There is still a price war to be fought in the peak season. Sellers: It’s OK as long as we don’t lose money this year

As the fourth quarter's major promotional festival approaches, the discussion about the "peak season" in the industry continues to heat up, but unlike previous years, the focus of this year's discussion is not because of the explosion of orders, but the lack of explosive momentum in the number of orders. Faced with stubborn inflation and concerns about an economic recession next year, consumers are tightening their wallets.

In order to gain more traffic, both online and offline retailers have used their own trick of "low price". According to news, some offline retailers in the United States have already launched large holiday discounts, and online sellers have also "rolled up" and are engaged in a price reduction competition. The prices of some products on the BS list are almost the same as domestic prices. And the "Cheng Yaojin" who suddenly emerged this year is even more eager to watch. On social media, you can often see posts saying "You can get Christmas gifts on Temu for free or for 1 cent."

The peak season price war is imminent. Compared with the continuously falling selling prices, advertising fees and storage fees are rising all the way, so some sellers have no choice but to unilaterally withdraw from the peak season. Based on the overall unsatisfactory situation this year, some sellers have made a conclusion early on: "As long as there is no loss, it's fine."

Fortunately, the development of cross-border e-commerce has not stagnated or declined. For example, Amazon's revenue in the first three quarters was still positive, at 7.3%, 7.21%, and 14.7% year-on-year, respectively, but the growth rate has slowed down. Data shows that the data of Chinese sellers on Amazon has gradually recovered in the past six months, indicating that sellers continue to be optimistic about the future development prospects of cross-border e-commerce.

The price is catching up with the domestic price.

Now the US dollar exchange rate has risen back to the "7" digit, and freight rates have also dropped sharply, especially the price of a 40-foot container from Asia to the West Coast of the United States, which once dropped to $1,500. This is good for sellers, but according to feedback from some sellers, the current profit margin has actually decreased. The reason is that the "price war" is too fierce, and everyone is frantically lowering prices.

Costs such as advertising fees and rush fees soared during the peak season, but products could not be sold at a high price, so profit margins were naturally compressed. Moreover, not all sellers ship their products abroad when freight rates are low. Not long ago, when Yien published an article titled "The boss takes the lead in selling! This peak season is so quiet that sellers are "disappointed"," some people said that a large amount of their goods were shipped at $12,000-20,000 (the price of a 40-foot container from Asia to the West Coast of the United States), and they are still clearing out inventory.

The big sale is coming, and price wars are inevitable, but the price wars during this peak season seem to be more intense. In fact, all this was foreshadowed as early as Halloween. At that time, sellers found that even though prices had dropped to lower than the same period last year, market prices generally fell by one-third year-on-year. Many used low prices + large coupons to boost rankings, and even started to roll directly at $9.9 three months before the holiday.

At that time, sellers were worried that they would face the same problem in the coming peak season. Some sellers who sell winter products said they were panicking. Some sellers also said they dared not stock too much during this year's peak season.

Now, the sellers' worries have become a reality. This year's peak season is still as it should be. With the arrival of November, the orders of most sellers have begun to slowly increase. Although there is no big explosion like in the past two years, the overall sales volume is indeed better than the off-season. However, as the order volume increases, the competition for traffic among sellers has become more intense.

One seller was shocked one morning because he found that the price on the BS list, which he hadn't checked for a while, had dropped to almost the same as the domestic price. The same product was 66 yuan on Taobao and 12 dollars on Amazon. Excluding the 15% platform commission, delivery fee and first-leg shipping fee, it was basically a lonely cross-border sale.

Leon, a lamp seller , also said that a rechargeable touch lamp in the category used to sell for around $30, but now the lowest price has dropped to $16, a drop of nearly 50%. "The low-priced ones sell well, but after deducting the costs such as commissions and FBA fees, it is basically a loss-making business."

Another seller shook his head helplessly at a new clothing link that was priced at $6.99 and offered a 20% coupon .

Seeing that everyone is "competing" to lower prices, offering large coupons, and grabbing the low-price sales during this peak season, some sellers who originally insisted on not doing charity have also been swept up in the torrent and are being swept forward by "low prices."

Slow growth, large year-on-year sales decline, and a price spiral that came earlier and more intensely than in previous years are the consistent feelings given to sellers in many categories. So much so that some sellers directly asked: "Can we unilaterally withdraw from the peak season?"

As for why the price war was so fierce, some sellers analyzed that it was because they overestimated this peak season and thought that there would be a big sales wave. Everyone shipped a lot of goods, but they were slapped in the face by reality. This year's peak season performance was not good, and products were not selling well, so everyone was in a hurry to sell them at a discount.

Although some sellers said that considering the dismal sales in the first three quarters, they have prepared much less inventory this year for safety reasons, many sellers still could not resist the temptation of the peak season and prepared a large amount of inventory.

Inventory is high. For sellers, it is better to sell at a discount than to spend warehouse fees if they cannot sell. On the one hand, it can recover funds, and on the other hand, it can free up storage space for future sales. One seller said that he did not want to have a huge order during the peak season this year, but only wanted to clear more inventory to make room for next year.

But other industry insiders said that the "price war" during this peak season was caused not only by sellers preparing excessive inventory, but also by the division of traffic. For example, offline retailers who also prepared a large amount of inventory have already started large holiday discounts and promotions in order to clear inventory. On the other hand, consumers who have downgraded their consumption are turning to cheaper platforms, such as Temu.

Traffic is divided, weighing heavily on Amazon sellers

Consumers’ purchasing power is fixed. The more people share it, the less money will fall on each channel. Now, the main competitors for Amazon sellers’ traffic are offline retailers and “Temu”, which emerged this year .

Retailers offer big holiday discounts to ease overstocking

If last year's holiday shopping was characterized by empty store shelves, that's been reversed just 12 months later, and now offline retailers are worried about oversupply and falling sales.

The seeds were planted last year when consumer demand for goods soared but supply chain jams led to long delays. Fearing the same shortages this year, retailers placed large orders earlier than in previous years, but consumers tightened their purse strings in the face of stubborn inflation and fears of a recession next year, creating a huge glut.

Now retailers have a lot of goods piled up in warehouses. Data shows that the vacancy rate of warehouse space in the two largest ports in the United States is only 0.2%, while it is usually 4% to 6% at this time of year.

Bloomberg recently reported that U.S. retailers are sitting on too much inventory, especially clothing and household goods. In order to avoid being overwhelmed by inventory, some brands are now adopting a variety of promotional methods, such as selling goods on second-hand websites, holding sample sales, offering big discounts, and even giving them away to employees or throwing them away.

Many retailers say this year's holiday season promotions are the most aggressive in recent years.

As we all know, as the epidemic situation in foreign countries is relaxed, many online consumers have returned to offline shopping. According to payment data released by Mastercard, in May, although online retail sales increased by 2.2% compared with the same month last year, in-store sales increased by 13.4%.

In addition, some promotional festivals during the Q4 peak season are considered by many consumers to be offline shopping sprees, such as Black Friday. According to research by UserTesting, the vast majority (63%) of Black Friday shoppers consider in-store shopping to be a tradition . More than 40% said that shopping in stores is "more important now" than before the pandemic.

Therefore, if offline retailers increase their promotional efforts, it will be a heavy blow to online sellers.

Data from Adobe shows that as retailers compete for consumers' money during the holiday season, online sales have plummeted and discounts have increased . Consumers will see record discounts during this peak season. Electronics, TVs, toys, clothing, sporting goods, computers, furniture and appliances will all have double-digit discounts, with computers leading the way with an average discount of 32%. This phenomenon began in October and November, and discounts are expected to deepen in December as online stores strive to attract a wave of consumers.

Temu is gaining ground in North America, with consumers attracted by its low prices

Also joining the battle for consumers' wallets is Temu.

After launching on September 1, Temu expanded rapidly in North America. Just 17 days after its launch, it became the most downloaded shopping app on the Google Play Store. One month later (October 18), it surpassed Amazon Shopping to top the list of free shopping apps on the US App Store.

Entering November, cross-border people clearly feel that Temu has accelerated its pace of grabbing the market. Its various marketing advertisements can often be seen on social media. Its advertisements are also everywhere on TV, browsers, subways and other public transportation.

Temu has now topped the US App Store shopping download rankings for more than a week.

Temu made no secret of its ambition to take more market share in the US during the peak season. Not only did it advertise that Black Friday offers up to 30% off, but it also directly offered a discount of 20% off for purchases over 40%.

At the same time, it has also been making a lot of noise on social media, where users can often be seen posting about how they got Christmas gifts on Temu for free or for just 1 cent .

It is human nature to be greedy for bargains. Although Americans say they don't want to buy, they are scrambling to get bargains on Temu. Industry insiders found that in just two weeks, Temu's traffic ranking rose by 500 places worldwide and 100 places in the United States.

Especially when spending power is declining, consumers are more sensitive to prices, and low prices are very tempting. I believe that sellers have also reduced prices before, and understand how strong the effect of low prices on increasing sales volume is.

Moreover, Temu not only opened up logistics, but also recently shortened the delivery time to one week. In the past, Temu logistics delivery took 7-15 working days.

Therefore , it is undeniable that Temu will indeed divert some of Amazon's traffic. However, this impact cannot be exaggerated, because Temu's current layout of categories is limited after all, mainly concentrated in more than ten categories such as shoes and clothing, children's clothing and toys, and maternal and child products. Therefore, if there is an impact, it will also be concentrated in these categories. Therefore, the impact is still mainly concentrated on light and small items and products without technical content.

However, some sellers think it is too early to say that Temu will have an impact on Amazon sellers, and that Temu is unlikely to shake Amazon's position in a short period of time. Among them, Shenzhen billion-level seller Da Bing said: "Temu has only been online for more than two months, and it is not enough to have an impact on Amazon sellers, at least not in this quarter. Amazon relies on the membership system to support the entire business empire , while Temu relies on low prices. For American consumers, low prices are not as killer as they are in China . What's more, Temu's current download volume is still small, and some of them are just for free."

However, some sellers believe that compared to diversion, the truly scary thing about Temu is that it is changing the perception of overseas consumers in a very scary way. In the future, when they get used to prices like Temu, it will be difficult for them to pay for more expensive products of similar quality on Amazon or other platforms.

However, the sellers who hold on until then to fight Temu head-on may be lucky, because many sellers have collapsed in this year's cold winter.

The cold weather is hard to resist, and a group of sellers will still be out of the market at the end of the year

When talking about this year's sales, sellers often say: "I thought last year's sales were bad, but I didn't expect this year to be worse." However, sellers generally believe that the worst has not yet arrived and the economic situation next year will be more severe.

Judging from the current forecast data of some authoritative institutions, the sellers' concerns are correct. Not long ago, Fitch, one of the world's three major international rating agencies, lowered its forecast for the US GDP growth rate in 2023 and warned that stubborn inflation and the Federal Reserve's sharp interest rate hikes will cause the US economy to fall into recession starting next spring. Fitch predicts that the US GDP will only grow by 0.5% in 2023, lower than the 1.5% expected by the agency in June.

The International Monetary Fund ( IMF) also lowered its forecast for global economic growth in 2023 on the 11th, believing that the worst has not yet come and the situation next year may deteriorate significantly. The IMF lowered its global GDP growth forecast for next year from 2.9% to 2.7%.

Many senior industry insiders also believe that the real winter for cross-border people will be next year. Cross-border sellers will have a hard time in the first half of next year. There may be a slight improvement in the second half of the year, but the overall momentum will still be downward.

In fact, under the impact of the cold weather, many sellers have left the market this year. Previously, Yien.com had released a data based on the statistics of Qichacha.com, which showed that more than 4,000 Shenzhen cross-border e-commerce companies have disappeared this year. This data is shocking, and these are only those with the words "cross-border e-commerce". If the companies without these four words are included, the number will be even larger.

However, this is not the end of this year's wave of bankruptcies. Many industry insiders believe that a group of sellers will leave the market by the end of the year. Some of them hoped to save the annual performance during the peak season, but ultimately failed, while others waited until the end of the year to see how the situation would be next year, and realized that the real winter had not yet arrived, so they stopped losses and exited the market in time.

The sellers who are in the peak season know the real situation better than anyone else. Although the peak season has not ended yet, some sellers have already started to summarize their performance this year. One seller gave four words helplessly when reviewing the whole year: "It's OK as long as there is no loss."

Shrinking profits are a common problem faced by cross-border sellers this year. Even though the revenue data of some sellers looks good, the net profit when calculated in detail is very bleak. If there is even a slight mistake, it can be easily eroded.

In view of this, sellers have become more conservative when making plans for next year. At the same time, in order to cope with the cold winter next year, some sellers have recently optimized their teams, reducing some staff before next year, and preparing for a more difficult economic environment in advance. Many even had their entire team laid off.

The cross-border workers who were laid off also changed from being angry and confused to self-mockery: "It's okay to be laid off this year. The market environment will be bad next year and there will be fewer jobs."

In the future, with the economic downturn and declining purchasing power, the high growth of cross-border e-commerce will be difficult to reproduce. Sellers must have a clear understanding and make reasonable anticipation for growth, while adjusting their business strategies in a timely manner according to changes.

Growth is still there, and the cross-border e-commerce industry is still worth persisting in

Although the signals given by the industry this year are that sellers are having a hard time, judging from some data, this "difficulty" may have been exaggerated by some people.

Amazon's revenue in the first three quarters still grew year-on-year, at 7.3%, 7.21%, and 14.7%, respectively, but the growth rate slowed down. Amazon's forecast for net sales in the fourth quarter is also expected to grow by 2% to 8% year-on-year.

"It was too easy for cross-border sellers to make money and live too smoothly in the past, so compared with this year, they naturally feel that they have a hard time and think that the industry is not doing well and they want to leave." A senior person in the industry said: "In fact, compared with many industries, the cross-border e-commerce industry is still worth sticking to. After all, many industries are going downhill, while cross-border e-commerce is on the rise."

Data recently released by Marketplace shows that starting from March this year, the data of Chinese sellers on Amazon US has gradually recovered, and Chinese sellers have quickly regained their lost market share. This indirectly shows that both the industry and the outside world continue to be optimistic about the future development of the cross-border e-commerce market.

Earlier, Wei Zhe, the founding partner and chairman of Jiayu Capital, Jiayu Fund, shared his judgment on cross-border e-commerce at a global brand summit and said: "The unbroken global supply chain will not be decoupled from the cross-border e-commerce market. China will definitely need foreign trade exports in the next few decades, and cross-border e-commerce, as an important growth point for foreign trade exports, has seen the country introduce more favorable policies almost every month or even every week.

In addition, the exchange rate will remain at 7-7.5 for a long time. Cross-border e-commerce receives USD and EUR, but a large amount of costs are paid in RMB. For example, procurement costs, employee costs, and even marketing costs can be paid in RMB. Such an exchange rate is conducive to risk hedging and helps us better expand our cross-border e-commerce business. "

Looking at this year's peak season, despite economic problems, the NRF recently predicted that sales will still grow during the 2022 holiday season. It expects holiday retail sales in the United States to grow 6% to 8% to $942.6 billion to $960.4 billion during November and December 2021. Last year's holiday sales grew 13.5%, while the 10-year average growth rate was about 5%, which is still above average this year.

Adobe also believes that e-commerce holiday sales will return to double-digit growth in the next few years, especially if consumer confidence builds by 2023.

So who has benefited from this growth? “Most of the growth has benefited from sellers who make products and have their own core technologies,” said an industry insider who has been in the industry for many years.

What’s more, shipping costs, which account for most of the sellers’ costs, have peaked and are beginning to normalize, which relieves a lot of pressure on sellers.

Low Price Spiral

Price war