Big sales lead the way! The cross-border industry begins a new round of layoffs

This year, the cross-border e-commerce industry is facing a situation of low market growth, fierce competition and high costs. In order to retain a glimmer of hope, many companies in the industry have successively reduced their staff in the first half of the year, and a group of operators have been forced to go out to find jobs. Not expanding and hiring less has become a consensus in the industry. Some of the laid-off operators may even face secondary unemployment because the new company is unsustainable.

We are entering the traditional peak season, but sales in many categories have not improved significantly. Some sellers have seen the decline and are not optimistic about the future e-commerce situation. In order to slim down for the winter, cross-border companies have started a new round of team optimization, with top sellers taking the lead.

Observing the market changes, e-commerce platforms are also adjusting their strategies. Affected by the current macro environment, Amazon recently plans to cut some non-profit departments to cut expenses and optimize costs. According to the latest news, Amazon plans to lay off about 10,000 employees, which is the largest layoff in its history. E-commerce giants are already downsizing to adapt to the slowdown in growth, and sellers should be more cautious in their layout.

In other peripheral industries related to cross-border e-commerce, social giants such as Twitter and Snap, as well as freight forwarding companies, have also begun to lay off employees one after another, taking a defensive stance against the continued downward trend in the market.

The air is cold, who will remain at the table after this round of shuffling?

Cross-border industry starts another round of "optimization"

After half a year of tepid sales, many cross-border sellers have high hopes for this peak season, hoping to make up for the sales decline and thin profits in the first three quarters. However, judging from seller feedback and market forecasts, the overseas consumer market has not shown strong purchasing power, and this year's peak season is almost certain to be sluggish.

In view of this situation, some sellers in the industry said that they have recently begun to optimize the team structure and make some streamlining efforts to prepare in advance.

The difficult market environment has a more obvious impact on large-scale cross-border companies. Last week, a leading seller in Guangdong issued an internal notice, under the combined influence of internal and external factors, to start early holidays for some business personnel , and the end time of the holiday is still unknown.

According to the company, the external environment this year is bad, the foreign market is weak, and the epidemic continues, product development and delivery work continues to be interrupted; on the other hand, the company's supply chain disorder continues to exist, which leads to a long payment cycle for overseas warehouse business. Based on these considerations, the company will reduce investment in unprofitable categories and give holidays early.

Those who received the notice are those who need to take early holiday due to the business they are responsible for, and the holiday will start on November 10th.

Earlier, there were reports that the company was facing challenges in its internal operations. As a large seller with a huge gap, it is understandable that it is facing considerable difficulties in its operations as it is now trying to save costs by reducing product lines and personnel.

When there is a layoff or such a suspension of work notice, one of the most concerned issues for the parties involved and the industry is the subsequent salary payment.

According to the company, the first month of early holiday will be from November 10 to December 9, 2022, when full salary will be paid. From the second month, 80% of the local minimum wage will be paid. Five insurances and one fund will be paid as usual, and the individual's share will be deducted from the pre-tax salary.

This has caused a lot of discussion in the industry. The minimum wage standard in the company's location is 2,300 yuan per month, and 80% of the minimum wage is 1,840 yuan. After deducting the five social insurances and one housing fund, there is not much left. Whether it is for renters or those who are in debt with mortgages and car loans, such income is obviously difficult to cover the cost of living.

Therefore, some employees expressed their inability to accept the company's decision and hoped to continue working. The company also made a plan for this situation. If you still clock in at the company during the stipulated holiday time, the system will treat it as a break, which is considered invalid. Some employees who insisted on staying were also discouraged.

Under such salary conditions, how long can those who are given early leave last? The company emphasized that during the early leave, employees are not allowed to work for a third party and should report back to the company in a timely manner after receiving a notice to return to work. Otherwise, the company will dismiss them according to the regulations.

At the same time, the notice stated that it is still difficult to determine when the holiday will end, depending on the external environment and internal improvements. But the reality is that with a salary of less than 2,000 yuan, most people will find it difficult to make ends meet and cannot remain unemployed for a long time. To get out of this situation, they can only find another way out.

The industry believes that the company must have reached a very difficult stage when issuing a holiday notice, but the provisions on salary and third-party employment in the notice also attracted some discussion. "This operation is actually understandable. The company is really in trouble, but behind it is indeed the smell of wanting to lay off employees but not wanting to bear more compensation, which makes people have endless reverie." said a seller.

The editor consulted a lawyer about the compliance of the content of the notice. The other party said that the company's practice of "paying full salary for the first month and 80% of the local minimum wage from the second month onwards" after giving employees early leave is legal, but if employees are given targeted leave, it is a disguised layoff.

It is the peak season, and the commissions and salaries of operators are at their peak throughout the year. The employees who were given leave obviously missed this highlight moment. Some industry insiders bluntly said that internal employees had known that the company had problems, but they were still content with the status quo and refused to find a way out. Now they can only be boiled like a frog in warm water.

Cross-border sellers are on the front line of sales and are more sensitive to risks, and will make personnel adjustments based on this. This market chill has already been transmitted to upstream supply chain companies. Due to the lack of orders, some factories are looking for orders everywhere, and have no business to do and can only stop production.

Sellers' inventory has dropped sharply, and suppliers have no orders to fulfill

In the past month, Amazon has adjusted its inventory capacity several times, and the shipping volume of most sellers has been visibly reduced. Some sellers' inventory capacity has been cut from 12,000 to 1,800, and even worse, the inventory capacity of more than 70,000 was directly cut to 9,000. The IPI score is an important factor affecting Amazon's inventory capacity, but even sellers with an IPI of more than 500 have had 80% of their inventory capacity cut at one time.

Storage capacity restrictions have affected sellers’ stocking. A freight forwarder said that the shipment volume last week was pitifully small. He asked several old customers and basically all replied that “there is no storage capacity”. Some sellers are not optimistic about sales and are preparing to ship conservatively in the future.

Under the dual constraints of sales and storage capacity, sellers' inventory has dropped sharply, and the upstream factories that supply them have run out of food and have begun to actively inquire and invite orders.

Industry insider "Amazon Product Development" lamented that this year many factories have seen a serious reduction in orders. In previous years, factories had no shortage of orders during this quarter, and it was the sellers who urged them to deliver. But now, among its major suppliers, three or four factories are often urging them to place orders, and their anxiety can be felt. In order to receive orders, factories will even take the initiative to reduce prices.

One of its cooperating factories started asking for the next batch of orders just after delivering 3,000 items. "He said that the market is really slow this year and he plans to take a holiday early after completing the orders from several major customers. If the employees don't take a holiday, they will just sit there doing nothing and it will be a cost. The market is really slow to a certain extent," the seller said.

The epidemic in Guangzhou has continued recently. Due to the impact on production, a factory in Guangzhou also announced early holidays last week.

It mentioned in the notice that 2022 is an extraordinary year. Affected by the recent epidemic, the company has been unable to operate normally. Due to the temporary extension of home office and silent time in the area, some employees have been sealed off or need to be quarantined. The company believes that it is still difficult to resume work and production in the short term.

On the other hand, most of the company's employees are migrant workers living in urban villages (high-risk areas for this epidemic), and some employees are willing to return home; at the same time, because they cannot go to work, they have to deal with expenses and material issues during the lockdown, and the personal and family expenses of the employees have increased.

Based on comprehensive considerations, the company has decided that all employees in Guangzhou will start their annual leave from today (November 8) and will resume work after the new year. In the current situation of frequent epidemics, this situation may not be an isolated case.

Domestic sellers, factories are on holiday, and layoffs are happening. The situation of foreign counterparts is not much better! Amazon's US site big sellers encountered layoffs and liquidation crisis; British furniture e-commerce suddenly closed; even Amazon could not bear the pressure and planned to carry out the largest layoff in the company's history.

Amazon plans to lay off 10,000 employees

About a week ago, British furniture e-commerce Made.com suddenly announced its closure and stopped accepting new orders. In an external announcement, it stated that the company is facing long-term difficulties mainly for two reasons: 1. The current economic situation has caused consumers to reduce spending on home products, and 2. The impact of the supply chain and the increase in product costs.

The company's collapse was already underway. In September, it announced that it would lay off about 35% of its employees by the end of October, while closing its business in China and reducing warehouse capacity.

Made.com mainly sells velvet sofas, armchairs, copper-framed beds and rose gold lamps. It was officially listed in London in June last year, raising 100 million pounds and reaching a market value of 775.3 million pounds. Since then, the company's business has declined rapidly, and more than a year later, Made.com has been shut down!

About two months ago, Packable, the parent company of Pharmapacks, the largest third-party seller on Amazon's US site, was reported to be conducting layoffs and liquidation. The notice issued by Packable to employees mentioned that the company would lay off 20% of its employees, and the remaining 370 employees would gradually withdraw from the company. The main reasons for the layoffs and liquidation are: 1. The failure to obtain new internal and external financing made it difficult for Packable to make profits in the future, and operations had to be stopped; 2. The impact of the supply chain last year made it difficult for its inventory to continue.

As a major seller on Amazon, Pharmapacks sells more than 31,000 SKUs, processes 30,000 orders per day, and ships about 1.8 million orders per month. Many of its products have topped the Amazon Best Sellers rankings. The company's sales in 2018 exceeded $270 million.

While the US site was making big sales and laying off employees, the platform also started a new round of "downsizing."

Yesterday, the New York Times reported, citing people familiar with the matter, that Amazon plans to lay off about 10,000 employees starting this week . This will be the largest layoff in the company's history and will mainly affect the device department, including the voice assistant Alexa, as well as the retail department and the human resources department. A source revealed that the layoffs may be carried out gradually, not all at once.

According to the Wall Street Journal, Amazon CEO Andy Jassy is leading a cost-cutting review and cutting unprofitable businesses such as Alexa, which costs Amazon about $5 billion a year and is not a sustainable business model.

It is understood that Amazon's senior leadership team regularly reviews investment prospects and financial performance as part of the annual operating plan review. This year's review will take into account the current macro environment and optimize costs. The Alexa department, which has more than 10,000 employees, will be subject to the most stringent review this year.

Amazon.com Inc has told employees in some unprofitable divisions to seek jobs elsewhere in the company because their teams have been suspended or shuttered amid a months-long cost-cutting review, people familiar with the matter said.

The holiday season is crucial for Amazon every year, and the company usually adds employees to meet the demand for increased orders. This year's large-scale layoffs at the peak season are certainly unusual, reflecting the company's tremendous pressure from the deteriorating macro environment and slowing sales.

In fact, Amazon's layoffs did not happen recently. Amazon seems to have been doing this throughout this year.

At the end of last month, Amazon was exposed to be laying off employees of the audio live broadcast application "Amp", and about half of the employees (150 people) will be affected. Amp is an audio live broadcast application launched by Amazon in March this year, which supports users to create live "radio programs" to talk and chat with listeners.

Last month, Amazon Music, the music division of Amazon, also laid off employees. According to internal information, the specific layoffs have been notified to those who were laid off, but it is unknown how many people were laid off. Those who were laid off in this department have three months to find other positions within the company.

In the first and second quarters of this year, Amazon's direct employees decreased by 99,000, a record decline. Amazon's chief financial officer Brian Olsavsky said that the main reason for the sharp reduction in employees was that Amazon laid off employees in warehouses and distribution networks.

Layoffs are just one of a series of measures Amazon has taken to implement its "slimming down" plan. In addition to layoffs, some of Amazon's recruitment and business expansion have also been put on hold.

Beth Galetti, Amazon's senior vice president of human resources, has announced on the company's official website that "new recruitment positions have been suspended."

In recent months, Amazon has also cut a series of businesses. Last month, Amazon announced that it would abandon the field test of the company's unmanned delivery vehicle project Scout, shut down warehouse robot startup Canvas, and terminate the development of online travel products Amazon Explore; in August, Amazon announced that it would close the telemedicine department Amazon Care.

Last July, Amazon changed its leader, with Andy Jassy taking over as CEO from Bezos. Faced with challenges such as a sluggish market, ongoing labor-capital struggles, and growing regulatory pressure, he took a series of measures to slim down Amazon after taking office, and it seems that these measures are still being implemented.

Accept the market's "pain" and survive the winter smoothly

Amazon's series of cost-cutting operations also prove that the current market is very cold. As the US economic growth slows down, Amazon's revenue will inevitably decline. According to its third-quarter financial report, as of the end of September, Amazon has lost $3 billion this year.

The previously profitable North American retail division also began to lose money. The division had never made a loss since 2013, but its operating losses have reached US$2.6 billion so far this year, and it is expected that the division will remain in the red for the entire year.

Amazon, which is losing money, has adjusted its business, cut some unprofitable businesses, laid off a group of employees, and "slimmed down". This series of actions is not good news for some employees, but it is good news for the company's stock price.

Last July, Amazon's stock price once reached an all-time high, with a market value of $1.88 trillion, a record high. Amazon's current market value is $878.7 billion, a decrease of more than $1 trillion. Since the beginning of the year, Amazon founder Bezos' wealth has decreased by $83 billion.

Spurred by the announcement of cost cuts, Amazon's stock price rose 15%, a gain that Amazon is happy to see.

At present, some sellers, led by top cross-border sellers, are optimizing their personnel structures, which may be similar to Amazon’s “slimming down” measures, aiming to increase profits by reasonably optimizing the company’s business and personnel structure.

Adjustments will be painful, but perhaps new opportunities will come after the pain. On the other hand, online spending by American consumers is also recovering.

Adobe Analytics reported that online shopping spending in the United States increased 6.9% year-on-year to $727 billion in the first ten months of 2022, with online shopping spending in October reaching $72.2 billion, an increase of 10.9% from September and $72.4 billion in October 2021. Spending in October this year was almost unchanged from October 2021.

It is worth noting that this year many retailers are offering bigger discounts than ever before. Adobe's report pointed out that some retailers in certain market segments are offering consumers big discounts, such as 17% off on electronics and 15% off on toys.

There may be more and more discounts in the fourth quarter of this year. Econoday's economic analyst Sheehan said that holiday shopping may temporarily boost e-commerce sales, and sellers will still have certain opportunities in the fourth quarter of this year if they can provide corresponding discounts.

Given the current market environment, there is actually no need for cross-border sellers to worry. When the wildly growing e-commerce industry gradually returns to normal levels, even giants such as Amazon and Walmart will experience pains and prepare for a slowdown in online shopping growth and intensified price competition, let alone ordinary cross-border sellers.

What cross-border sellers need to do now is to optimize their business and structure, reduce some unprofitable categories, gradually increase operating profits, improve labor efficiency, save operating costs, select products well, focus on some rigid demand categories, and cater to new consumer demands. On the basis of seeking stability, seize the opportunity to stay at the table, successfully survive the winter, and usher in the next round of explosion.

Cross-border e-commerce

Reduction in staff

Market Conditions