Cross-border Communication’s net profit is expected to plummet by 600 million yuan, and the shipping fee for free delivery is surprisingly 0 yuan?

In 2022, under the impact of high inflation, sluggish consumption and geopolitical crises, the cross-border e-commerce industry is generally facing the dilemma of declining sales and shrinking profits. The survey found that 60.4% of sellers reported a decrease in orders during the peak season in the second half of last year, of which 22.9% of sellers saw a 30%-50% decrease in orders.

While small and medium-sized sellers are facing sales bottlenecks, the performance of top sellers is also unsatisfactory. Recently, the 2022 performance forecasts of big sellers have been released one after another, and words such as "losses", "revenue decline" and "growth bottlenecks" have become common keywords.

Recently, Cross-Border Communication released its 2022 performance forecast. The announcement shows that Cross-Border Communication's net profit attributable to listed shareholders in 2022 is expected to be 5 million to 7 million yuan, a sharp drop of 99.26% to 98.96% from the same period last year; after deducting non-recurring gains and losses, the net profit is expected to be a loss of 90 million to 120 million yuan.

  ▲ The picture comes from the announcement of Cross-border Communication

As for the reasons for the sharp decline in net profit, Cross-Border Link stated that the main reason was the bankruptcy of Shenzhen Global and the sale of Paton last year, which recognized large investment income.

As the No. 1 cross-border e-commerce stock in the past, Cross-border E-commerce had an annual sales of over 10 billion yuan at its peak, and its market value once soared to 35.6 billion yuan. After acquiring Global Easybuy and Paton in 2014 and 2016, Cross-border E-commerce took advantage of the cross-border e-commerce boom and its performance soared.

However, while the massive distribution model blew up a rapidly expanding performance bubble, it also buried the seeds of the inventory crisis. In 2019, the fuse was ignited, and Cross-border Link suffered a loss of 2.686 billion yuan for the whole year. Its subsidiary Global Easybuy, which once helped its revenue surge five times in one year, fell into a quagmire of sharp business decline and a large amount of unsold inventory, becoming the culprit of Cross-border Link's losses.

After the outbreak of multiple crises, Cross-border Communication's decline became uncontrollable. Its former right-hand men and left-hand men were sold and went bankrupt. However, after the loss of its right-hand men, Cross-border Communication is gradually turning around. In 2021, it turned losses into profits, with a year-on-year increase of 132.69% in net profit. Although the overall profit growth in 2022 declined, the business in the second half of the year was significantly better, with a year-on-year increase of 103.16% in net profit in the third quarter.

It is not only K-Link whose performance is affected by its subsidiaries.

According to the performance forecast released by Xunxing Co., Ltd., its net profit attributable to listed shareholders in 2022 is expected to be 57.58 million yuan to 86.37 million yuan, a year-on-year decrease of 31.52% to 54.35%.

  ▲ The picture comes from Xunxing Shares Announcement

During the reporting period, affected by factors such as high inflation in the United States and Europe and sluggish consumption, homogeneous competition in cross-border e-commerce intensified, resulting in a significant year-on-year decline in the revenue of Xunxing Co., Ltd.'s cross-border e-commerce business and an estimated year-on-year increase in losses of approximately RMB 50 million.

On the other hand, the increasing losses of its subsidiary Jiazhilian also had a certain negative impact on Xunxing's performance. Due to high inventory pressure, promotion and logistics costs, Jiazhilian's losses are getting bigger and bigger.

After being acquired by Xunxing Co., Ltd. in 2017, Jiazhilian has not been able to bring growth to the parent company. At the beginning of the acquisition, the two parties signed a bet agreement for a cumulative net profit of 510 million yuan in three years. However, the final result was that Jiazhilian suffered losses year after year and failed to fulfill the bet. The founder was fined 1.01 billion yuan and fled abroad, refusing to execute the agreement.

For today's Jiazhilian, how to reduce cost pressure and solve the inventory crisis is an imminent problem.

In the past two years, the cost pressure of ocean freight has undoubtedly been one of the biggest challenges faced by cross-border merchants. The supply-demand imbalance in the container shipping market has led to a crazy surge in freight rates. Both small and medium-sized sellers and leading sellers are caught in the dilemma of a significant backlog of profit margins, and their performance has been greatly impacted.

However, since the second half of 2022, the frenzied shipping market has cooled down significantly. The shipping price, which once broke through the 50 mark and was close to air freight, has gradually fallen back to the pre-epidemic level. The situation in the past where sellers were hard to find a cabin has also reversed to a situation where freight forwarders are looking for goods everywhere and competing for customers.

The money-making power of the maritime printing press is no longer there, and many freight forwarders have started fierce price wars to compete for market share, with cost prices of 2.5 yuan, 3 yuan and loss-making prices abound. However, recently, some freight forwarders even announced that they would give away goods for 0 yuan, which surprised many people in the industry.

A senior seller revealed that a freight forwarder updated the quotation list in the circle of friends, bluntly saying that the freight rate was reduced to 0 yuan/kg. The goods in the ONT8, LGB8, LAX9, and SBD1 warehouses are all free, and the promotion is valid for a long time.

The freight forwarder promised that the goods will be loaded into the container in the second week after arriving at the warehouse, and the logistics timeliness and shelving efficiency are guaranteed.

Many sellers have pointed out that there must be something fishy going on when free shipping is a loss-making business:

"Free delivery, but delivery is not included."

"I will take the goods for free. There will be a lot of them at the docks, and you will have to pay to redeem the goods."

"Ordinary goods are matched with sensitive goods. It's okay for you to pay for the ordinary goods."

"This usually involves taking your ordinary goods as a cover, and then storing the goods that really make money in the cabinet. If they are found, the entire cabinet will be destroyed.

A seller revealed that the logistics company had been exposed to bankruptcy, and the goods were detained by customs due to unauthorized change of product names. According to the company information displayed by Tianyancha, it had been involved in multiple risk lawsuits before.

Therefore, the so-called free delivery may just be a gimmick. If the goods are seized by customs due to shady operations, or if they encounter other inspections, the seller may have to lose money to redeem the goods.

After the crazy shipping market cooled down, the cross-border logistics industry, which was already a mixed bag, was even more chaotic. Sellers still need to keep their eyes open and not lose money and goods because of greed.