Last week, the domestic e-commerce circle should be swiped by Shopify’s announcement of 10% layoffs. At the same time, many sellers have been at a loss recently. The dilemma of increasing sales and decreasing profits seems to have become a dilemma that almost all sellers are experiencing and have to face. Why does such a problem occur, and how should we face it as a Chinese seller?
The first part of sellers: sales rise, profits fall
It's been two weeks since Prime Day, and although most sellers' sales have increased a lot on Prime Day, we've seen orders from most Amazon sellers drop recently after Prime Day.
At the same time, we have also seen feedback from many sellers that although there has been no vicious competition in the past two years, they have not seen an increase in profits despite the increase in sales. .
Recently, Hui.com is also carefully observing the western consumption data and analysis reports, and we can vaguely see the reasons behind the above problems.
Overall, online shopping (eCommerce), after a post-pandemic surge, has slipped this year as various Western countries return to normal.
According to the data of the banking industry in the first six months of this year and the feedback of 2,000 interviewed households, the following changes have taken place in the online purchasing behavior of western countries, especially the United States and Canada this year:
Western consumers’ perception of e-commerce post-pandemic
50% of respondents report that their online spending budget will not change 20% report that their online spending budget will decrease 30% report that their online spending budget will increase
Inflation is the main reason for the above uneven consumer feedback because:
50% of consumers who will not change their spending budget think that they can find cheaper products online 20% of consumers reduce their online budget because they think offline supermarkets are cheaper and can pick up goods in time 30% of consumers consider upgrading online Consumption budget, mainly because they think it is more economical and convenient to shop first, so products that are not urgently needed will consider buying online
The above information should be able to explain the dilemma you are currently encountering, that is, consumers are significantly more sensitive to commodity prices than in the past 2 years. If commodity prices are high, it is very likely that sales will not increase, and if prices are lowered, there will be sales profits but no sales. .
Part 2 Platforms: Amazon Thrives
In addition to seller feedback, the three major cross-border platforms Amazon, Walmart, and Shopify also recently announced their second-quarter results:
In its July 25 earnings report, Walmart forecast an overall 11-13% decline in profit this year, more than a dozen times more than Walmart’s previous estimate of a 1% decline.
2. Shopify Standalone Station
Shopify’s situation is more similar to that of Chinese sellers. Shopify CEO Lutke claimed that Shopify’s sales and market share are still growing, but it will not maintain the growth rate during the epidemic, and he believes that the epidemic will cultivate the online shopping habits of Western consumers, So Shopify has recruited more people to expand and develop during the epidemic, but now it seems that he has lost the bet and has to lay off 10% of its workforce, and more than 1,000 employees around the world will leave Shopify.
Amazon announced its second-quarter results last Thursday, U.S. time, and China time last Friday. The financial report showed that Amazon still lost about 2 billion US dollars (13 billion yuan), but this has been greatly improved and narrowed compared with the first quarter. Meanwhile, Amazon's online marketplace sales are up 7% year-over-year from 2021, and the overall Amazon global marketplace is up about 10% from 2021 if you factor in foreign exchange.
From the feedback from the above three major cross-border e-commerce mainstream platforms, we can see that the following reasons have caused the same dilemma faced by platforms and sellers:
The deep reasons for the decline in profits of e-commerce platforms
The epidemic has not changed the habit of western consumers to spend their main funds on offline supermarkets. Although inflation has not reduced the total consumption, it has made more consumers more sensitive to prices, which mainly include:
(1) Rent and mortgages rose sharply after interest rate hikes in Europe and the United States
(2) The Russian-Ukrainian war caused oil prices to rise
(3) Rising labor costs have led many companies to reduce the number of employees
(4) The geopolitics between China and the United States has caused the logistics cost to remain high (the United States Postal Service to China has been cancelled for more than 2 years)
(5) Changes in the global supply chain (factory moved to Vietnam, shortage of chips, increased cost of raw materials, and uncertainty about labor and stocking caused by domestic epidemic lockdowns) have resulted in increased manufacturing costs
3. In addition, data from various platforms shows that more and more western consumers are now adding domestic manufacturing as keywords when searching for product keywords, such as: led light made in usa (LED light made in the United States)
What makes Amazon stand out?
However, Bloomberg Finance shows that Amazon's share of the online market continues to increase, approaching $150 billion (about 1 trillion yuan), followed by Walmart, and Shopify is now the third-largest platform by market share, followed by eBay, Etsy and Wayfair.
Compared to other platforms, Amazon is still far ahead. Amazon CEO Andy Jassy said that despite inflationary pressures and rising oil and shipping costs, Amazon is still operating its FBA distribution network efficiently and will allow the market to see faster performance growth.
Bloomberg Finance explained the reason behind the different performance of Amazon and Walmart in one sentence: "Compared to Walmart, Amazon's customer base has higher income and is more resistant to inflation."
And a few pieces of information are worth our attention:
What makes Amazon stand out?
Prime Day two weeks ago still set an all-time record for sales during a period of high inflation. Prime's membership fee hike has brought more revenue to Amazon, but since Amazon also provides more value, Prime memberships haven't dropped and Continuing to increase Amazon's Small Business support for the US market will drive more sales for small and medium-sized sellers in the US The function will allow sellers to make real-time adjustments to advertisements in the near future, which is what other platforms have not done. In the fourth quarter of this year (festival season), Amazon FBA will begin to use aircraft delivery in California and Texas, which will make FBA's delivery more efficient. Greatly improved, and is likely to drive a substantial increase in Amazon's sales at the end of the year.Although Amazon has not achieved many gains and development in the offline market, Amazon continues to try to deploy more offline stores. Now it is the only retail giant other than Walmart that can make online purchases offline. Due to Amazon's big data computing capabilities, It is possible that Amazon will introduce the Best Seller products with the online time into the offline store and truly start online and develop offline.
The third part of development: the confusion and hope of Chinese sellers
I believe you can see from the above two parts that the problems causing the current industry predicament are more complicated. After Prime Day, many sellers may be a little confused when orders and profits decline, and start to turn their attention to more platforms, which mainly include:
A new attempt for cross-border sellers
1. Amazon Small Language Market
If deployed in this direction, it should be the preferred solution now. Because compared with the United States, Canada, Europe and Japan have less market competition, and the overall shopping habits are similar to those in the United States.
2. Independent foreign trade station
The independent station is indeed a relatively obvious development trend, but not all products are suitable for the independent station, because the independent station and the platform are different in that the independent station itself does not carry traffic, and all promotions and orders need to rely on itself. Therefore, the current independent station is mainly suitable for the following two types of products:
(1) The value is at least more than $50 USD
(2) Personalization and customization
3. Other e-commerce platforms in Europe and America
On the whole, the input-output ratio of these platforms is not necessarily higher than that of Amazon, and there are more problems of overseas stocking. Therefore, if you are considering developing on these platforms, it is recommended that you at least see that there are people around you who are actually making money through the relevant platforms. Friends who are familiar with the platform lead the way, otherwise the uncertainty will be higher;
4. Ali International Station and AliExpress
Ali International Station and AliExpress have always been targeting Asian, African and Latin American countries, so there are still some order opportunities. However, in terms of profit and investment, unless these two platforms have the support of Xiaoer, it is difficult to generate profits.
5. Domestic e-commerce platforms
The domestic e-commerce platform should be said to be the most difficult of all e-commerce platforms. This is not only because the top-level traffic and orders on the platform are now almost occupied by operators who cooperate with the world's top 500 and domestic big names, and new sellers can only rely on low prices. Single-burn advertising has developed, and in the end, there are basically only sales and losses. It is also because there is almost no further development after Li Jiaqi and Wei Ya Jingsheng who are currently live streaming.
Last week, there were also sellers who left us a message on the Hui.com service account, telling us that it seems that the domestic risk control policy cannot be ended in a short period of time. Looking at other industries other than the cross-border e-commerce industry, there is a feeling of "every industry withering". In contrast, cross-border e-commerce may have declining profits, but capital flows are still growing, and there is still hope compared to other industries. However, it is increasingly felt that the previous operating model will be difficult to sustain, and we are asking if we have an operating model with less investment but higher returns.
According to the current overall market situation, we suggest that you may make adjustments from the following aspects:
What should be done to reduce the burden and increase the profit?
Platform : Focus on Amazon and the platforms that have already placed orders stably, don't try new platforms easily;
Inventory : Instead of desperately using all the inventory and advertisements on the US station, it is better to allocate the inventory to: the United States, Canada and five European countries, and each region can be listed in the form of ASIN sharing;
Profits : The practice of high advertising costs to offset the sales of a single market may consider switching to a small advertising fee for each market to increase product sales profits
Outside the station : Since Amazon is now very strict with evaluations, it is recommended that you stop trying your own way. In the past, the way of sending test needs to become cooperation with users on social platforms, and continue to use cashback to improve BSR, but do not let customers leave comments.At the same time, let participants create content and attract more customers to pay attention to the product by @several friends who may be interested in getting a free product
Independent website : Of course, it is a must, but it needs to rely on SEO to improve traffic and rankings. It can be promoted with a small amount of Google Shopping advertising.
Finally, I believe that everyone can feel that based on past experience, the middle and late July should be a relatively difficult period of the year, because the customer's desire to buy before and after Prime Day is not high, and many people will choose to travel in July. , shopping behavior will also be weaker than in June and August. but:
Q3 layout, Q4 harvest
The data in the first quarter of this year shows that the cross-border industry is indeed relatively sluggish, but the sales of both the platform and the seller in the second quarter have begun to increase significantly . After entering August, I believe that the data will be further improved; if this year Amazon's fall Prime Day It is held in October, so August and September are just the time to prepare. Once September enters, I believe that everyone's current confusion will become clearer goals and hopes.
On the first day of August, we hope you all start seeing more growth!