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'Made in China, sold on Amazon' troubles continue as US$314 million sale of online merchant Patozon drags on

The former owner of Patozon, one of the biggest "made in China, sold on Amazon" merchants, has slapped online fast fashion retailer Shein and another firm with a lawsuit for non-payment of the stakes in that business they had agreed to buy.

Global Top E-commerce announced the legal action in a filing to the Shenzhen Stock Exchange on Wednesday, indicating that the company has not yet received 53 million yuan (US$8.3 million) in overdue payment from Shein and Xiamen Yiwei Yihang Investment Partners since it entered into a 2 billion yuan sale of Patozon to a group of investors early last year.

Shein and Patozon did not immediately respond to a request for comment on Thursday.

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TikTok owner ByteDance and Chinese smartphone giant Xiaomi Corp were the major investors in the Patozon acquisition.

A cross-border trading company based in the Jianghua E-Commerce Industrial Park on the outskirts of Shenzhen, Patozon was once a high-flyer in the "made in China, sold on Amazon" community, with the potential to dominate the global market for electronics accessories such as headphones and keyboards.

The firm's business, however, took a nosedive after its flagship online store on Amazon.com, Mpow, was shut down by the US e-commerce giant in April last year over suspected abuses of its customer review system.

The ban on Mpow came a month after Patozon's acquisition was announced. Global Top E-commerce warned in August last year that Mpow's predicament was expected to "slow down the collection of payment". At that time, the Shenzhen-listed company already received nearly 1.4 billion yuan from the sale of Patozon.

Global Top E-commerce's lawsuit shows there may be more signs of trouble in the "made in China, sold on Amazon" community, following the US e-commerce firm's extensive crackdown that removed thousands of Chinese sellers from the platform.

A total of 615 million yuan from the Patozon sale remains unpaid, according to Global Top E-commerce's filing on Wednesday. That includes 326 million yuan from investment firms representing Patozon's founders and senior management team, as well as 236 million yuan from Achiever Ventures III (Hong Kong), which wanted to pull out of the deal.

Achiever Ventures requested to terminate its deal because of "material adverse change" in the business of Patozon, according to Global Top E-commerce. It said legal action against the Hong Kong firm will be considered if the two sides fail to reach an agreement.

'Made in China, sold on Amazon' community grew in 2021

Checks on Thursday showed that while the online store pages for Mpow were still up on Amazon, product listings remained unavailable. An internal notice in August last year revealed that Patozon suspended its research and development team for six months.

The US e-commerce giant, meanwhile, said in January that the "made in China, sold on Amazon" community continued to grow in 2021, despite its crackdown on paid reviews and other violations.

The number of new Chinese sellers added to the Amazon platform recorded double-digit growth last year, according to Cindy Tai, the US firm's vice-president for Asia Global Selling, in a video released during the company's seller conference in January.

But a report in the same month by business intelligence firm Marketplace Pulse showed that Chinese merchants made up 33 per cent of Amazon's top sellers by the end of 2021, down from 40 per cent at the start of last year.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2022 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2022. South China Morning Post Publishers Ltd. All rights reserved.