Another Amazon seller files for bankruptcy!

After Amazon's big sellers in home furnishings, shoes, and home appliances have successively collapsed, now there are also big sellers in the apparel category. Lunya, a well-known Amazon DTC brand, whose price on Amazon is 10 times higher than the category leader, is now heading towards the stage of filing for bankruptcy reorganization. In the post-epidemic era, the internal competition between American platforms and sellers seems to be more fierce.

Amazon clothing brand Lunya declares bankruptcy

Lunya, a DTC brand founded in 2012, recently filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code, hoping to restructure its business.

The reason why Lunya filed for bankruptcy reorganization is also very simple. Its performance continued to deteriorate and its debt crisis was difficult to resolve. Relevant data shows that nearly 83% of Lunya's revenue comes from e-commerce platforms, but compared with the first quarter of 2022, the revenue in the first quarter of 2023 further dropped by 29%. In the past 12 months, Lunya's online store has lost an average of $135,000 per month. At the same time, in 2022, the company's revenue has dropped to $35 million.

Currently, the company has a reduced staff of 40, and the official website is conducting a big promotion to try to bring back cash. Among the company's creditors are Leap, a platform used by brands to operate stores, and ClearCo, an alternative financing provider.

It is understood that Lunya is mainly known for selling pajamas such as silk pajamas, bathrobes and nightgowns, aiming to provide women with a comfortable experience. Initially, the products were mainly sold through independent websites, Amazon, Walmart and other e-commerce channels, with good sales and good reputation. In the early days of the company's development, it invested heavily in product development to ensure that each pajamas can simultaneously achieve the effect of modifying women's figure and being suitable for daily home wear, and thus captured a group of loyal customers. The official Instagram platform has as many as 270,000 followers.

At its peak, Lunya's product prices on Amazon were nearly 10 times higher than the category leader. Despite the high prices, it still couldn't resist the enthusiasm of consumers, and sales on multiple platforms have been good. Looking at the data from 2020 and 2021, Lunya's average annual revenue once reached US$50 million.

Even with its halo, Lunya could not withstand the impact of consumer demand and competitors and could not escape the fate of bankruptcy and reorganization.

There are multiple factors that led to Lunya's bankruptcy and reorganization.

In mid-2021, the company misjudged the situation and believed that the e-commerce growth triggered by the COVID-19 pandemic would continue, so the company began to significantly increase inventory.

Reality broke the company's imagination, and monthly revenue began to decline compared with the previous year. The company attributed part of the reason to Apple's changes. In 2021, a major event occurred in the promotion of independent sites. In the update settings of Apple iOS14, users can choose not to share their privacy data with advertising platforms, which is equivalent to the loss of the effect of targeted advertising. But for Lunya, its target users are precise "high-income urban emerging women". This change of Apple undoubtedly dealt a fatal blow to Lunya and also caused a sharp decline in Lunya's sales.

Offline rent is also a key point for Lunya to go bankrupt. During the business expansion phase, Lunya not only vigorously developed online, but also increased its offline business. It opened 7 self-operated retail stores between 2020 and 2022. However, due to the large scale of offline retail stores, the huge rental costs became a key point that dragged down Lunya.

However, some industry insiders speculated that perhaps the product was priced too high, and the online pajamas design could not be clearly differentiated, so consumers were not willing to buy it, resulting in a sharp decline in sales and unsatisfactory performance. Even though the CEO tried to reverse the situation by reducing seasonal product launches and focusing on the company's best-selling products, it did not achieve much success.

In the future, as competition in the industry intensifies, perhaps more American sellers will leave.

Crazy low-price internal competition may cause more local American sellers to leave the market

Looking at the current US market, there are many companies that have gone bankrupt or even left the market, and sellers have been announcing their departure from the market intermittently. Top personal care seller Packageable filed for bankruptcy, home furnishing brand Fully ceased operations, and home furnishing e-commerce platform Brosa officially went bankrupt and liquidated. These cases all seem to foreshadow the future direction.

In today's fiercely competitive US market, multiple platforms are competing head-on, and the fighting will only get more intense in the future.

After entering the US market, Temu won the hearts of a large number of American consumers with its low prices. For example, shoes priced at $0.99, skirts priced at $0.50, and small items priced at free successfully attracted American consumers to stay on the platform. On the eve of Amazon's Prime Day this year, it continued to grab the Prime Day traffic with various promotions, and even launched a wave of advertisements with the price of new products reduced to $0.99. Some sellers directly said that the traffic of Amazon's Prime Day was intercepted.

Fortunately, most sellers performed well on Member Day, with some sellers' sales increasing by 7 or 8 times, or even dozens of times. There was also a seller whose single-day sales of a single product exceeded 3K, and he lamented that this experience could be written into the history of Amazon's industry experience. It is understood that this seller's hot-selling product not only had good sales volume, but also good profits, with a profit of about 90 yuan per order, which means that the seller's profit for a single product reached 270,000 yuan a day.

But this exciting achievement did not stop the low-price involution in the industry. In addition to the involution between platforms, the sellers on the platforms did not loosen the valve of involution, and remained in a tight state of involution.

Take Amazon as an example. The price war on the platform is getting more and more intense. A seller of lamps found that the top product in the subcategory was dropping prices like crazy. The FBA delivery fee was $4.86. The product price was close to the delivery price. Where is her profit? The same situation is not uncommon.

"If you sell at 29.99, I will sell at 19.99; if you sell at 19.99, I will sell at 9.99." Such low-price involution will only intensify market competition. Some sellers may call this strategy a strategic loss, that is, the purpose in the early stage is just to increase orders first, not to make profits. Later, they will reduce costs in procurement, packaging, head-end and other links, and finally increase product prices to keep orders and profit margins.

But as the saying goes, ideals are full of hope, but reality is very skinny. When you sell at a low price, more low-priced products will emerge. No matter it is the top sellers or small sellers, they will use price as a deadly weapon to get orders. The final result is that no one makes money, and then some sellers leave the market sadly.

Now that many big sellers from the US have left the market, it may be due to their own poor management, but more importantly, it is due to multiple influences such as low-price competition, changes in the market environment, and the impact of new platforms. In the current environment, if sellers want to establish themselves, they need to make efforts in terms of product itself, service quality, function upgrades, etc., rather than just focusing on price wars.

Amazon

Bankruptcy

apparel