Shipping prices fall to 5 yuan! Sellers' prices are going to skyrocket during the peak season

It is the peak season for stocking up, but a Shenzhen seller noticed that in this city full of cross-border e-commerce companies, no one was rushing to buy goods during the peak shipping season. "It's scary to think about it. The cold weather this year is too severe."

Judging from market feedback, the freight rates of Matson and Zim are continuing to fall, and the general ship price has fallen back to less than 5 yuan/kg, and quotations of 3 yuan/kg or even lower have appeared. As freight costs decrease, sellers who prepare for the next period may lower their prices again, and this peak season may face more severe price competition. This is not a very friendly signal for both new products and old stocks that need to be cleared.

Transportation demand is sluggish, and shipping prices have fallen back to less than 5 yuan

Mid-to-late September is the peak shipping period in previous years, and shipping prices have soared. But this year is completely the opposite. Shipping prices continue to fall, and there seems to be a sign of returning to the pre-epidemic period.

A logistics company in Shenzhen quoted a price for regular shipping by Matsun, including tax, for cargoes over 100kg to the West Coast, Central and East Coast of the U.S., and the price is 12 yuan/kg, 13 yuan/kg and 14 yuan/kg respectively, and 1 yuan will be reduced for overtime ships. Another freight company quoted a price of 10 yuan/kg for the West Coast, 11 yuan/kg for the Central Coast and 12 yuan/kg for the East Coast of the U.S.

At the same time, the prices of 2.5 yuan/kg, 3.5 yuan/kg and 4.5 yuan/kg for ordinary ships have appeared, and the quotations of 5 yuan and 3 yuan are everywhere. There are quotations from freight forwarding companies, and three popular warehouses such as ONT8 are offering a special price of 4.5 yuan/kg. The normal time limit is 35-45 days. If it exceeds 45 natural days, compensation will be paid. The sellers are full of emotion: it has come to this extent, and the price of 4.5 yuan has overtime compensation.

The current shipping price is much lower than that of last year.

In September 2021, the freight for a 40-foot-long container from China to the US port of Los Angeles rose to $17,500 . The prices for shipping to the US West Coast, US Central, and US East were quoted at 28 yuan /kg , 29 yuan /kg , and 30 yuan /kg, respectively. Air freight is even more expensive , with the freight for a 40-foot high cube container rising to $100,000-130,000 . Even if it is shipped by sea, the freight may be much higher than the purchase cost, and the delivery time is worse, which makes sellers complain.

Compared with last year, the continued decline in shipping prices this year has given sellers a sigh of relief.

Recently, Huakai Yibai, the parent company of Yibai Network, said that the company's current mode of transportation is mainly sea transportation. Since the second quarter of this year, global shipping costs have shown an overall downward trend. The price of the Matson Express has dropped from the peak price of 30 yuan/kg last year to the current 15 yuan/kg. The reduction in shipping costs is a major benefit to increasing product gross profit.

The reason for the continued decline in freight rates is the reduction in cargo volume. So how much has the industry’s shipments decreased?

One seller said that companies around him were either laying off employees or their shipments had dropped by more than half; a logistics company revealed that this year's cargo volume had dropped by 2/3 compared to the same period last year. If it had not transformed and taken on some traditional foreign trade orders, the situation would have been very difficult.

The Port of Los Angeles is the largest container port in the United States. Its recently released import and export data show that the import of the Port of Los Angeles fell sharply in August, down 16.8% year-on-year and 16.7% month-on-month; the total throughput was 805,672 TEU, down 15.5% year-on-year; of which the import volume was 404,313 TEU and the empty container volume was 300,875 TEU. There are multiple reasons for the decline in import volume. In addition to the advance preparation of cargo by cargo owners and the transfer of cargo to other ports, another reason is that a large number of orders were cancelled, resulting in a decrease in market cargo volume.

What are the current trends in shipping demand and prices? The latest China Export Container Shipping Market Report released by the Shanghai Shipping Exchange shows that shipping demand is growing sluggishly and freight rates continue to fall :

European routes . The transportation market continued to perform poorly after the Mid-Autumn Festival, and the market freight rates continued to fall. On September 16, the market freight rate (sea freight and sea freight surcharge) from Shanghai Port to the European base port was US$3,545/TEU, down 8.6% from the previous period.

North American routes . The inflation level in the United States continues to be at a historical high, and the risk of the economy falling into recession has further increased . Last week , transportation demand was sluggish, the supply and demand fundamentals continued to be weak, and the market freight rates continued to decline. On September 16, the market freight rates (sea freight and sea freight surcharge) from Shanghai Port to the basic ports in the West and East of the United States were US$3,050/FEU and US$7,176/FEU, respectively, down 12.5% ​​and 7.6% from the previous period.

Japan route . The local epidemic situation is severe recently, the transportation market is basically stable, and the market freight rate has dropped slightly. On September 16, the freight rate index of China's export to Japan route was 1142.22 points.

Huakai Yibai believes that compared with the price before the epidemic, the current shipping costs are still high, and it is expected that there is still room for reduction in the future. Some people believe that the trend of shipping prices may continue to fall, because the market has changed from "grabbing cabinets" in the past two years to "looking for goods to ship" now. Combined with the previous shipping costs of $1,000 per cabinet to Europe, $2,000 to South America, and $500 to the Middle East, the shipping costs will continue to fall in the future.

The logistics industry is having a hard time. An industry insider lamented: "European and American shipping rates have been falling for three consecutive weeks, and market prices have been rising again and again. Matsun has cancelled its Shanghai CCX route, and ZIM has made a comeback. Matsun's CLX throne is also shaky. This year, not only is e-commerce difficult, but the logistics industry is also under great competitive pressure."

Regarding the current situation of inconsistent quotations, some people believe that the chaotic pricing in the market has become a pathological problem. In the short term, price will be the focus of sellers, but in the long run, the importance of goods safety, stable timeliness and the company's ability to resist risks must be prioritized.

Shipping costs are reduced, and price competition may become more intense during the peak season

According to the feedback from freight forwarders, the market volume is still on a downward trend recently. The shortage of goods has led to a continuous decline in freight rates, and the decline in freight rates will further affect the sales prices of e-commerce.

One seller bluntly stated that the current shipping cost is much lower than at the beginning of the year or even two months ago. This is definitely not good news for sellers who have a large backlog of old inventory and hope to make a comeback during this year's peak season.

Compared with the inventory prepared at the beginning of the year, the transportation costs of goods shipped now or later are reduced by more than half, which has a greater cost advantage. In the case of fierce sales competition, this cost advantage is likely to be converted into a price advantage. The price of category products may face a certain decline, and it will be difficult to achieve price increase sales.

Some sellers of large products have found that similar products on the platform are already being sold at crazy discounts. Otherwise, the competition will be even more fierce when goods with cheaper freight rates enter the market later. One seller lamented that his large goods entered the market when the ocean freight was high, and it was a new link. In the off-season, there is no way to roll in. In this situation, some sellers who also entered the market when the freight rates were high have basically sold out their stocks, and they are very fortunate.

In the current market environment in Europe and the United States, many people have very limited hopes for this peak season. However, before the price cuts that may be triggered by low shipping costs, some sellers' expectations for the peak season will be lowered again.

According to data released by the Center for European Economic Research, the Eurozone ZEW Economic Sentiment Index in September was -60.7, down about 6 percentage points from the previous month, indicating that the European business community is generally pessimistic about the prospects for economic development in the Eurozone. The recent fierce conflict between Russia and Ukraine has caused geopolitical risks to continue to hover at a high level. In addition, with inflation levels remaining high, the future economic situation will face multiple risks.

With inflation continuing, the US market is not optimistic. Taking the US market as an example, the decline in transportation costs and the rise in exchange rates are both positive, but in the case of weak market consumption and poor overall traffic, these positive factors are still not enough to make up for the decline in profits of cross-border sellers.

Judging from the current order situation, the start of this peak season is not amazing.

Sellers speculate that October will officially enter the peak season, and now is the prologue of the peak season. After entering September, some sellers found that the orders increased and the performance was considerable, and they happily thought that the peak season had arrived early. But this small climb lasted only two weeks, and then the orders fell again. "The first two weeks were good, but this week was not good. It is estimated that it will get better in the second half of the week." "Last week I also hoped that the peak season would come, but this week it is back to square one."

Some sellers who have seen a decline in orders said that the number of orders has dropped by about 1/5 compared to the previous week, and some even said that orders have dropped by 1/3 since Labor Day in the United States. Others have not yet felt the peak season. One seller said that the impact this year was relatively large, and the product performance was not very good, and there is no upward trend at present; another seller felt the same way: Is the peak season about to begin? It's not very busy this year.

Due to varying degrees of decline in orders, many cross-border sellers have no demand for shipment. In addition, a large amount of inventory has been accumulated due to over-stocking and slowing market growth. The top priority for cross-border sellers is to clear inventory. Even some holiday products and winter products have joined the inventory clearance team.

Starting to clear out Christmas and winter products?

Many sellers lamented: Clearing inventory is the main theme of this year! But is it too early to start clearing inventory for the upcoming holiday season and winter products?

Seasonal products such as Halloween and Christmas have always been a love-hate relationship for cross-border sellers. If the products are selected and marketed properly, these products will see a surge in traffic, orders and rankings in an instant when the holidays are approaching, and the profits are relatively high. In many cases, supply exceeds demand. If the stocking is strong at the same time, sellers can often make a fortune from these holiday products.

However, if holiday products are not selected properly and consumer demand is not grasped, they often fall into the embarrassing situation of unsalable goods. The goods that you spend money to prepare can only be cleared out at a loss in the end. After the season is over, they have to be promoted at a "discounted price". If you are not careful, you will end up with these goods in your hands, resulting in heavy losses.

Perhaps it was because of the excessive inventory backlog last year, or the sluggish sales of seasonal products this year. In September, some sellers found that some Halloween and Christmas products were being sold at super low prices, and they were being sold as if they were clearing out inventory.

Some sellers, seeing the current situation of their peers and analyzing the current traffic status, are also beginning to worry about the sales of Halloween and Christmas products this year. The seller said that they are ready to clear out their inventory. Another peer said that this is the first time they are trying Halloween products this year, and they feel that they need to clear out their inventory!

In addition to seasonal products, although winter is still some time away, some winter products are also experiencing large-scale price cuts. One seller said that some winter products were being promoted at a 50% discount in September, which is not very friendly to new sellers. If cross-border sellers are willing to make a loss, how can they ensure profits?

Even holiday season products and winter products are being sold at reduced prices, and other categories of products are even more implemented with the low-price internal volume strategy. Currently, products in multiple categories including clothing, home furnishings, 3C, etc. are being sold at low prices.

Industry insiders analyzed that there are two reasons why holiday and seasonal products are being cleared out at low prices. 1. Last year, many sellers prepared a large amount of stock due to the optimistic market conditions. As a result, the market suddenly cooled and product inventory was seriously overstocked. 2. This year, the market conditions continued to decline. Coupled with the epidemic and inflation, Americans' purchasing habits have changed. Many people have given up buying products other than daily necessities, resulting in many products being unsalable.

Not only small and medium-sized sellers are clearing out their stock, but well-known top sellers in the industry are also clearing out their inventory, and the inventory levels of many large sellers are not small.

Recently, Huakai Yibai was asked about the situation of clearing inventory in overseas warehouses and how long will the impact on the company's performance last? In response, it said that the current inventory balance in overseas warehouses is less than 40 million, and the impact in this regard can be basically eliminated in the second half of this year. Perhaps many sellers are in the same situation, and the impact of excess inventory can only be eliminated in the second half of this year, and some may take longer.

On the other hand, since Pinduoduo Temu went on sale in the United States, cross-border sellers have become more concerned about clearing inventory and selling at low prices.

It is understood that the current price of many products on Temu is $0.99, including clothing and electronic products. One Lenovo Bluetooth speaker is only priced at $0.99, and some discounted products with limited purchase quantity are marked at $0.01. Such prices can be called the ceiling of the resale price!

Seeing such prices, cross-border traders can’t sit still. They sighed: “With such low prices, there is definitely no profit. More and more people are joining the ranks of philanthropists and contributing to the American people!” Some sellers who have joined Pinduoduo also ridiculed themselves: “It doesn’t matter whether I make money or not, the main thing is to be a philanthropist!”

A US media outlet reported that Temu offers shoppers "irresistible" prices, and at least for now, this low-price strategy has worked. This action is still ongoing, and Temu has even launched a "1 cent zone." The team began to launch a "three-dimensional war on land, sea and air" to fully advertise and attract traffic for the App.

Pinduoduo officials said that the traffic team is currently actively directing traffic to the mall and placing bulk advertisements to online classified ads, variety TV shows, events and other activities.

As Temu increases its promotional efforts in the United States, the number of Temu App downloads may reach a new peak, and the sales of products on the shopping website will also increase significantly.

In order to compete with Temu's ultra-low prices in the United States, cross-border sellers may only be able to sell at low prices and clear inventory if they do not have advantages in products and brands. However, according to forecasts, the overall market conditions in the United States in the second half of the year are still good, so sellers can still look forward to it.

U.S. holiday sales to rise

This year, inflation in the United States has hit new highs, even reaching the highest level in 40 years. Currently, the United States is facing a new round of inflation, and the prices of many commodities are rising, including the prices of online commodities.

According to the latest Adobe Digital Economy Index (DPI), in August this year, the price of online goods in the United States rose by 0.4% compared with the same period last year and rose by 2.1% compared with July.

Some cross-border sellers have also gained a deep understanding of low-price sales, and they believe that profit is the most important thing. Due to rising costs, many operators have increased the selling price of their products and put profit first.

A seller praised the company's operations, saying that it gradually increased the selling price of its products from US$19.9 to US$29.9. By slowly increasing the price, the profit increased and the sales of the products were not affected.

Nowadays, many cross-border sellers are more rational. They will protect profits and maintain the company's expenses according to the situation. Based on the principle of survival, they will no longer engage in low-price involution and earn US dollars comfortably.

In August, DPI tracked 18 categories of online goods in the United States, of which 12 categories saw price increases compared to the same period last year, with groceries seeing the largest increase, up 14.1% year-on-year and 1.1% month-on-month; online prices for clothing rose 4.9% year-on-year and 8.7% month-on-month; and online prices for personal care products rose 2.7% year-on-year and 1.1% month-on-month. This must be due to rational sellers.

Although prices in the United States are rising, Americans will not give up on purchasing. Instead, they will look for promotional products to buy. Online sales in the United States will still grow this year.

MasterCard Spending Pulse predicts that sales will be strong during the U.S. holiday season. During the upcoming 2022 holiday season, retail sales in the United States excluding automotive products are expected to increase by 7.1% year-on-year.

U.S. economists say that this holiday season, consumers should find ways to cope with inflationary pressures, looking for discounts and making trade-offs when shopping. With the increase in U.S. jobs, rising wages and people having some savings, many consumers are ready to shop during the upcoming holiday season.

The University of Michigan's consumer confidence index pointed out that the US consumer confidence index reached 58.2 in August, higher than 51.5 in July. With the US consumer confidence index rebounding, holiday season sales will remain strong. There will be greater demand for products such as clothing, shoes, decorations, barbecue tools, and outdoor equipment.

The peak holiday season in the United States is generally between November 1 and December 24. During this year's peak season, Black Friday and Cyber ​​Monday will usher in a sales explosion. However, compared with previous years, the popularity of Black Friday and Cyber ​​Monday this year will decline.

In early September, a survey conducted by Shopkick on more than 10,000 consumers in the United States showed that American consumers' enthusiasm for Black Friday and Cyber ​​Monday has declined this year. Only 43% of people said they planned to shop on Black Friday, a decrease of 18% from last year; only 27% planned to shop on Cyber ​​Monday, a decrease of 40% from last year.

Holiday shopping will also be moved forward this year, with 40% of consumers planning to start holiday shopping before Thanksgiving, a 15% increase from last year; and 27% planning to start before Halloween, an 18% increase from last year.

When it comes to choosing shopping channels, 98% of consumers said they would choose Amazon as their first choice; 43% of Generation Z and 35% of Millennials also plan to shop on Etsy, and 23% of consumers will prefer to buy on eBay.

Given the high demand in the U.S. market during the holiday season, Amazon sellers can also expect peak season growth.

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