Prices have fallen for 9 consecutive months! New costs are approaching, sellers: dare not raise prices

Under the current situation of both loss of order volume and traffic, sellers have attached increasing importance to "reducing costs and increasing efficiency" in the past two years, but recently sellers may face another dilemma of possible cost generation.

Will the "Tariff Exemption Policy for Goods Under 800 Yuan" be Cancelled Again ? Sellers: Will the Price Be Raised?

Recently, Reuters reported that bipartisan lawmakers in the United States proposed a bill to cancel the tariff exemption policy enjoyed by e-commerce sellers shipping from China to the United States.

According to the "de minimis rule" ( i.e. tariff exemption policy ) in the US tariff law , imported goods valued at $800 or less are exempt from tariffs if they are shipped to individual consumers . In other words, cross-border sellers can save the cost of tariffs by shipping small packages.

Moreover, small packages worth less than $800 are rarely subject to U.S. Customs scrutiny of the goods' country of origin and manufacturer.

But now, many local American businesses and government officials believe that this policy has become full of loopholes as it develops.

For local businesses, Chinese sellers can divide goods into multiple packages below $800 and enter the country tax-free. More and more Chinese sellers will take advantage of this loophole to squeeze into the US market in batches, resulting in intensified competition. According to US Customs data, the shipment volume of small packages increased to 685.5 million in 2022 , compared with 410.5 million in 2018 .

Relevant US departments believe that this policy will not only have a negative impact on the fairness of market transactions, but will also be detrimental to product safety inspections.  

Therefore, in the past two years, there have been more and more voices about canceling the "tariff exemption for packages below $800". There was also a related proposal last year, but it was ultimately rejected by the US Congress. This time, another US congressman proposed the bill and said that once the bill is passed, small packages from China will be immediately banned .

The news naturally caused heated discussions among sellers in the cross-border circle. Some sellers believed that the "fuse" of this proposal was the two platforms SHEIN and Temu.

In recent years, SHEIN and Temu have successively set off a storm in the US e-commerce market, using their price advantage to tear open a hole for development and growth in this market. As for Temu, thanks to cost control such as tariff exemption, it has captured the hearts of American consumers with low prices. People familiar with the matter estimate that its GMV in the first half of this year has approached US$3 billion .

Therefore, many American industry insiders believe that the biggest beneficiaries of this exemption policy are Temu and SHEIN, and the two have also exacerbated the degree of internal competition in the US e-commerce market.

It is reported that the proposal only applies to parcels from China and Russia , and other countries can still enjoy this tax-free benefit .

It is not clear how much support it will receive. But if the bill is officially enacted, Chinese sellers will face another cost expenditure. When the news came out, many sellers said:

——Will this force us to raise prices? Is there still a market for raising prices?

——Looking for cooperation with factories in Vietnam and Southeast Asia?

In response to these voices, some freight forwarders left messages saying, “Is this going to ‘destroy’ the cross-border logistics industry?”

Of course, these voices are just ridicule. In the European and American markets where inflation has not eased and Temu has entered the market with a strong force at low prices, if sellers raise prices, it may be "tantamount to cutting off their own livelihood."

Online prices of many categories have fallen for 9 consecutive months, and sellers dare not raise prices

Adobe Digital Price Index ( DPI ) shows that in May this year , US online prices fell 2.3% year-on-year , the largest drop since the COVID-19 outbreak . It also marked the ninth consecutive month of year-on-year decline.

It is reported that the year-on-year decline in online prices in May was driven by a sharp decline in non-essential categories such as computers, electronic products, and electrical appliances . Inflation in essential categories such as groceries and personal care slowed down, and price increases declined significantly.

Of the 18 categories tracked by the DPI, 11 saw year-on-year price declines, with the flowers /related gifts category experiencing the largest drop of 27.8%.

Household appliances : Prices fell 7.9% year-on-year and 2.4% month-on-month, the largest drop since 2014. Previously, prices in this category had risen for 29 consecutive months, but now they have experienced eight consecutive months of year -on-year declines.

Home and Garden : Prices fell 6.3% year-on-year and 0.9% month-on-month , and prices are much lower than the same period last year .

On the contrary, prices of categories such as personal care, pet supplies , groceries, tools /home improvement, and medical supplies have increased year-on-year . The rising prices of essential products mean that consumers' desire to spend on non-essential products is decreasing. For most sellers, this is not good news.

Lowering the price still cannot save the order volume.

In the "Pulse of E-commerce in May 2023" released by Signifyd , sales of multiple categories continued to decline. Among them, outdoor camping supplies fell by 8%, leisure supplies fell by 4% ; in the field of household goods, online sales of home furnishings (-2%) and furniture and decoration (-7%) all fell year-on-year .

Even outdoor camping products, which should have been hot-selling products with the arrival of summer, showed weakness on the demand side. It is conceivable how cautious American consumers are about spending on non-essential goods.    

At the same time, since last year, consumer demand and capacity in the global market have both weakened. Compared with its heyday, the global e-commerce market is facing a situation of market contraction , with reduced transaction volume, declining sales, and stock prices of related companies plummeting .

In this context, how dare sellers raise prices easily?

" If this proposal is passed, B2C small-item sellers and B2B small-batch sellers will undoubtedly be the first groups to be hit hard , " a seller told Ennet.

In the cross-border circle, some sellers with low-value goods are accustomed to using express or small package channels for single-ticket customs clearance, which can enhance their cost advantage and thus improve their market competitiveness. However, if the proposal is passed, it will inevitably increase cost pressure.

Moreover, the proposal only allows private shippers such as FedEx, UPS and DHL to transport a minimum number of packages. That is to say, even if you use official logistics such as Amazon , as long as the goods are not stocked in overseas warehouses, they may be affected .

On cross-border e-commerce platforms such as Amazon, most Chinese sellers sell small items such as shoes, clothing, accessories, 3C products, and home furnishings . These categories used to be eligible for tax-free policies and had good profit margins. But now, sellers say the emergence of the proposal is "not wanting to give Chinese sellers a way out."

At present, the new proposal has not yet put forward a specific tax rate , but considering that many countries charge 8 % tax on the declared value, the United States may not be much different from this. The additional cost for sellers will make the already sluggish revenue even worse.

Since the beginning of this year, many sellers have been suffering from the decline in orders in the US market. Some sellers told En.com that if the tariff exemption is really cancelled, costs will increase and prices will have to be raised, but raising prices now is not feasible and may eventually force Chinese sellers to leave the market .

Leaving the market may not necessarily mean leaving in earnest. After all, the US market is a very popular market. However, the ever-changing international trade environment will inevitably put sellers' ability to withstand pressure to a greater extent.

Seller

cost

Vietnam