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In 2022, the COVID-19 pandemic has repeatedly caused a severe impact on the global economy. Coupled with the increasing international friction and unstable foreign trade situation, the cross-border e-commerce industry has undergone many profound changes and continued turbulence. At the same time, as the epidemic front gradually lengthens, the e-commerce dividend effect brought by the epidemic is slowly weakening. The first quarter has come to an end in a blink of an eye, but the situation has not been reversed. The above factors are continuously expanding their impact on cross-border trade like a butterfly effect. In the first three months of this year, cross-border people did not seem to have waited for their spring. Words such as layoffs, lockdowns, price increases, and stagnation frequently appeared in news reports, constantly tempering the will of workers. This article will start with the three roles in the cross-border e-commerce industry - cross-border platforms, cross-border sellers, and cross-border service providers, and explain the development status of these three during Q1, providing cross-border practitioners with cutting-edge perspectives and the latest information. Cross-border e-commerce platforms: cost reduction, efficiency improvement, and involution This year will be a challenging year for major cross-border platforms. As the leader in cross-border e-commerce, Amazon has undergone profound changes in just two years, from its massive outbreak in 2020 to the withdrawal of a large number of sellers in 2022. It is learned that Amazon CEO Andy Jassy recently released his first shareholder letter, in which he wrote that the consumer business has achieved three years of growth in the past 15 months. At the same time, Andy also mentioned the logistics, supply chain and labor challenges faced by Amazon in responding to the global epidemic crisis . The conflict between Russia and Ukraine unexpectedly deepened larger problems such as fuel costs and inflation . He also said that the rapid sales growth brought about by the epidemic only lasted until the first quarter of last year, and then the growth rate slowed down due to the relaxation of anti-epidemic restrictions and people no longer staying at home. Looking back at Amazon's performance, we can also see the decline of this giant from a series of data: net sales in the fourth quarter of 2021 increased by 9%, which was the first single-digit growth since 2017 ; in 2021, Amazon's net sales were US$469.8 billion, a year-on-year increase of 22%; operating profit was US$24.9 billion, a year-on-year increase of 8.7%. In the first quarter of 2022, Amazon expects its net sales to be between $112 billion and $117 billion, but lower than the market's general expectation of $120.94 billion. Operating profit is expected to be between $3 billion and $6 billion, lower than $8.9 billion in the first quarter of 2021. In other words, Amazon's high performance growth will be difficult to maintain, and operating profit may decline sharply. In addition, Amazon's business in the Chinese market is cooling down. Not only has the number of new sellers from China decreased, but the market share of China's top sellers on Amazon is also gradually declining , a change from the booming scene in the past. Not only will Amazon's business development be constrained by multiple parties, but other well-known e-commerce platforms are also not having a very good time. For example, Shopee, the Southeast Asian e-commerce giant , has reached a turning point in its development this year. Not only has it suffered huge losses, but it has also suffered setbacks in overseas markets, and has fallen into an awkward period of being caught between a rock and a hard place. After closing its French site in March, it recently announced that it would withdraw from the Indian market. In addition, it has faced many obstacles in entering Latin America, forcing Shopee's global expansion to pause. Similar to Shopee's fate, Wish, known as the American version of Pinduoduo, also suffered. According to the financial report, Wish's Q4 revenue was US$289 million, a year-on-year decrease of 64%; its net loss was US$58 million, a year-on-year increase of 90%. In the fierce e-commerce competition, Wish, which pursues the principle of low prices, has entered a development cycle, with losses becoming larger and larger, and sellers on the platform are constantly leaving. Some people are heading for the bottom, while others are heading for the top. On one hand, a group of veteran cross-border players are declining, and on the other hand, new blood is joining the cross-border market. For example, Tik Tok under ByteDance, independent website pioneer shein, and e-commerce dark horse Walmart are all accumulating strength to share this big pie, and the trend of internal competition is constantly intensifying. Faced with a declining market environment and the blockade of competitors, these cross-border giants are also actively seeking changes. Take Amazon as an example. Its most obvious approach is to reduce costs and increase efficiency, transfer part of the costs to sellers, and widely open other businesses. For example, Amazon AWS cloud business revenue has returned to a high growth rate of 37%, and it will invest billions of dollars to develop "one-day express delivery" for Prime users. For example, in order to offset some of its own costs, Amazon announced a 5% fuel and inflation surcharge for FBA sellers in the US, and subsequently imposed a 4.3% logistics surcharge on sellers in the EU and UK. It is understood that this is the third time this year that Amazon has adjusted FBA shipping fees. Any disturbance on the platform is a huge shock to sellers. Not only will cross-border e-commerce platforms face these challenges, but third-party sellers will also be greatly affected. Cross-border e-commerce sellers: declining profits and shrinking scale Amazon's new regulations are undoubtedly a depth bomb. This move will deal a fatal blow to the daily operations of many sellers, forcing them to raise product prices or control profits. At the same time, uncertainties such as international logistics and politics have exacerbated the turbulence of cross-border trade, causing the daily operations of small and medium-sized sellers and large cross-border sellers to gradually enter a period of stagnation. It is understood that many sellers have reported that their performance has repeatedly declined in the first quarter, and traffic has been sluggish. Some cross-border companies have even carried out large-scale layoffs and liquidations due to shrinking business. An industry research report shows that in the first quarter of this year, more than half of the sellers said their profits were lower than the same period last year. Even though revenue is still growing, profit levels have been declining. At the same time, a relatively high proportion of cross-border companies said that their business strategies have become more conservative. Some have reduced their company size and reduced hiring, while others have directly carried out large-scale layoffs or restructuring. Just a few days ago, a medium-sized cross-border company was exposed to have made personnel adjustments due to the closure of the company's account, and suffered countless losses. Other cross-border sellers have also begun to sell off their stores at low prices, even some large stores. According to reports, at the beginning of the year, a search on Tianyancha for companies with the word "cross-border e-commerce" in Shenzhen showed 7,185 results, but at the beginning of April, there were only 6,255 results. In other words, in the first quarter of this year, nearly 1,000 cross-border e-commerce companies in Shenzhen were closed for various reasons. It is not just small and medium-sized sellers who find it difficult to withstand the impact of the times. Many large cross-border sellers also have their own troubles. It is learned that as of the end of March 2022, the IPO plans of many cross-border e-commerce companies, including Suntech Power Holdings Co., Ltd., Zhiou Home Furnishing Technology Co., Ltd., and Shenzhen Santai E-Commerce Co., Ltd., have been suspended for review. Big sellers that have not yet gone public are worried about their IPOs, while big sellers that have already gone public are concerned about their falling stock prices and profit margins. It is learned that recently, many major cross-border sellers have released their 2021 annual reports. Looking at their financial data, it is found that profit decline has become a common phenomenon for major cross-border sellers. In 2021, Anker achieved total operating revenue of 12.574 billion yuan, a year-on-year increase of 34.45%; this was the first time that Anker's revenue exceeded 100 million yuan, but its net profit after deducting non-recurring items fell by 2.69%.
In 2021, Superstar achieved total operating revenue of 10.92 billion yuan, a year-on-year increase of 27.80%; net profit was 1.27 billion yuan, a year-on-year decrease of 5.93%.
In 2021, Lechuang achieved operating income of 2.87 billion yuan, an increase of 47.95% over the same period last year; net profit was 180 million yuan, a decrease of 14.93% over the same period last year.
In 2021, JMET achieved operating income of 715 million yuan, a year-on-year decrease of 16.35%; net profit was 26.4202 million yuan, a year-on-year decrease of 75.16%.
As for why the profits of big sellers have declined, it is nothing more than the following factors: 1. Intensified market competition 2. Exchange rate fluctuation risk 3. Rising prices of raw materials 4. Platform policy changes In addition, the recurrence of the epidemic in many regions of China this year, such as the severe situation in cross-border e-commerce centers such as Shenzhen, Shanghai, and Hangzhou, has also had varying degrees of impact on sellers. Anker Innovations recently issued an announcement stating that some employees in areas with severe epidemics are working from home, and some upstream suppliers temporarily stopped work in mid-March due to the epidemic lockdown in the Greater Bay Area. However, the situation for cross-border e-commerce sellers has become more unpredictable this year due to the Russia-Ukraine war, persistent supply chain bottlenecks and inflation, and consumer shopping habits are still changing. Nowadays, rising costs and falling profits have become a common problem for cross-border sellers. Many sellers have begun to transform and seek change, either reducing the size of their companies or opening up other growth channels. This situation is also profoundly affecting another group - cross-border service providers. Cross-border e-commerce service providers: too many suppliers and too little meat, and low orders It is learned that as an emerging industry, the cross-border service provider industry has gradually become standardized and transparent through years of development and improvement, and has begun to attract the attention and favor of capital. In 2021 alone, there have been reports of large-scale financing from several leading service providers, such as: - In December 2021, Lingxing, a cross-border e-commerce SaaS service provider, announced the completion of a RMB 280 million Series C financing;
- In September 2021, Wanliniu, a cross-border e-commerce SaaS ERP service provider, announced the completion of a nearly 100 million yuan Series B financing;
- In August 2021, Panding International, a cross-border circulation empowerment platform, announced the completion of a multi-hundred-million-yuan A+ round of financing;
- In August 2021, cross-border software service provider E-Cang Technology completed a US$25 million Series B+ financing round.
However, unlike the hot financing scene in 2021, the number of service providers that raised funds in the first quarter of this year has shrunk, and the scale is relatively small. As a service provider industry with cross-border sellers as its main customer base, as the business volume of cross-border sellers decreases, service providers also seem to be facing a cold period. A service provider engaged in trademark business told us that since Amazon started to block accounts on a large scale, its business volume has shown a downward trend. Not only is the number of sellers who consult on a daily basis no longer the same as before, the number of completed orders has also gradually decreased . The most direct impact of this change is a sharp drop in wages and commissions. "There are fewer updates from many service providers in the circle of friends who handle complaints and account selling businesses, and some friends have also expressed their intention to change careers," said a seller. A merchant providing comprehensive services said: "We have lost a lot of orders from old customers due to the account blocking. Many businesses are difficult to continue, such as on-site and off-site promotions, reviews, etc. There are fewer people consulting now, and many sellers choose to change careers, making it even more difficult to develop new customers." In addition, affected by multiple factors, the business of some cross-border logistics companies has also declined rapidly this year. A freight forwarder who has been engaged in Russian transportation business for 15 years said that since the outbreak of the war in late February, the order volume has dropped by 30% because many Russian customers have canceled or postponed their orders . In addition, a freight forwarder of a logistics company in Shenzhen also said that due to the impact of the Russian-Ukrainian war, the freight business volume of his company has dropped by 20%-30% . As it becomes increasingly difficult to develop customers and improve performance, an internal war is also taking place in the service provider industry. It is understood that the number of service providers has been growing exponentially in recent years, and there are also cases where sellers have changed careers or worked part-time as service providers. In order to compete for customers and markets, many service providers have begun to cut prices and offer discounts, creating price advantages to attract customers, and thus save the sluggish performance. The above is the general situation of cross-border platforms, sellers, and service providers in the first quarter of this year. Looking back on the past three months, it seems that all roles have not been smooth, and the gray theme runs through all entities. As an indispensable member of the cross-border ecosystem, platforms, sellers, and service providers are actually interconnected communities of shared destiny, and a relationship that affects the entire body. As an industry observer, I deeply understand the anxiety and concerns of cross-border sellers. However, in the tide of the times, no one can be immune to it. Instead of complaining about the world, it is better to start with oneself and strive to break the growth bottleneck. It is observed that cross-border e-commerce is currently going through a painful period. Looking at industry dynamics and market changes, we can find that there are the following changes and trends in the industry this year: Cross-border sellers have entered a period of steady growth, no longer expanding blindly, and actively deploying other platforms and online and offline channels;
Cross-border sellers have a stronger sense of branding and pay more attention to product innovation and R&D, talent training, risk avoidance, etc.;
Cross-border sellers pay more attention to aspects such as platform operation compliance, capital security and sufficient cash flow.
Therefore, cross-border sellers can refer to the above directions, improve and adjust their own companies and businesses, actively respond to market changes, follow the trend of going overseas, and achieve steady victory.
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