Under the influence of inflation and weak consumption, even the former largest seller on Amazon's US station could not hold on. Slightly different from other companies' layoffs, clearing inventory, and maintaining business development, the seller's parent company stated that it will close related businesses after layoffs and liquidation.

Top third-party sellers on Amazon's U.S. station, now layoffs

Recently, Packable, the parent company of Pharmapacks, the largest third-party seller on Amazon’s US station, was revealed to be undergoing layoffs and liquidations, sparking heated discussions.

Foreign media sources said that on Monday, Packable issued a relevant notice to its employees. The notice said the company will lay off 20% of its workforce, and the remaining 370-odd employees will also be gradually withdrawn from within it.

In addition, the content of the notice also revealed that the layoff and liquidation were mainly due to the lack of new internal and external financing , which made Packable's subsequent profitability difficult, and operations had to be stopped. Last year's supply chain impact made it unsustainable for inventories . In short, the products are not available and the funds are not enough. The simultaneous appearance of the two crises was the last straw that broke the company.

(The picture comes from the official website of Pharmapacks)

This 12-year-old company first entered the public eye because of medical supplies, and its sales in 2018 have exceeded 270 million US dollars. Received $32.5 million, $150 million, and $40 million in financing from 2018 to 2020, respectively.

With the development of the business, while expanding the sales categories, the sales channels have also been synchronized from offline to online, and the market has been gradually expanded. At present, its main products include cosmetics, household products, baby products and other categories in addition to medicines.

According to public information, Pharmapacks sells more than 31,000 SKUs, processes an average of 30,000 orders per day, and ships about 1.8 million orders per month, and has partnered with over 100 brands.

In terms of sales channels, although its products are sold on Amazon, Walmart, eBay and other platforms, nearly 80% of its revenue mainly comes from Amazon. In February this year, the relevant person in charge of Packable also revealed that the company's average daily income in January this year was nearly 1.6 million US dollars, an increase of about 6% over the same period last year. However, some investors say its growth has slowed.

In terms of business style, Pharmapacks mainly adopts the mode of timed price adjustment, brand and real-time supply, and quickly occupied a certain market share.

In the first quarter of this year, the company's seller review growth rate still ranked first on Amazon's US station, and other top sellers included Orva Stores, Zappos, etc. Although the rankings of other sellers will fluctuate relatively, Pharmapacks' top position has always been solid.

The long-term stable dominant position and strong business development ability have made the industry very optimistic about its future development. The brands that cooperate with it continue to increase their weight. However, few people would have thought at the time that Packable would announce a "retreat" from the industry nearly half a year later.

Most of the industry's impression of the company is still at the stage of its SPAC listing failure. The company was valued at nearly $1.6 billion last year after news of its pre-IPO came out. However, due to the failure of the company's SPAC listing, coupled with the supply chain crisis, the company is facing huge operating pressure.

Behind Packable's layoffs and liquidation, we can actually see the pressure of the current market environment faced by third-party sellers and platforms in Europe and the United States: high inflation and weak consumption.

Weak consumption, high inflation, many companies lay off employees and cut performance

In addition to Packable, a number of traditional U.S. retailers are also laying off or have already laid off workers due to market pressures.

In the first and second quarters of this year, Amazon’s warehouses and distribution centers made large-scale layoffs, and the total number of layoffs in other positions was 99,000. Walmart also said earlier this month that it would lay off about 200 jobs, and Best Buy also announced hundreds of layoffs in the past week.

Compared with the wave of titles and high freight rates last year, what worries sellers and retailers in the European and American markets this year is weak consumption and persistent inflation. In the second-quarter earnings reports released by several major traditional retail companies in the United States this year, Wal-Mart, Macy's and other performance exceeded market expectations, but then they all lowered their full-year performance forecasts.

Walmart lowered its full-year profit to 11% to 13% from a 1% decline previously . Macy's also cut its full-year profit by about $100 million, and Best Buy made the same adjustment, down 11%. Obviously, the uncertainty of the future has become the main threat to these companies' future development.

As for the reasons for the downward revision of the annual performance, the above-mentioned retailers mentioned one point in the relevant interviews: the consumption situation of consumers may continue to "deteriorate" under inflation . Most of them believe that under the influence of high inflation, consumers will shift their consumption focus to daily necessities, and the demand for clothing and consumer electronics may decline.

Data show that the current inflation rate in the United States in Europe and the United States is still at a high level, which has exceeded the annual target set by the Federal Reserve. The inflation rate in the United Kingdom has hit a new high in the past 40 years, breaking 10%, and the inflation rate in other European countries such as Spain and the Netherlands has also exceeded 10%.

Under the high data, the lives of people in Europe and the United States have been greatly affected, and changes in consumer spending are one of the most important manifestations. Although some young European and American consumers do not care too much about the continued impact of inflation, in terms of the actual situation, the impact is substantial.

In the first half of this year, the economic development of the US market was not optimistic, and the consumer confidence index continued to decline under high inflation. In July, the U.S. consumer confidence index fell to a new low of 95.7. In the case of changes in consumer consumption habits and spending, sellers and platforms have become "mirrors" that directly reflect this situation.

Relevant surveys show that more than 70% of American consumers are shopping less, and more than half of them have reduced their purchases. In terms of categories, sales of groceries, shoes and clothing have declined. The above categories are basically the same as the inventory accumulated by the above retailers.

In order to reduce such inventory, these retailers are using price promotions to clear the remaining inventory within a few months to ensure normal operation in the second half of the year. Walmart and Target also recently announced they would cancel billions of dollars in orders to clear remaining inventory.

It can be seen that consumers and sellers are making preparations under the low market pressure. Layoffs and price cuts have become common practices of many companies, and it is not ruled out that more retailers will take the same measures in the future.

Although the European and American markets are in a low pressure state and consumption has been downgraded, the willingness of consumers in Europe and the United States to consume is still higher than that in the early stage of the epidemic. In addition, the existence of peak seasons in the third and fourth quarters may become a key point for sellers and platforms to break the ice.