Tomorrow, Amazon's 2-day US seller conference this year will be held at the Seattle Convention and Exhibition Center. Many sellers are looking forward to Amazon to launch more new services and promotion methods that are beneficial to sellers at this conference. What everyone pays most attention to should be It is whether Amazon will announce the cancellation of IPI and FBA warehousing restrictions at this conference.
Huiwang will come to Seattle tomorrow to attend the Amazon Summit, and will share the conference in real time through the Huiwang Douyin account (heyanguk).
And just two weeks ago, PhamaPacks, the top #10 seller on Amazon's US station for the past five years, suddenly announced its closure. This surprised many American sellers, because this company's operation model and image in the hearts of American sellers are like the image of "Sakata Five Tigers" in the hearts of Chinese sellers. But most Chinese sellers don't know about PhamaPacks. In today's article, Huiwang will share with you the operating model of this company and why they suddenly collapsed.
Part 1: Who are PhamaPacks?
Before we talk about why PhamaPacks fell, let's introduce the company to you.
Through the link of their independent station (), you can see:
A Quick Look at PhamaPacks
1. Focus on cosmeceutical beauty products
2. The company has been established for 10 years
3. Mainly focus on Amazon, Walmart, eBay, Target, Google Shopping and other e-commerce platforms
4. Cooperated with more than 100 world-renowned brands
5. More than 850 employees
6. More than 31,000 SKUs
7. 1.8 million orders per month
8. Self-built warehouse area of more than 500,000 square feet
9. The total evaluation of each platform is more than 2 million
10. The annual shipment volume exceeds 13.3 million pieces
Therefore, PhamaPack is a veritable top seller in the United States. And their business model is mainly:
PhamaPacks operating model
1. PhamaPacks is actually a company that operates on behalf of
2. The main partners are well-known brands in the global cosmeceutical beauty industry
3. Self-provisioning warehouse
4. Selling entirely online
5. Almost all operations are carried out in-house without outsourcing
Part 2: What brought the PhamaPacks down suddenly?
The above business model should be the envy of many sellers, because the cooperation is with first-line brands, and they receive high operating fees. The self-owned warehouse is not afraid of the platform’s title, and the number of evaluations is far ahead of its competitors. . Such a business model can only be described as "perfect" and "seamless".
But what brought the operator that was almost ranked #1 in the US with a bang? MarketPulse has the answer. According to data provided by MarketPulse:
PhamaPacks are a veritable blockbuster
1. From August 2021 to August 2022, the annual sales of PhamaPacks exceeded 500 million US dollars (3.5 billion RMB)
2. PhamaPacks ranked #1 on Amazon for 1730 days out of 1825 days in the past 5 years
3. Besides Amazon, they are the #1 seller overall
4. Achieve a gross profit of 45% in 2021
5. But the actual loss for the whole year reached 112 million US dollars (¥784 million yuan)
Here, it may be difficult for everyone to understand the above contradictory figures, and also want to know why such a large company suddenly collapses when its gross profit exceeds 45%.
In fact, the fundamental reason is that PhamaPacks relies too much on capital and does not pursue a profitable business model . I believe that before 2020, everyone is still discussing who can be the next IPO in the cross-border e-commerce industry, but it seems that now everyone thinks that the original idea is too naive. What really made PhamaPacks suddenly collapse was capital. After the company received Series B financing in 2020, it planned to go public in March this year, but because no institutions were willing to invest in the company, it had to give up the listing plan. It was announced on August 30th two weeks ago.
The main reason why investors are reluctant to continue investing is that PhamaPacks:
Warnings from PhamaPacks to Every Seller
1. Unbranded: You have to compete with low-priced third-party brands on the online market without being able to price your own products
2. Competing with offline supermarkets: relying solely on internationally renowned brands for online sales is actually directly competing with mature offline supermarkets, because consumers can easily walk into any offline supermarket and have professional shopping guides in pharmacies purchase under the guidance of
3. Heavy investment: PhamaPacks does not use Amazon's warehouses, but operates its own warehouses and recruits more than 850 operators
4. Over-reliance on the platform: In fact, PhamaPacks, as a domestic company in the United States, is fully capable of opening up more sales channels, but it has mistakenly put all its investment and orders on the e-commerce platform
5. Uncontrollable advertising costs: This point may resonate with many members and sellers. Due to the fierce competition on the platform, the advertising costs of the platform will only increase. Since PhamaPacks has almost no customer accumulation and orders outside the platform, investment institutions believe that this The company's future earnings will only get worse.
Part 3: Abandoning/Reducing On-Amazon Advertising is a Trend
I believe everyone can feel from the above analysis that no matter the size of the company, every company is now looking for a "profit model". Contrasting with the fall of PhamaPacks may be the two US category head sellers "Simple Modern" and "QuadLock" that we shared in the past articles, because these two companies have one thing in common:
Big U.S. sellers drop Amazon's in-house ads
1. They don't use "Amazon" or the e-commerce platform as the only source of orders,
2. They all cut Amazon’s advertising fees to 0
3. They are more focused on social media promotion and content marketing
And it takes a lot of determination for these top sellers to abandon Amazon advertising, because their inventory turnover directly affects their capital flow, and abandoning Amazon in-house advertising means that their inventory backlog is likely to skyrocket.
But in the end, they decided to give up on-site advertising on Amazon, and still managed to stay in the #1 category on Amazon. The main reasons are:
Simple Modern and QuadLock operating models
The cost of advertising on Amazon has made these big sellers unaffordable. In the long run, the cost of advertising on Amazon will continue to increase, which will make it more difficult for the company to operate. Through Google advertising, you can still get off-site orders, although the conversion rate is lower than Amazon, but You can continuously obtain complete customer information. Through social platform gifts and lottery, customers can quickly accumulate, and the off-site traffic can be effectively imported into Amazon to improve the ranking . The survival of the enterprise cannot rely on one platform, and its development needs to continuously accumulate customers and strengthen itself. s brand
Part 4: Branded Content Will Be Key to Conversion
Maybe everyone should be aware of a problem today when you think that Amazon is becoming more and more difficult to do, that is, "consumer shopping habits have changed":
Unsolved Amazon, because consumption habits have changed
If you want a shopping experience and on-site guidance, go to an offline store. If you want to find out which product suits your needs, go to YouTube. If you want a great product at an affordable price, go to Amazon.
But now the problem is coming. For Chinese sellers, there is no shortage of high-quality and cheap products, but they feel almost the same when they are placed on the e-commerce platform. If consumers can learn more about their products, it may be the only The way is social media push. Because the advantage of social media is that they can capture each user's "daily habits" and push them according to their preferences.
But the reason why Chinese sellers can't be overseas sellers on social media is not because our products are not good, but because we can't find enough usage scenarios and materials from the real life of Westerners. Even if we can find some streets in China that look like Europe and America, to foreigners it will look like "foreigners filmed a video in Chinatown, it does look like China, but we can see at a glance that this is not China" .
At the same time, the promotion of social platforms also requires a large and continuous stream of materials, which will cause great trouble for our Chinese sellers.
Because of this, Huiwang has been helping Huiwang Hui members with overseas scenes and video shooting since September this week, and will share and promote them through Huiwang's TikTok, Instagram, YouTube and Hui members' own social platforms. . At the same time, from this month, Huiwang's Amazon Live broadcast will officially start to promote Hui members' products. I hope we can work together with you to help you get out of the current predicament.
From now on, we will help Huiwang Hui members, especially the products promoted in the Huiwang Smart Camp project, to create more high-quality video content, attract more attention and traffic, and increase the conversion rate for everyone. Relevant plans include:
Hui Net Red Hot Video Program
1. Free video of Smart Camp members
Just two weeks from the beginning of September, we will record product videos for free for Hui members who participate in Huiwang Smart Camp, and will publish them through Huiwang Amazon Red Person Program, Huiwang TikTok, Huiwang Instagram Reel, Huiwang YouTube channel .
2. Video recording of all Hui members and overseas shooting of products
At the same time, we will provide overseas video shooting, model shooting, and drama shooting related services for all members from September
3. Live broadcast of all members of Hui.com
In order to help members get more traffic and attention, and make related videos appear more on your Amazon Listing page and Amazon homepage. We've now partnered with Best Buy's Official Live Hosts and will be streaming live via Amazon Live, TikTok, Reel and YouTube for our members.The live broadcast is only for Huiwang Hui members, and the products of Zhiying Hui members will be recommended for free in the live broadcast
1. Shipping of the product
The above recording and filming work requires everyone to send the products to Canada immediately. The main reason is that with the increasingly fierce market competition, we need to help you develop more free and private domain traffic, and this requires us to provide products for everyone. Continue to create more materials for overseas life scenes.
2. Privacy Protection
Out of consideration for the privacy of Huiwang's products, we will not release the link to the Huiwang celebrity account to Chinese sellers for the time being. The live broadcast and product videos released through the Huiwang Amazon Red Person Program will be sent to the sellers in a one-to-one manner. Relevant members.
Hui.com is honored to hire BestBuy's product propaganda host Rylie as the host of "Hua.com Amazon Live", and will recommend the products of Huiwang through Amazon Live, TikTok, YouTube and Instagram.