on June 14 and disputed KZ’s claims.
KZ filed a separate lawsuit in May alleging one other L.A.-area supplier, Juniper Holdings, sold the corporate over half 1,000,000 dollars value of stolen goods. A portion of those goods was seized by CHP when it raided KZ’s warehouse, the grievance said.
KZ learned some products were stolen months before the raid, in response to the grievance, after a client received a letter from TP-Link warning that routers it had sourced from KZ had been stolen. Juniper told KZ it couldn’t return the merchandise, the grievance said.
Babayan didn’t reply to a request for comment. Juniper CEO Cameron Webb denied the allegations in KZ’s lawsuit.
CNBC reached out to Sobrie, the owner of KZ, quite a few times by phone and text at numbers we found for him in California, Florida and Recent Jersey. He didn’t respond.
The owner of the Huntington Beach property that was raided by law enforcement declined to supply a comment but acknowledged that raids had occurred and said Sobrie’s company was not a tenant.
Kevin Cole, Sobrie’s attorney, didn’t provide answers to questions on his client’s business activities or relationship to Amazon, writing in an email that “the allegations in our lawsuits speak for themselves.”
Sobrie is well-known in Amazon reseller circles. He’s been profiled for his success selling wholesale goods on the positioning and might be seen in Instagram posts posing in luxury vehicles and sharing e-commerce business advice.
Sobrie now runs a recent wholesale company in Recent Jersey, KN Trading LLC, in response to business records filed within the state. Its Telegram channel, which has over 1,100 subscribers, buzzes with recent deals almost every day. A recent video posted on its Instagram page shows a warehouse stacked with boxes of products, and employees loading packages onto UPS trucks. The caption reads, “Able to boost your Amazon business? KN Trading is the partner you would like!”
Meanwhile, the suspended sellers remain desperate for answers as they burn through money. They’re almost certain to miss out on Prime Day, Amazon’s annual deal event, scheduled for next week, and may only hope they’ll rise up and running in time to organize for the vacations, the time of yr when many retailers finally turn a profit.
Within the group chat, they check in with one another almost every day, swapping suggestions for his or her appeal interviews, searching for any approach to increase their probabilities of getting their accounts back.
Certainly one of them wrote in a recent message, “I’m praying all of us get great news very soon and this will probably be a story that ended well.”
WATCH: Amazon shares move down over FTC’s antitrust case