Net profit plummeted by 90%! A sword that slayed many big sellers

At present, the industry's major sellers are collectively releasing their 2022 performance forecasts. Most of the sellers who have been able to break through the haze and grow against the trend have adjusted their business strategies in a timely manner, such as optimizing product structure to increase gross profit margin. However, judging from the feedback from multiple leading players, the main reason for their performance decline is highly consistent, that is, the decline in consumer purchasing power due to the overseas economic downturn.

After reviewing the past, most cross-border companies were inevitably hit by this dragon-slaying sword, including smart furniture giant Qisheng Technology, smart home seller Ogawa, and e-commerce platform Newegg .

There are more and more voices that the United States will fall into an economic recession. The decline in consumer power in 2023 will be difficult to reverse quickly. Against this background, sellers still need to take a defensive stance, such as increasing the proportion of cost-effective products.

Qisheng Technology's net profit plummeted by 90% after becoming popular during the Winter Olympics

When analyzing the reasons for the decline in performance in 2022, Youkeshu and Jiazhilian both mentioned one point: due to the slowdown in economic growth, high inflation in Europe and the United States, and sluggish overseas consumption, cross-border e-commerce competition has intensified. Subsequently, more big sellers issued performance forecasts, all mentioning the damage caused by this "dragon-slaying sword".

Qisheng Technology released its 2022 performance forecast yesterday, and it is expected that the net profit attributable to the parent company's owners in 2022 will be 25 million yuan to 33 million yuan, which will be a decrease of 324.1189 million yuan to 332.1189 million yuan compared with the same period last year, a year-on-year decrease of 90.76% - 93.00%.

It estimates that the net profit attributable to shareholders of the parent company after deducting non-recurring items for the year will be RMB 106 million to RMB 140 million, which will be a decrease of RMB 177.1974 million to RMB 211.1974 million compared with the same period last year , a year-on-year decrease of 55.86% - 66.58%.

Qisheng Technology's performance plummeted, with net profit decreasing by more than 300 million yuan, a drop of more than 90%.

Qisheng Technology focuses on the smart electric bed and its supporting service sub-industry. During the 2022 Beijing Winter Olympics, American bobsled athlete Summer Britcher praised the Winter Olympics smart beds on social platforms, and Qisheng Technology, a smart bed supplier, became famous.

It is understood that Qisheng Technology's main market is concentrated overseas, with the United States as the main exporter of its products. It has won the US smart bed sales champion for many consecutive times. In 2019, 2020 and January-June 2021, the company's US market revenue accounted for 85.40%, 82.52% and 84.11% of the company's main business revenue. Smart electric beds are the company's main business, accounting for about 90% of the company's total revenue.

However, the market cooled down in 2022. Qisheng Technology analyzed that due to the impact of global inflation, the consumption demand of overseas end consumers was suppressed, and the company's overseas market sales were slightly affected. In addition, the structure of the company's overseas products changed in 2022, and the proportion of cost-effective products increased, so the overall gross profit margin declined.

Another reason for the decline in its performance is that in order to continue to gain popularity as the only official smart bed designated supplier for the 2022 Beijing Winter Olympics and Paralympics, and to build and enhance the domestic "Shuford" brand's visibility and influence, Qisheng Technology has increased its investment in marketing and publicity, and its multi-channel layout has increased its sales expenses, but performance growth has not yet been seen.

In the first half of 2022, Qisheng Technology's profits have begun to shrink. From January to June, its revenue was 1.433 billion yuan, an increase of 8.01% year-on-year; its net profit attributable to the parent company was 0.98 billion yuan, a year-on-year decrease of 27.60%; its net profit attributable to the parent company after deducting non-recurring items was 125 million yuan, a year-on-year decrease of 3.02%. In the second half of the year, the decline has significantly widened.

In cross-border channels, Qisheng Technology also directly sells its own brand of smart electric beds and mattresses and other products in COSTCO and Amazon's online stores . Its brand Ergomotion focuses on adjustable bases, and its prices on Amazon's US site range from several hundred to thousands of dollars.

Smart electric beds are a professional market, but as people's pursuit of health upgrades, the user base will continue to increase in the future. The home furnishings giant Levo also targeted this category and added smart electric beds as a new core category.

Consumption in the health massage industry has decreased, and Ogawa's net profit has dropped by 70% year-on-year

There is another giant in the smart home industry - Ogawa, whose main business is health massage (massage chairs, small massage appliances), healthy environment (fresh air systems, air purifiers, etc.), home medical and other health products.

(Ogawa product)

Ogawa's development model is driven by both globalized independent brands and ODM business . In the Chinese market, its main brand "OGAWA" massage chair products have a leading advantage. At the same time, it has launched small electric massage products, forming a smart massage product matrix that can meet the multi-level needs of consumers, achieving complementarity and diversion between categories, and further expanding the main brand's competitive advantage in the domestic health massage market.

In the three core markets around the world , Ogawa has also launched a number of independent brands and has become a leading local brand through localized operations. Among them, "OGAWA" is mainly deployed in the Southeast Asian market and is one of the top two famous health brands in Asia; "FUJI" focuses on the Taiwan market and is a well-known massage chair brand in Taiwan, ranking second in market share; "cozzia" is deployed in the North American market and is a high-end brand in the North American home furnishing market, ranking second in market share; "medisana" is deployed in the European market and is a leading European family health brand, ranking top three in market share in Europe.

Ogawa also operates on mainstream cross-border e-commerce platforms such as Amazon, mainly selling office or home heating products such as electric blankets, electric shawls, electric cushions and foot warmers.

It introduced that the company has a large-scale technology and product R&D team in the industry, with annual R&D investment accounting for nearly 5% of operating income and annual R&D funds exceeding 200 million yuan. However, Ogawa's performance in 2022 is not good.

In 2022, Ogawa expects to achieve a net profit attributable to shareholders of the listed company of RMB 77.4 million to RMB 116 million, a decrease of 83.11% to 74.69% compared with the same period last year.

Its analysis of the reasons for the performance changes stated that the external environment in 2022 was complex and changeable. Affected by the repeated epidemics and economic inflation in major demand markets, global market volatility increased, which had an impact on the consumer market. The overall growth rate of demand at home and abroad slowed down, and the company's main business of health massage consumer demand was affected to a certain extent in the short term.

In fact, Ogawa mentioned this in its 2022 semi-annual report. After experiencing the continued global COVID-19 pandemic , high raw material prices , soaring shipping costs and other unfavorable factors in 2021, the company has been operating under high pressure for a year. In 2022, the Russian-Ukrainian conflict, high inflation in the United States, and frequent outbreaks of the epidemic have led to a significant contraction of the global market, weak market consumption, insufficient overall momentum of demand at home and abroad, and a significant slowdown in consumer demand for the company's main business of health massage, further increasing the company's operating pressure.

E-commerce platform Newegg was also hurt by this. Its parent company Lianluo Interactive expects total operating revenue of 12 billion to 13.5 billion yuan in 2022, net profit attributable to shareholders of listed companies is expected to be -750 million to -900 million yuan, and net profit after deducting non-recurring gains and losses is expected to be -550 million to -700 million yuan.

Among the reasons for its performance losses, the first one pointed out is the decline in consumption: due to the high CPI in the United States in 2022, consumer demand has declined, and at the same time, there is a lack of eye-catching 3C/IT new products on the market, resulting in a decline in user demand for technology products. The net profits of local e-commerce companies in the United States that mainly market technology products in 2022 were generally affected to varying degrees, including the e-commerce business of the company's subsidiary Newegg, where sales and net profits declined year-on-year.

Will the "low spending power", the biggest factor suppressing cross-border e-commerce, disappear in 2023? The answer may not be optimistic.

Recently, emergency savings company SecureSave conducted an online survey of approximately 1,100 American adults . The results showed that only one-third of Americans can easily pay for an emergency expense of $400 , while the remaining two-thirds of Americans are unable to pay for this unexpected expense and must use credit cards or loans to solve it.

Suze Orman, a personal finance expert, warned that financial insecurity is spreading. She believes that most people in the United States today have no money. "It can be said that we are now experiencing a financial pandemic . "

High inflation has put a red flag on US consumption. Many US car owners are unable to repay their car loans in time. The current US car loan delinquency rate is higher than at the peak of the financial crisis .

There are more and more signs and warnings that the United States will fall into an economic recession, and its residents' consumption power may not rebound quickly in 2023. Cross-border sellers still need to be prepared for this, such as appropriately tilting their products towards high cost-effectiveness.