Amazon borrowed $8 billion at the beginning of the year. Cross-border transactions will be even more difficult in 2023!

“ This is the best of times, it is the worst of times. ”

For cross-border people, every year is the best and worst era for cross-border transactions . After experiencing a surge in sales and the survival of the fittest in the early and middle stages of the epidemic , the industry slowdown that began two years ago is still having a continuous impact on sellers , and multiple data indicate that the industry is still in a period of pain in 2023. Not only are sellers in dire straits, but even the giant Amazon is having a hard time.

On January 3, Amazon borrowed $8 billion from a number of lending institutions. This move by Amazon to borrow a huge sum of money at the beginning of the year frightened many industry insiders.

By borrowing $8 billion at the beginning of the year, is Amazon sending a negative signal to the market?

According to Reuters , Amazon reached a loan agreement with several institutions last week , which will provide Amazon with $8 billion in unsecured loans.

The loan reportedly took effect on January 3 and will expire in 364 days (January 3, 2024), but Amazon can choose to extend it for another 364 days. However , if Amazon decides to extend the loan period , the interest rate spread will also increase from 0.75% to 1.05% .

Regarding the reason for the loan, an Amazon spokesperson said: "Given the unpredictable macroeconomic environment, over the past few months, we have used a variety of financing methods to fund capital expenditures, debt repayments, acquisitions and working capital needs."

Obviously, the negative consumption caused by crises such as inflation has hurt Amazon . Whether it is the slowdown in growth throughout 2022 or the $8 billion loan at the beginning of this year , it all points to this fact .

Some analysts said that Amazon's short-term loan is enough to show that the current sluggish consumer market will continue for some time, because applying for a loan means that its financial situation has reached a "tight" state, and the tightening of capital liquidity foreshadows a wider range of economic headwinds in the future market .

For Amazon, the $8 billion loan does not seem to be a big deal, because as of now, excluding this new loan, it has already carried nearly $59 billion in long-term debt on its books . In addition, as of the end of the third quarter ended September 30, Amazon also had about $35 billion in cash and cash equivalents , and previously expected full-year sales to exceed $500 billion. Compared with these figures, the $8 billion loan does not seem to be worth mentioning at all .

But this is even more strange. Why would Amazon need such a "small loan"?

Analysts said the $8 billion loan may be an indirect sign that Amazon is facing a liquidity crisis in the near future.

In 2022, although Amazon's financial report showed that its revenue was growing, its profits fell sharply and its losses should not be underestimated. Due to high transportation, inventory and personnel costs, Amazon's operating profit in the first three quarters of 2022 only reached US$9.5 billion , far lower than the US$21.4 billion in the first three quarters of 2021 .

In addition, in the first three quarters of 2021, Amazon's net profit was as high as US$19 billion, but it lost US$3 billion in the same period of 2022. For four consecutive quarters , its free cash flow was negative US$19.7 billion .

In order to reduce losses, Amazon has been shrinking its warehouses, which have expanded wildly in the past three years. It also decided to lay off tens of thousands of employees at the end of last year. Its CEO Andy Jassey said that 18,000 Amazon employees will be laid off in the foreseeable future , higher than the previous estimate of 10,000.

Over the past year, Amazon's stock price has plummeted 51%, with closing prices hitting new lows. This has also caused its market value to be cut in half, from $1.7 trillion at the beginning of the year to approximately $834 billion. Founder Bezos ' personal net worth has lost approximately $100 billion.

Due to the current revenue and market conditions , Amazon was forced to state in a document submitted to the U.S. Securities and Exchange Commission that market uncertainty continues and that it needs an $8 billion loan for " general corporate purposes."

While the loan may not be absolutely necessary, Amazon 's move clearly foreshadows dire conditions in the industry in the future.

In fact, it's not just Amazon. Even technology giants such as Microsoft and Alphabet are laying off employees to cut costs in response to economic headwinds , and many American economists are also predicting a bearish market. The sellers' " first blow" in 2023 has begun.

Rising unemployment, economic recession ... Sellers: This year will only be more difficult than 2022

According to the latest survey by the Wall Street Journal, 65% of American economists believe that the United States will fall into a recession in 2023 , and Bloomberg 's survey conclusions are consistent with this.

A poll by the National Association of Manufacturers ( NAM) also showed that 62 % of manufacturers believe the United States will face a recession in 2023.

In addition, according to Fed Chairman Daly , Fed policymakers unanimously believe that U.S. inflation is more persistent than expected and that interest rates may need to be raised to above 5% and kept high for some time.

As for the next rate hike, Daly said that 50 basis points or 25 basis points are both possible, after all, the CPI data has not been seen yet.

The negative impacts of inflation also cover the U.S. labor market. Daly said that the U.S. labor market will continue to slow down in the first quarter, and there is no sign of a spiral of wages and prices . The unemployment rate is expected to rise to 4.5% or 4.6% by the end of 2023 .

Rising unemployment means more consumers are facing financial crises and cutting back on spending, which will lead to a continued slump in the market.

Faced with these negative messages, some sellers smiled bitterly and said, " In 2023 , it is an instinct to develop the habit of difficulty ."

When talking about the market forecast for 2023, many sellers told Ennet that they would have to pay hundreds of thousands of yuan in storage fees at the beginning of the year, and that their profits from the last few months of last year were gone. The remaining inventory is expected to be cleared out by May . If the US market continues to be like this, it may take Amazon Prime Day to "do charity" to clear out all the inventory.

Some sellers said that they were still working hard to clear the last wave of inventory and had not replenished the inventory. They might take a break for a while after clearing the inventory to see how the market performs. Some sellers even said that they were doing some side jobs to support themselves .

In terms of strategy, some sellers said that they will tighten their battle lines in 2023. The distribution model is no longer advisable. They should continue to delve deeper into product categories and create high-quality products, stabilize the basic market and then slowly expand the cake.

Regarding this year's market conditions, the vast majority of sellers believe that the ideal state is to seek progress while maintaining stability , but the reality is that they still have to continue to "survive" .

It is foreseeable that the pain brought by inflation will not disappear quickly. The supply chain continues to be disrupted , the cost of raw materials remains high , and the demand in the consumer market is deeply weak ... A series of crises are still knocking on every seller.

I thought 2022 was already tough enough, and I thought there would be a turning point in 2023 and the market would improve, but perhaps the real darkest moment in the cross-border circle has not yet come.

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