The US dollar exchange rate soared to 7.2, and a wave of sellers immediately lowered their prices

In the cross-border e-commerce circle, the dynamics of the US dollar exchange rate continue to be screened, and some sellers have said that they have seen the highest exchange rate since they entered the industry. If the withdrawal time is accurate, this wave of rise will bring a considerable net profit to sellers who have hoarded US dollars. Some economists believe that in the fourth quarter of this year, the long and short positions are intertwined, and the RMB exchange rate may continue to adjust in the short term. This is a good thing for cross-border e-commerce exports.

However, as the U.S. dollar exchange rate rose, some sellers found that their peers in the same category had begun to lower their prices, using the newly added exchange gains as a cost-effective advantage to gain more market share. This caused headaches for sellers who had been troubled by low profits for a long time.

Cross-border sellers are experiencing a challenging year with increased competition, rising costs and slowing growth, and service agencies are also feeling the chill. This year, Swiftline, which provides loans to online merchants, has rejected more loan applications, saying that many customers have seen sales decline and are over-leveraged. "Sellers" have been defined as a high-risk group.

The US dollar exchange rate rose above 7.2

Recently, the exchange rate of the US dollar against the RMB has been rising all the way into the 7 era, making many sellers dream back to 2020.

On September 28, the RMB spot exchange rate against the US dollar fell below 7.18, 7.19, 7.20, 7.21, 7.22, 7.23, 7.24, and 7.25 during the trading session. The onshore RMB fell to a low of 7.2507 and closed at 7.1995; the offshore RMB exchange rate against the US dollar fell to a low of 7.2672 and closed at 7.1556 yesterday. Wind data showed that this was the first time that the RMB exchange rate against the US dollar fell below the 7.2 mark since February 2008.

The sharp appreciation of the US dollar in one day has excited cross-border e-commerce export sellers:

"The US dollar exchange rate is 7.21, awesome!"

"The exchange rate is now 7.2, so I can exchange another 300,000 US dollars."

"It was 7.1 yesterday, and it just changed a little bit and it's 7.2 today. It's outrageous."

"7.22, the highest exchange rate I have seen since crossing the border..."

In response to investors, Xinghui Co., Ltd. stated that its export sales revenue accounts for a high proportion of its operating income, and settlement is mainly in US dollars. The depreciation of the RMB is beneficial to the company.

The exchange gains brought by the short-term appreciation of the US dollar have a huge impact. One seller analyzed that when the US dollar exchange rate rose from 6.5 to 7.1, his friend's exchange rate profit from Amazon's monthly payment was more than that of a year, which was fatal. If the US dollar exchange rate rises above 7.2, the gap will be even greater.

In just the past one or two months, the US dollar exchange rate was still around 6.7 in early August, and has now risen to 7.2. Now sellers can get an additional 500,000 RMB for every 1 million USD they withdraw, which is real profit.

For big sellers with huge sales, this amount is even more considerable.

Rebecca's overseas revenue accounts for about 80% of its revenue, and the company's export business settlement currency is mainly US dollars. The sharp depreciation of the RMB against the US dollar is not only beneficial to the company's product exports, but also may generate exchange gains and reduce financial costs. In the first half of the year, the company generated exchange gains of 37.4941 million yuan.

Big sellers have ample funds. However, due to operational turnover, most ordinary sellers do not have too many dollars in their accounts, so it is not easy for them to get the exchange gains. One seller, who could not wait for the dollar to appreciate, withdrew all the dollars he had hoarded for half a year at 6.3.

Before the end of April this year , the US dollar exchange rate was at a low level for a long time. After that, the US dollar rebounded, and most sellers took advantage of the rising exchange rate to withdraw the balance in their accounts immediately. In late September, the US dollar broke through 7, and the sellers were overjoyed. They did not deliberately reserve cash withdrawals. Therefore, after the US dollar unexpectedly rose above 7.2 yesterday, many people regretted that they could not set aside a large amount of US dollars to withdraw cash at a high point.

In the context of the current pessimistic industry situation, the US dollar exchange rate breaking 7 is a great comfort to cross-border people. Some sellers look at the exchange rate changes calmly, saying that although they are happy to withdraw cash, the purchasing power of Americans has also decreased. In comparison, he still hopes to receive more sales orders. The actual situation is also the case. In the past two days, feedback on the reduction of orders has increased.

Some sellers hold different views, believing that a slight drop in order volume is not a big deal. After all, the increase in exchange rates brings pure profit. Even if the appreciation of the US dollar hedges the decline in orders, the market will still rise.

Meanwhile, in the foreign trade sector, some B-end customers have begun seeking price cuts. One merchant said that on Tuesday, overseas customers had already lowered their prices by $0.3; another merchant may face a bigger price cut, "In June, customers asked for a price cut and we cut it by 2%. Now customers are asking all suppliers to cut prices by 4%-6%." As the US dollar exchange rate continues to rise, some customers have even begun to actively communicate with foreign trade companies to settle in RMB.

The reason for the short-term downward trend of the RMB exchange rate is the aggressive interest rate hike by the Federal Reserve. On September 21, the Federal Reserve announced a 75 basis point interest rate hike, raising the target range of the federal funds rate to between 3.00% and 3.25%. This is the fifth interest rate hike by the Federal Reserve this year, the largest intensive rate hike since 1981, and the cumulative rate hike this year has been 300 basis points.

On September 26, the central bank announced that in order to stabilize foreign exchange market expectations and strengthen macro-prudential management, it decided to increase the foreign exchange risk reserve ratio for forward foreign exchange sales from 0 to 20% from September 28, 2022. Starting from September 15, the central bank also lowered the foreign exchange deposit reserve ratio of financial institutions by 2 percentage points, from 8% to 6%.

On September 29, the central parity rate of the RMB against the U.S. dollar in the interbank foreign exchange market was 7.1102 yuan, up 5 basis points from the previous value, stopping the trend of "nine consecutive declines".

Since the beginning of this year, the RMB exchange rate against the US dollar has fallen by more than 13% in both the onshore and offshore markets . Federal Reserve officials expect that the interest rate hike at the last two FOMC meetings this year may reach 125 basis points, and the RMB and other currencies are still under downward pressure.

Excellent philanthropist? Some sellers start to lower their prices

Although the market is not prosperous, the decline in shipping costs and the rise in exchange rates have greatly eased the operating pressure on sellers. However, as the US dollar appreciated, some sellers began to lower their prices and use the income to increase sales, which caused a lot of resentment.

" The exchange rate has risen so fast that I see a large number of competitors directly cutting prices and the conversion rate has plummeted. The increase in the exchange rate is not a good thing. " said a seller.

Similar situations are not uncommon. The rebound of the US dollar in the second half of the year allowed sellers on the US site to enjoy the exchange rate dividend, but price cuts soon began to spread. In the sellers' words, no matter how much the exchange rate rises , they only make 1 yuan, and any extra profit will deviate from the original intention of doing charity. Holding the unwarmed exchange income deepens the spiral on the market, which makes sellers who have been tortured by low profits for a long time angry, and the extra profit may be swallowed up again.

On Amazon, the average order value of some products is so low that it is puzzling. Isn’t this a loss-making strategy? Why can it continue to be promoted?

The famous V "Factory Manager in the Wind" posted a question from a netizen: Why do many Chinese sellers on Amazon's US site have prices so shockingly low? After calculating their costs, they are all losing money. For example, one of their products sells for $15.99, but the other party sells a set of five or six at the same price. How do they make money?

The sellers analyzed the reasons and found four main reasons. First, these sellers have extremely strong supply chains and can use economies of scale to control costs to the extreme. Second, the role of this product is to attract traffic at a loss and drive sales of other profitable products in the store. Third, it is a strategic loss in the early stage to push up the link ranking and then slowly increase the price. The fourth is to clear inventory to avoid becoming redundant inventory and resulting in a series of costs such as long-term storage fees.

In addition to the periodic losses, some sellers also pointed out another possibility. "For some categories of products, the price is more reasonable than the money spent on advertising, which shows that the opponent is still quite powerful, whether in terms of channels or funds. Or the purpose may be to promote the big sale and get rankings in advance. The specific products need to be analyzed in detail."

The factory manager also cited an example of a top seller. This seller previously sold a product with a factory price of more than 100 yuan for more than 50 US dollars, but now only sells it for more than 20 US dollars, losing at least several dozen yuan per piece. The reason for this operation is that the seller is developing a new product in the category and using this product to attract traffic at a low price.

However, some sellers pointed out that for big sellers with deep pockets, the spiral can be used as a flexible means to verify the market, and products that cannot even incur extreme losses can be completely rejected; but this approach is obviously not suitable for small sellers because there is not much room for strategy and trial and error.

The current situation of domestic Amazon sellers is not satisfactory, and domestic sellers in the United States are also having a hard time. Most of them don’t even have hope for this year’s holiday peak season.

Amazon sellers brace for a bleak holiday season

Amazon sellers are bracing for a dismal holiday shopping season as consumers curb their spending amid inflation , according to a Bloomberg report .

Steven Pope, an Amazon seller who has been selling gifts on Amazon for seven years, said he has never been more nervous about the holiday season than he is now.

Sales of Steven Pope's $50 "Mom Box" (including body wash, soap and lotion) fell more than 50% this Mother's Day compared with 2021. He worries about a similar drop in spending before Christmas as shoppers focus on essentials and have less money to buy other products.

Unybrands, a foreign company that sells products in categories such as baby, fitness and personal care, is trying to control prices by cutting logistics and other means, according to company managers.

Fellow sellers are also taking similar measures to reduce costs and adapt to new consumer demands.

Marlee Rabin of Montreal launched her brand, Homie Collection, on Amazon two years ago with a $25 clear plastic cutlery bin as her best seller. She is preparing to launch a smaller kitchen organizer this year that she expects will sell for less than $10. In addition to targeting cost-conscious shoppers, she said, the smaller, lighter product will save her a lot of money on Amazon storage and shipping fees.

" I'd be willing to sell at a higher price, but in this environment, I think lower-priced products will do better, " said Marlee Rabin.

Almost all sellers have felt the market is cold this year. Nancy Philips, a small seller who sells used books on Amazon, snapped up some old books at yard and library clearance sales, but they were not selling well and have now been stuck in the warehouse for about a year.

Nancy Phillips is slashing prices on these used books because if she doesn’t clear out the sales, her storage costs will go up as Amazon raises its fees for slow-moving products during peak season.

“I would take a book that was originally selling for $20 and drop it to $10 or less. The fees I had to pay Amazon were about $8, so I didn’t make any money, but I needed to get rid of the inventory.”

Many sellers on Amazon have had to cut prices to clear excess inventory. At the beginning of the outbreak, sellers saw the rapid growth of online channels and increased their investment to stock up in retaliation. Now that market demand has suddenly changed, the goods that sellers have stocked up are seriously overstocked in warehouses.

U.S. online sales will grow just 9.4% to $1 trillion this year, the first time growth has fallen to single digits, according to Insider Intelligence, which cut its previous annual forecast in June. Spending on Amazon will reach $400 billion, up 9%, slower than the industry as a whole, the research firm said.

“It seems consumers aren’t spending much beyond basic necessities, so sellers have to offer discounts and coupons to boost sales,” said Lesley Hensell, co-founder of Riverbend Consulting. “For sellers, it could be a cost increase, and the fourth quarter of this year looks scary.”

Amid sluggish consumption, Amazon sellers are experiencing a cold winter, but as many states in the United States will issue inflation relief funds, there is still room for growth in sellers' sales.

17 U.S. states give out money

According to CNBC, 17 states in the United States have already or plan to send money to residents by sending rebate checks to combat the impact of continued inflation.

The 17 states include California, Colorado, Delaware, Florida, Hawaii, Illinois, New Jersey, New York, etc. Each state's tax refund is different, and the amount of available deductions, income limits, qualifications, and payment dates are also different.

California: Residents can get a refund of up to $1,050. Individuals with income up to $250,000, heads of households with income up to $500,000, and married couples filing jointly with income up to $500,000 are eligible for a refund from the California Department of Revenue if they were California residents for at least six months during 2020 and were California residents when the refund was issued.

Colorado: Cash back rebates are limited to tax filers who are 18 years of age or older on December 31, 2021, lived in Colorado throughout 2021, and filed a state tax return for the 2021 income tax year. Eligible residents can receive $750 each, which is expected to be credited by the end of this month.

Delaware : The 2022 Delaware tax relief rebate program is available to residents who file a 2020 or 2021 tax return or are 18 or older by December 31, 2021, and is $300 per individual and $600 for joint filers.

Florida : Gov. Ron DeSantis announced a one-time $450 rebate check specifically for low-income individuals who are part of the Temporary Assistance for Needy Families program. Families caring for children who are part of the Custody Assistance program are also eligible for a $450 rebate.

Georgia : Single taxpayers can receive $250, heads of household can receive up to $375, and married couples filing jointly can receive up to $500.

Hawaii : Single filers with incomes under $100,000, or couples with incomes under $200,000, will receive $300 per person. The benefit also applies to families with dependents, with a family of four receiving $1,200. Taxpayers with incomes of $100,000 or more, or couples with incomes of $200,000 or more, will receive $100 per person.

In addition to the above states, residents of 17 states in the United States can receive inflation relief, which will undoubtedly stimulate purchases. Especially in the context of the epidemic and inflation, American consumers seem to be accustomed to online shopping, and the proportion of online sales has also increased.

Sellers can prepare for holiday sales

Relevant data predicts that the compound annual growth rate of B2C e-commerce in the United States will be 10.22% from 2022 to 2026. The total value of B2C e-commerce in the country will increase from US$1,408.3 billion in 2021 to US$2,323.9 billion in 2026 , with promising medium- and long-term growth prospects .

Sales growth in the United States declined in 2021 , but total purchases were still much higher than pre -pandemic levels. The decline in growth was due to some consumers returning to offline physical stores. However , in 2022 , online sales in the United States are expected to accelerate , and as online shopping gradually develops into a trend, large retailers including Amazon and Walmart will benefit.

As online shopping becomes more convenient and the fulfillment and delivery services provided by e-commerce platforms become more mature , the trend of online shopping in the United States is expected to move forward further in the next three to four years . At the same time, sales in the United States during this year 's holiday season will also increase.

MasterCard Spending Pulse's annual holiday season forecast shows that retail sales in the United States excluding automotive products are expected to increase 7.1% year-over-year during the upcoming 2022 holiday season.

Creatopy conducted a survey on holiday spending intentions of multiple US respondents, and the survey showed that most respondents want to start shopping one month before the holiday ( 29.38%), while a considerable number of people intend to start shopping two months in advance (19.97%). Some people plan to shop two weeks in advance (11.42%) or even closer to the event . This year's holiday season, the overall spending trend of US consumers is to complete as early as possible.

Inflation may not have a huge impact on holiday spending , but many consumers do have some concerns. Nevertheless, overall holiday spending may not decrease because shopping is advanced and consumers are likely to spread shopping expenses over several months.

According to a survey of consumer purchasing trends, sellers need to pay attention to the following points if they want to achieve good sales during the holiday season :

1. High-quality products and services must be provided : high-quality products and better logistics and distribution services can greatly promote consumers to place orders;

2. Online advertising : 40.63% of American consumers will make a purchase after seeing relevant online ads , which means sellers have a great opportunity to boost holiday sales through advertising;

3. Focus on social media marketing : 35.14% of consumers consider purchasing through social media channels. Sellers need to pay attention to this channel. When promoting on social media, they need to pay attention to posting content regularly and find suitable influencers for promotion.

4. Offer competitive prices : According to a YouGov survey, 95% of holiday shoppers are actively looking for ways to save money. Because of concerns about inflation , they will reduce spending or wait for promotions, and 52% of consumers will buy gifts when there are coupons, discounts or promotions. On the other hand, part of the reason why consumers choose online channels for shopping is that they can check prices in real time . Obviously, offering competitive discounts can drive sales growth.

The level of consumer spending in the US market during the holiday season is still considerable, but consumption may change at any time. What is certain is that economic instability will affect consumers' willingness and budget to purchase certain goods. Therefore, cross-border sellers need to keep up with consumption trends and make good sales arrangements for the holiday season.

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