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▶ Video account attention cross-border navigation
According to reports, California has recently passed a preliminary agreement, the core of which is a $17 billion inflation relief plan that will provide tax refunds for millions of working-class Californians. It is estimated that about 23 million Californians will be able to receive "inflation relief."
If the agreement is formally passed, it will be implemented as early as late October, which coincides with the traditional peak season for the cross-border e-commerce industry. Some sellers are looking forward to this round of distribution of money to stimulate a wave of consumption. However, more sellers are not optimistic about this. Domestic inflation in the United States has reached a historical high, and continuing to distribute money is likely to make the situation worse. Affected by the persistent high inflation, the current US macro-economy is weak and consumer purchasing power has dropped significantly, which has also directly affected the performance of cross-border sellers, resulting in a "double decrease" in traffic and sales in the first half of the year. As a result, many factories have fallen into operational desperation. The factory was forced to close down due to a sudden drop in orders, and the seller’s sales volume shrank by 90%! According to reports, a factory in Dongguan that specializes in supplying cross-border merchants has recently encountered serious operational difficulties due to a sharp drop in orders and obstruction in payment collection. As a result, it was forced to suspend work and production from June 27.
▲ The picture comes from the Internet In order to "revitalize" the company and repay debts, the factory is currently working hard to recover customer payables through negotiation, arbitration and other means, and plans to introduce an auditing agency to conduct a comprehensive review of assets, receivables and payables, and formulate payment plans for each supplier. It was learned that after the factory issued a notice to stop work and production due to a large amount of overdue payments to customers, many freight forwarders and suppliers came to the factory with banners, crying, "Unscrupulous scammers, give me back my hard-earned money." Layoffs, running away, bankruptcy... The cross-border e-commerce circle in the first half of the year can be said to be in a turbulent period. The large number of sudden incidents also reflects the difficulties currently faced by the industry. Factors such as soaring operating costs and sluggish consumer markets in Europe and the United States have impacted this year's cross-border market. According to survey data, 71.5% of sellers' revenue in the first half of the year fell compared with the same period last year, and only 17.1% of sellers' revenue increased. It can be seen that shrinking performance has become the norm in the current cross-border market. Weibo celebrity @风中厂长 revealed that the orders from his factory's largest customer, Amazon, from April to June this year were only one-tenth of the same period in 2021. ▲ The picture comes from Weibo In 2020, the epidemic boosted the economy, and Amazon's cross-border e-commerce became a new outlet for "digging for gold everywhere". At that time, the major customer even went to the factory in person to urge the delivery of goods. After occupying one-third of the factory's orders, it required an additional 40% increase in production capacity in 21 years. By the middle of last year, thanks to the dual effects of Amazon's substantial growth and the explosion in the category stimulated by the epidemic, the customer's product sales had quadrupled compared with previous years, thus once again forcing the factory to further expand its production capacity. Now, a year has passed, and the once thriving performance seems to have hit a freezing point, taking a sharp turn for the worse, shrinking to less than one-tenth of the same period last year, which is a cause for regret. Many suppliers admitted that many factories were overwhelmed with foreign trade orders last year and worked overtime every day to rush to deliver goods. They were even "confused" by the temporary prosperity and expanded their production capacity. However, this year, the number of customer orders has dropped sharply, and many factories have stopped production or are even on the verge of collapse. The depression of downstream factories is actually the result of the shrinking and stagnant cross-border market. "We had a major customer who was clamoring for an IPO last year, but this year he laid off employees." "The main task of our peers in the first half of the year was basically to clear inventory, profits were supported by old links, and new products were difficult to promote." "In the past six months, sales have been steadily declining every month. It is also difficult to launch new products. We are desperately trying to maintain profits." "I've felt the number of orders has been declining since the end of last year, and it's even worse this year. The ranking is better than last year, but the number of orders is only 2/3 of last year." Through the feedback from sellers, we can see that in the environment where sales are falling and new products are difficult to promote, most sellers hold the view that "clearing the inventory is considered a success." Big sellers’ revenue increased but profits did not, so where did the small sellers’ orders go? Looking at the industry's leading sellers, their performance in the first half of the year also experienced varying degrees of ups and downs. Zebao and Youkeshu, which were involved in the account suspension incident, had a revenue of 318.2 million yuan in the first quarter and a total profit of -27.0584 million yuan, while the other parent company's revenue in the first quarter fell 71.13% year-on-year and achieved a net profit of -26.8003 million yuan. However, big sellers such as Anker Innovations and Lechuang Holdings, which were not affected by the account ban wave, had Q1 revenues of 2.865 billion and 764 million respectively, showing a steady growth trend, but at the same time, their net profits declined compared with the same period last year. It can be seen that some of the big sellers that were hit by the account blocking wave have not yet completely recovered from the impact of the account blocking, and are generally suffering losses. However, the big sellers that were not affected by the account blocking incident have shown a slowdown in revenue growth or a trend of increasing revenue but not profits due to internal and external troubles such as rising costs, repeated epidemics, and business expansion. This is the case for the top sellers, not to mention the mid- and downstream sellers. Compared with expanding scale and shipping new products, today's sellers tend to streamline product lines, control risks and maintain cash flow. Why did the performance of cross-border sellers generally shrink in the first half of the year? It is believed that it is mainly due to the following reasons. 1. Operating costs soared and profits were eroded Since the beginning of this year, Amazon has raised FBA logistics fees several times. On January 18, the US site officially raised delivery rates, inventory disposal and other fees, and then on April 28, it imposed a 5% fuel and inflation surcharge on top of the original charges. The data shows that 64.2% of sellers believe that Amazon FBA’s price increase policy has a greater impact on them and has led to a significant increase in costs. Not only that, the high demand for freight since the beginning of the year has stimulated the continuous increase in freight rates, and the high first-leg logistics costs have become the number one "beast" that erodes sellers' costs. In addition to rising transportation costs, the sharp increase in traffic costs also limits sellers’ performance. According to Yahoo Finance, the price of Amazon advertising has continued to soar in recent years, with the average cost per click increasing from 14 cents in 2014 to $1.6 now. 2. Global inflation intensifies, and consumer markets in Europe and the United States are sluggish According to foreign media reports, inflation in the United States hit a record high again in May, with the Consumer Price Index (CPI) rising by 8.6% year-on-year. The soaring prices of raw materials, daily necessities, etc. have put ordinary consumers under great economic pressure. As the Federal Reserve raises interest rates and shrinks its balance sheet to curb consumption, the disposable income of many European and American consumers has decreased, and their purchasing desire and purchasing power have dropped significantly. On the other hand, due to the surge in online shopping due to the epidemic in 2020 and 2021, many consumers over-stocked, causing demand to further slow down, and it is difficult to return to the same period level in previous years. 3. Price wars intensify internal competition, and the effectiveness of low-price sales is weakened Faced with the booming online shopping in 2020 and 2021, many cross-border companies have been stocking up on a large scale and even expanding blindly, so now they have to face the dilemma of inventory backlog. At the same time, new competitors continue to pour in, accelerating the trend of price wars. Many sellers can only sell at a loss under fierce competition. However, as the consumer market gradually weakens, the effect of low-price volume stimulation is also weakening. Although the peak season promotion in the second half of the year is approaching, many sellers believe that the current strategy should adhere to conservative operating principles. They should be cautious in stocking up, slow down the pace of expansion to ensure profits, and also keep in mind to optimize costs to the maximum extent, save expenses, and leave enough price space. What do you want to say about this? 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