Ten-year-old company closes down! Another cross-border company announces liquidation

This week, a cross-border e-commerce company that has been operating for more than 10 years entered liquidation procedures. In its heyday , the company received two rounds of financing and was a leader in its industry. Now its nearly 200 employees will be forced to find new jobs.

This year's cross-border e-commerce situation is full of challenges, and this situation is not an isolated case. Now that the Golden Week before Christmas is coming to an end and the peak season is drawing to a close, sellers are lamenting that costs are too high and payments are too little when doing year-end inventory. Looking at the eight Amazon fee notices that will take effect in January, one can't help but complain that "Amazon makes all the money."

With the Spring Festival approaching and the changes brought about by the relaxation of epidemic prevention and control, sellers' post-holiday stocking plans have changed. How to prepare stocks accurately under Amazon's continuously increasing storage capacity restrictions has also become a difficult problem. Will the road in 2023 be smoother or more difficult?

10-year cross-border company announces liquidation

On December 14, a seller revealed that the cross-border service provider Sihai Shangzhou announced liquidation, and a senior industry insider confirmed the news. On that day, the company's Qichacha page traffic suddenly climbed.

A leaked "letter to employees" shows that the company is unable to continue operating due to long-term operating difficulties. The company has decided to end operations and terminate labor contracts on December 15, 2022. The company has entered liquidation procedures.

Regarding employee salaries, the wages from November 1 to November 30 this year will be settled based on actual attendance, half of which will be paid before December 31, and the remaining amount will be paid before February 10, 2023. The wages from December 1 to December 15, 2022 will be settled based on actual attendance and paid before March 10, 2023, and no wages will be paid after that. The five social insurances and one housing fund will be paid after December 2022.

As one of the earliest cross-border e-commerce companies, Sihai Shangzhou was founded in the early stages of the industry and was once a leading cross-border e-commerce comprehensive service provider in China. "In 2015, I heard their boss give a speech in Guangzhou," said a seller. The industry calls it the "Nanjing Cross-border Huangpu Military Academy", but now many cross-border people don't know it.

Sihai Shangzhou was established in 2011 with a registered capital of RMB 11.5829 million. The company's main businesses include joint operations (helping enterprises operate, joint operations in Europe, America, Japan and Australia), management consulting (leading enterprises to operate, cultivating mature cross-border e-commerce teams in 3-6 months), providing operations, marketing, logistics, intellectual property and other services, covering multiple platform channels such as Amazon, eBay, Wish, Walmart, etc., and cooperating customers include Lechuang, Zhejiang Yongqiang, etc.

( Photo source /Sihai Shangzhou website )

It is reported that in 2016, Sihai Shangzhou's total turnover exceeded 200 million US dollars, more than 90% of which came from the United States. The company has accumulated operating experience and supporting resources in many categories such as home furnishings, fashion, sports and outdoor, 3C, etc., and has operating centers and warehousing and logistics centers in Los Angeles, Detroit, Hamburg, Germany, Australia, the United Kingdom, Japan and other places.

During its golden period, Sihai Shangzhou received two rounds of financing, including a US$40 million Series A financing from IDG; in 2017, it received another Series B financing, but the amount of financing was not disclosed, and the investment institution was Qinglan Venture Capital.

(Photo source : Qichacha)

In 2018, Lechuang also planned to issue shares to purchase all or part of the equity of Sihai Shangzhou. Lechuang said that on the one hand, the acquisition would help to accelerate the incubation of brands on platforms such as Amazon and eBay by leveraging the target's professional capabilities and enhance Lechuang's brand value. On the other hand, the target's overseas operation center and warehousing service system would help enhance the complementary advantages of both parties in the overseas operation system and help the company improve its operating efficiency.

However, the acquisition failed as the parties failed to reach an agreement on the core transaction terms.

Today, Lechuang's annual revenue is close to 3 billion, making it one of the top sellers in cross-border e-commerce, but Sihai Shangzhou will be out of the market. In the eyes of industry insiders, the founder of Sihai Shangzhou has a strong industry foresight, but during the rapid development of the industry, the company does not have strong product support, and it is only a matter of time before it is washed away by the waves.

In 2021, Sihai Shangzhou still has 188 employees, and now these people can only look for jobs again. An employee of the company said that it is not clear where to work next.

As companies closed down or shrunk, there was already an undercurrent of layoffs in the cross-border industry at the end of the year. Companies were unable to continue due to losses and simply closed down.

" A few years ago, there was a legendary team of seven or eight people working on a small goal. They thought they were awesome at the time and everyone was envious! Later, I heard that something went wrong during the epidemic and they lost a lot of money. Recently, I heard that they had disbanded. " said a seller.

In early December, one operator said that as expected, the company went bankrupt this month and he was given one and a half months’ severance pay. Another operator said that the company also went bankrupt, but only gave him half a month’s severance pay, which was quite helpless.

There are many similar cases. "The previous company also announced bankruptcy and layoffs. The boss was in debt of several million and did not give us any compensation. We paid our wages and left." said an operator.

Other cross-border companies are in decent condition, but given their poor performance in 2022, they still hope to control their basic situation by downsizing.

"It's really not easy this year, and I'm planning to lay off some people recently," said one seller. Some companies have already started laying off employees, and one seller admitted that "all the layoffs have been completed, and we'll just have to wait until 2024 for three people to survive."

The peak season is coming to an end. After reviewing this year's business, sellers will make further decisions on next year's work and personnel deployment.

“ Arrives after Christmas ” is here, and the peak season is coming to an end

Over the weekend and Monday, many sellers felt the surge in traffic, with order volumes even exceeding those during the Black Friday promotion.

This is not difficult to understand. The two weeks before Christmas is the peak period for purchase conversion, and products with gift attributes are particularly popular. Overseas consumers have no time to compare prices and rush to place orders. Products with the "Arrives before Christmas" label are even more popular, so some sellers seize the opportunity to increase prices, and the increase can even reach 50%.

In the United States, the second Monday in December is called "Green Monday", where "green" refers to the color of the dollar. Although many people have not heard of it, this day is indeed one of the busiest online shopping holidays, because consumers realize that Christmas is less than two weeks away and the delivery deadline for Christmas gifts is approaching, so they will buy quickly.

Some sellers have calculated based on past experience that the independent website will see a sales decline around December 15th, because some products cannot be delivered before Christmas if purchased later than this time; in contrast, the sales period on Amazon can last until the 22nd, because Prime delivery can still achieve fast delivery at this time, in time for Christmas. After this sales climax, some products will see a cliff-like sales drop.

But judging from the situation this year, this wave of upward trend seems to be more short-lived. Starting from Tuesday, sellers noticed a decline in traffic and the number of orders fell again. The decline was very obvious. Some sellers even worried that the link was down and they could not place orders, so they opened the link to confirm. According to sellers' feedback, compared with one or two days ago, the number of daily orders decreased by 15%-30%, or even halved.

Sellers know that when delivery starts to show "Arrives after Christmas", traffic and conversion rate will drop sharply. This is indeed the case. In the past two days, the "Arrives after Christmas" label has appeared one after another, and the conversion rate has plummeted. The peak season has basically come to an end.

The two weeks before Christmas are an important time for sellers to clear inventory. The sales period is about to pass, and there is still a large amount of inventory to be cleared. Sellers can't help but get anxious when they think of the large storage fees they will face.

At present, more and more Christmas products are released in the relevant clearance groups, but the clearance channels that mainly sell offline have long stopped accepting Christmas product stocks. Half a month ago, a stock collection merchant told the editor, "We don't accept Christmas products now, it's out of season."

The industry will return to the off-season, and one seller lamented that the real peak season is getting shorter and shorter. "In 2017, the peak season was clearly felt in September, and the company began to hold a peak season mobilization meeting; in 2019, when I started my own business, I could clearly feel the peak season around October; this year, there is no so-called peak season, and it is only about ten days."

It's not just the period at the end of the peak season. Many sellers never saw a boom during this year's peak season. Some sellers who did feel the impact of the peak season were affected by factors such as rising advertising costs and warehousing costs, and their operating costs increased sharply.

Operating costs increased, and sellers' payments dropped by nearly half

As the peak season is coming to an end, some sellers are beginning to calculate their gains this year. Many of them lamented: “This year’s costs have risen significantly, and the returns have dropped a lot. All the money has gone to Amazon!

One seller described what he saw: CPC on the US site this year is twice as high as the same period last year, from about $1.1 last year to more than $2 this year. Especially in the first half of the year, the top brand ads that they thought were very useful had bids of $8 to $10 for big keywords, but the average order value of the products was only about $30. Do they really make money?

A rough calculation shows that operating costs include 15% for advertising, 15% for commission, 18% for FBA delivery, 3% for warehousing, and 3% for refunds, so the recovery rate is only 46%.

The situation is similar for fellow sellers. They said that the percentage of Amazon's operating costs, of which the FBA delivery fee can fluctuate greatly, is related to the customer unit price, product volume, and weight. The higher the FBA delivery percentage, the lower the collection rate. Amazon really makes all the money!

Another colleague said that after looking at the new store, after deducting the advertising fee and storage fee, the return was pitifully small, not even enough to cover the operating salary, and it was really like working for Amazon! Another seller said that his product was on the shelf for four or five days and now it was negative $26.

The sudden increase in operating costs directly affects the profits of sellers. This year, many sellers have directly felt that their profits have declined significantly. One seller said that compared with the same period last year, sales increased by more than 30%, but profits decreased by more than 20%. This is not an isolated case, but the real situation of tens of millions of sellers in the same industry.

During the holiday shopping season every year, advertising costs on major e-commerce platforms generally increase, and this year is no exception.

Alasdair McLean-Foreman , founder and CEO of a research institute, said: "This year's holiday season advertising costs will be higher than in previous years. Consumer spending levels in the second half of the year are difficult to predict, and economic instability will affect consumers' willingness to buy certain products. For sellers, they need to consider the increase in advertising costs and more intense competition."

In fact, Amazon's advertising costs soared at the beginning of this year. At that time, many Amazon sellers reported that the recommended bids for advertisements in multiple categories of products on the platform were raised. The highest bid in the category of one seller rose from more than 2 points to more than 6 points.

In 2014, Bernie, a foreign seller, started selling computer accessories on Amazon. According to him, the CPC cost of advertising was about 14 cents at that time, but it rose to $1.60 in February this year. In the past eight years, this cost has increased more than 10 times.

According to the "Amazon Advertising Benchmark Report for the Second Quarter of 2022" released by Tinuiti, Amazon's CPC growth began to slow down in the second quarter of this year. As Amazon shifted its advertising prime time from June to July, product promotion CPC only increased by 8% in the second quarter. At the same time, Amazon's brand promotion advertising spending also fell to 2%. On the other hand, in the second quarter, clicks on sponsored display ads increased by 17% and CPC increased by 36%.

In the third and fourth quarters, with the arrival of the peak season, what really affects sellers is the sharp increase in advertising costs. During the holiday shopping season, sellers are competing for traffic, so advertising investment must be more intense.

In addition to advertising costs, Amazon's warehousing and logistics costs are also rising sharply. The various peak-season storage fees have made sellers feel heartbroken. Some peers have had their peak-season storage fees deducted by tens of thousands of dollars. And with the adjustment of Amazon's storage capacity policy, some sellers have to choose to use Amazon's AWD, which is undoubtedly another increase in costs.

According to the relevant policies that Amazon has released, storage fees will remain high next year. Industry insiders Cross-border Backpackers have summarized Amazon 's expenses in 2023, and you can intuitively see the details of the platform's storage fee adjustments in 2023. This also includes adjustments to the small and light program fees, new storage utilization surcharges, FBA fees and dangerous goods delivery fees, removal and abandonment order fees, etc.

1. The 2023 Amazon US commission and Amazon Logistics FBA fee adjustments will take effect on January 17, 2023

2. Amazon’s 2023 dangerous goods delivery fee adjustment will take effect on January 17, 2023

3. Changes to Amazon Logistics Removal and Abandonment Order Fees in 2023 will take effect on January 17, 2023

4. The 2023 Amazon Logistics Bulk Clearance Program fees will take effect on January 17, 2023 , and the bulk clearance fees will remain unchanged.

Amazon will charge two fees for each item in bulk liquidation:

The commission for bulk clearance sales is 15% and will be calculated based on the total recovery value;

Bulk clearance handling fees are charged per piece and depend on the size and weight of the item.

5. 2023 monthly storage fees will take effect on February 1, 2023

Non-peak storage fees (January to September): $0.04 per cubic foot for standard-size items; $0.03 per cubic foot for oversized items.

Peak season storage fees (October to December): The fees for sortable items will remain the same; the fees for non-sortable large items will increase by $0.20 per cubic foot.

6. Warehouse utilization surcharge will take effect on April 1, 2023

Sellers using professional accounts and whose storage utilization exceeds 26 weeks are required to pay the storage utilization surcharge.

The following sellers do not need to pay the storage utilization surcharge, but only need to pay the relevant fees according to the basic rate of the monthly storage fee:

Sellers using professional accounts with a storage utilization rate of no more than 26 weeks;

New sellers who have sent their first inventory shipment to Amazon no more than 52 weeks ago ;

Sellers using personal accounts;

Sellers with an average daily inventory volume of less than 25 cubic feet.

7. Surcharge for overage inventory will take effect on April 15, 2023

The storage age is between 271-365 days: the surcharge will be increased for storage age between 271-365 days;

Inventory age is between 180-270 days: an over-age inventory surcharge is imposed, excluding the following categories of products: clothing, footwear, luggage, jewellery and watches.

8. 2023 Amazon Logistics Small and Light Program Fees Effective January 17, 2023

The price of eligible items will increase from no more than $10 to no more than $12;

The 1-pound and under size segments for Small Standard and Large Standard will be divided into 4-ounce increments;

Large standard-size items weighing more than 1 pound will be divided into 0.5-pound increments.

In this view, based on this situation, the company only hopes to achieve sales before the peak season in 2022 in 2023. After all, operating costs have increased and profits have decreased. The company does not seek growth but only survival. However, some peers have different views.

The economy is slowly recovering, and growth is expected next year

Faced with the current situation, many sellers in the cross-border circle are indeed facing a lot of uncertainties, but as the epidemic situation is relaxed, more people remain optimistic about growth in the new year. They begin to plan for the Spring Festival holiday and stock up after the New Year so that they can show their talents after the New Year.

As the Spring Festival holiday approaches, some cross-border companies and factories have already started their holidays. For cross-border e-commerce sellers, the most important thing at this point in time is to prepare for the end of the year.

This year's stocking is destined to be unusual. The epidemic coincided with the Spring Festival, and many factories may not be able to resume normal operations after the New Year. By then, the situation at the beginning of this year may occur again - even if you have money, you cannot order goods.

One seller said that the supplier has informed them that they will not accept orders, and their workers have returned to their hometowns . The workers are unwilling to take risks for low wages. It is still uncertain what the situation will be like next year, and there may be shortages of many products. At this time, cross-border sellers can prepare goods in advance and send them out before the New Year, so that they will not be in a hurry during the New Year holiday.

In the opinion of a professional, after the domestic epidemic is relaxed, there may be a rapid period of pain, which will be a great test for the supply chain. After the pain period, everything will return to normal, and the supply chain will slowly return to the calm state before 2020.

Based on this judgment, some sellers have set a small goal for next year: a 30-50% increase in sales and profits.

Overseas, the economies of Europe and the United States are also slowly recovering. These favorable factors have also increased the confidence of some cross-border sellers.

The U.S. Department of Labor report showed that the U.S. consumer price index rose 7.1% year-on-year in November, lower than the expected 7.3%, which may mean that the worst of U.S. inflation is over and inflation is about to reach a turning point.

Data released by the UK National Statistics Office showed that the country 's inflation rate in November was 10.7%, down from 11.1% in October.

With the economic recovery in Europe and the United States, the domestic supply chain has returned to calm after some pain. For cross-border sellers, growth can be expected in 2023.

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