Winter is coming! Another cross-border company closes

In the past two days, Ren Zhengfei's words "pass on the cold" have been all over the Internet, and the pessimistic economic situation is vividly reflected. As early as the beginning of this year, cross-border sellers issued a warning, emphasizing that companies should shift from pursuing scale to pursuing profits and cash flow. Now that Ren's views have been made public, they have been recognized by many sellers, who have become more vigilant and are treading on thin ice in their operations.

Since the beginning of this year, there have been many bankruptcies in the cross-border e-commerce industry. Last week, another cross-border enterprise announced its closure due to operational difficulties. Under such market conditions, companies with mediocre performance no longer expand, and companies with good current conditions also begin to save money and reserve food. The wind is getting colder and colder, and winter is coming. Sellers must think about how to survive this period of lows and arrive at the next spring.

A cross-border company in Dongguan ceases operations

Last week, a cross-border company in Dongguan issued a closure notice to its employees.

It was mentioned that due to the changing international situation this year, the company's cross-border business volume continued to shrink, and the platform policy adjustment and the refusal to lend to Russian funds caused serious difficulties in the company's operations. It is currently difficult to maintain normal production and business activities, so it reluctantly announced to employees that it would suspend operations:

"From September 1, 2022, the company and everyone will officially terminate the labor contract. All colleagues do not need to go to work in the company and can find another job. The unpaid wages will be paid as soon as possible."

In fact, cross-border sellers have an unprecedented sense of crisis since the beginning of this year. Since the first half of the year, many sellers have planned to suspend expansion, reduce the recruitment of non-essential personnel, reduce office size and other operating expenses, hoping to protect themselves when the big waves come.

However, turmoil in the industry could not be avoided - freight forwarding companies such as Quanyi collapsed one after another, Cooper, a factory with thousands of employees supplying top cross-border e-commerce sellers, suddenly closed down, Shenzhen big sellers were unable to repay the payment for goods and so notified suppliers to pay in kind... Sparks appeared frequently in many links of the industry chain, and even big sellers could not get out of it unscathed, which frightened ordinary sellers.

There is growing anxiety in the cross-border e-commerce export sector, and the atmosphere in the import sector is even more depressing.

A few days ago, Yangmatou founder Zeng Bibo issued an open letter, saying that the cross-border giant is facing multiple problems such as cash flow crisis, large-scale employee turnover, and supplier lawsuits.

"Today, this winter is unusually cold, and this year's life is really difficult. Many of our colleagues who deserve our respect have also chosen to withdraw. Some changed their tracks, some closed down, and some exploded. Several of our colleagues also received some negative news one after another..." Zeng Bibo felt that he was in deep crisis.

From the external environment, it is the impact of the epidemic. He mentioned that the epidemic prevention and control has had a serious impact on the overall import e-commerce, especially after the international flight capacity of various international import express delivery companies was greatly reduced, the customs clearance time at ports was greatly extended, and the overall time link time was extended. The buyer's fund settlement recovery was seriously affected. After the user waiting time was extended, the order cancellation rate was also higher than before, which led to the continuous decline of the platform's current business.

Yangmatou's main customers are all from Shanghai. During the local epidemic, a large number of orders were canceled under the nearly three-month quarantine, traffic was lost, and the platform rhythm was disrupted. In order to ensure that the buyer business was not affected, Yangmatou used its own operating funds to ensure the timely settlement and repayment of its order funds, which further deteriorated the company's cash flow and triggered multiple supplier debt lawsuits and bank loan withdrawals.

Qichacha shows that Shanghai Yangmatou Network Technology Co., Ltd. is currently facing a total of 37 judicial risks, including 15 lawsuits due to service contract disputes, 4 lawsuits due to sales contract disputes, and 4 lawsuits due to advertising contract disputes.

Some buyers went to its Shanghai headquarters to "collect debts". Under the impact of multiple shocks, the company lost a large number of employees, and the remaining staff had to cope with the doubled workload with half the salary.

At present, the settlement of platform transaction funds on Yangmatou has been separated from the company's own operating risks. Zeng Bibo pleaded with buyers to resume live broadcasts and put goods on sale so that the platform can continue to operate.

Regarding buyers and suppliers who do not want to continue operating, he said that the company will not default on the remaining debts, and he personally will not run away at will. No matter what the company's next step is, he will do his best to take responsibility, "Even if I have to do live broadcasts to sell goods, I will think about paying off this debt."

Yangmatou is in a critical situation. In August, the lease of its Shanghai headquarters in the Shibei Hi-Tech Industrial Park in Jing'an District will expire. In order to cut unnecessary expenses, its team will start to normalize remote work from home.

It is a pity that an industry giant has come to this point. The future of Yangmatou is still unclear, but what is certain is that winter is coming.

The screen is going viral! "Making survival the main goal"

This week, a statement by Huawei founder Ren Zhengfei went viral on the Internet.

On Monday, Ren Zhengfei published an article on Huawei's internal website titled "The entire company's business policy should shift from pursuing scale to pursuing profits and cash flow", stating that the global economy is facing a recession and Huawei should change its business strategy and make "survival" the first priority. Some of the key points mentioned in the article are as follows:

1. The next ten years should be a very painful historical period. The global economy will continue to decline and consumption capacity will drop significantly. The world economy is unlikely to improve in the next three to five years.

2. The basis for survival must be adjusted to focus on cash flow and real profits, and no longer just sales revenue as the goal.

3. With survival as the most important priority, all marginal businesses will be contracted and closed.

4. Businesses with more profits and cash flow at the end of the year will receive higher bonuses. Businesses that cannot create value will receive very low bonuses, or even no bonuses, forcing the business to commit suicide and passing on the coldness.

At present, from technology and the Internet to supermarkets and retail, many industries at home and abroad are sending similar signals: Amazon, Walmart, PayPal, Twitter and others are laying off employees or reducing their scale, Tencent and JD.com are laying off employees in China, Secoo e-commerce has gone bankrupt, Gome and Suning have sounded the alarm, and the storm is about to come.

"Shifting from pursuing scale to pursuing profits and cash flow" is also highly applicable to the cross-border e-commerce industry, and some sellers have reorganized their businesses based on this.

——"We have already cut off unprofitable products in the first half of the year because the market consumption environment is not ideal. We have also stopped developing products with too high unit prices and focused on promoting mid-range products. For products with decent profits, we will strive to further optimize the supply chain."

——"Recently, I have started to focus on clearing out the inventory. I will clear out the slow-moving items as soon as I can to break even. I am focusing on healthy cash flow and profits. Sales volume and revenue are nothing but clouds, so it is better to put the money in the pocket and be safe."

——"In the next few years, we should control risks, avoid blind expansion, focus on profits and cash flow, and pay less attention to sales volume and revenue."

An industry insider lamented that he thought things would get better after this year, but who knew this year might be the best in the next few years. The shrinking sales volume is due to the stagnation of industry growth, which had been evident for a long time.

One seller said that in the first half of last year, there was a fierce competition for talent on Amazon. He also transformed from a self-employed seller and hired several employees. In May, the "Zhang Sanfeng" incident occurred, and the platform began to block brands, stores, and funds. The seller laid off the three employees he had hired and returned to the situation of fighting alone.

"I had a feeling that things would be difficult in the future. Now it seems that this decision was right for me." He analyzed that the expansion and replication of the model requires opportunities and time. If you don't hit the right point or don't have the ability and funds, blindly expanding will only backfire. "I hope I can survive in the next few years. As long as I am at the table, there will be opportunities."

For sellers, ensuring profits and cash flow is the top priority. For example, with Amazon raising delivery fees and storage costs during peak seasons, sellers should also raise prices appropriately, so that the platform does not make money, buyers get the goods, and the merchants only make a profit or even lose money.

Judging from the current situation, sellers' sales are not optimistic. Take Amazon as an example. After a brief rebound on Member's Day in July, sellers' overall sales fell again in August, and orders were erratic and frequently jumped. For example, a product with dozens of orders a day could have only single-digit orders without any adjustments to the title or advertisement, and the reason for this was unknown. During this period, advertising costs remained high.

On the other hand, due to the impact of inflation, sellers have reported that the return rate is continuing to rise, which has caused a secondary reduction in order volume.

At a time when profits and cash flow are becoming increasingly important to cross-border sellers, some sellers in the industry have developed steadily and achieved considerable net profits, such as Anker Innovations, Ecovacs, and Loctek. Their performance is outstanding when many sellers have increased revenue but not profits.

Net profit and cash are king

Anker Innovations is a benchmark company in the industry. In recent years, its revenue and net profit have been considerable, and its cash flow is the envy of its peers. In 2021, Anker Innovations' revenue was 12.574 billion yuan, an increase of 34.45% over the same period last year; net profit attributable to shareholders of listed companies was 982 million yuan, an increase of 14.70% year-on-year; cash flow from operating activities was 11.7 billion yuan, and net cash flow from operating activities was 449 million yuan, an increase of 139.11% over the same period last year.

The company's cash flow is nearly 12 billion, and Anker Innovations has enough confidence to provide employee benefits and expand its business.

This year, amid a wave of downsizing and layoffs among its cross-border e-commerce peers, it has continued its spring and autumn campus recruitment activities as normal.

Anker Innovations recently announced its autumn recruitment, recruiting positions in product, testing, structure, algorithm, software development, big data development, marketing, finance, legal affairs, etc. The company mentioned that it provides highly competitive salaries and rapid growth channels in the industry, and can be promoted to management in three years, with a total income of over 1.5 million!

In addition, Anker Innovations' recruitment involves bonus benefits. For the company's annual long-term contribution award, the top 30% of employees can receive approximately 9 months of current salary, which can be accumulated every year; the year-end excellence award is 50,000 for individuals and 300,000 for teams!

In the spring campus recruitment in March this year , Anker Innovations recruited more than 200 positions in technical R&D, marketing, product, etc. In the recruitment at that time, the company mentioned in terms of salary and benefits that the operating results analysis award can be added every year, and 200 million was issued in 2020!

In terms of employee benefits, Anker Innovations also provides loans for buying houses. Earlier this year, Anker Innovations formulated the "Employee Loan Management Measures" to regulate the application, approval and execution of employee loan benefits. The total loan amount of 40 million yuan is given to employees, and the loan purposes mainly include: attracting core talents, employee housing purchases, medical expenses for major diseases and accidents of employees or their immediate family members, and other approved fund turnover purposes.

This shows Anker Innovations' sincerity in improving its employee welfare system and attracting core talents. It is also a reflection of its company's continued positive development and sufficient cash.

In addition to Anker, another company that lends money to its employees to buy houses is Lechuang. About a month after Anker Innovations released its loan management measures, Lechuang also issued an announcement to provide financial assistance to its employees to buy houses. The announcement mentioned that it plans to use 3 million yuan as loans for employees to buy houses.

In addition to lending money to employees to buy houses, Lechuang also spent money on building overseas warehouses. Now Lechuang has successively established overseas warehouses in Europe, the United States, Japan and other countries. This year, Lechuang will spend 207 million yuan to build a 1,800TEU container ship, which is expected to be delivered in the first quarter of 2023.

The high-profile spending comes from Loctek's confidence in its revenue and profits. In 2021, Loctek's operating income was approximately 2.871 billion yuan, and the net profit attributable to shareholders of the listed company was approximately 185 million yuan. The company's cross-border e-commerce sales revenue increased by 38.76% year-on-year, of which independent site sales increased by 89.19% year-on-year. In recent years, the penetration rate of Loctek's linear drive products has continued to rise, and the dividends of the ergonomic health home blue ocean market have continued to be released, which has steadily improved its business.

Net profit is one of the important indicators of a company's development. Anker and Legg have relatively excellent net profits. Another company in the industry, Ecovacs, is also in the leading position in terms of net profit.

Ecovacs ' revenue in 2021 was 13.086 billion yuan, a year-on-year increase of 80.90%; net profit attributable to shareholders of listed companies jumped directly from 641 million yuan in 2020 to 2.01 billion yuan, a year-on-year increase of 213.51%. In the first quarter of this year, it also maintained a high-speed growth trend, with revenue of 3.201 billion yuan, a year-on-year increase of 43.90%; net profit attributable to shareholders of listed companies was 424 million yuan, a year-on-year increase of 27.20%.

With the halo of being the "first stock of sweeping robots" in China , Ecovacs has delivered a brilliant performance. Since 2018, the Ecovacs brand has been listed in Kantar BrandZTM China's Top 50 Global Brands for four consecutive years.

There are many cross-border enterprises with good performance, such as Ecovacs, Loctek, and Anker Innovations. In the current cold market environment, these enterprises have fought a good battle. The bankrupt Dongguan company mentioned above is a microcosm of more cross-border sellers in the current market situation.

As market conditions change, the economic situation in Europe and the United States continues to deteriorate, and consumer spending has become more cautious. Even giants such as Amazon, Walmart, Target, and Best Buy are laying off employees. Europe and the United States are the main sales markets for cross-border sellers, which will inevitably affect the sellers' business.

American consumers reduce shopping, giants are laying off employees to protect themselves

The United States is currently facing the worst inflation in 40 years. According to a survey recently released by the National Association for Business Economics, nearly half of the economists surveyed believe that the US economy will fall into recession within a few months, and 70% of the respondents have no confidence that the Federal Reserve can reduce inflation to its target level without triggering a recession.

McKinsey's research data shows that consumer confidence in the economy has fallen to a new low under inflation. As inflation intensifies and prices continue to rise, consumer behavior has also changed. 74% of American consumers said they are shopping less; 50% of them believe that their consumption level has dropped significantly; 60% of consumers have reduced the amount of purchases, and 44% of consumers have decided to delay purchases.

Amid economic headwinds, giants such as Amazon, Walmart, Target, Best Buy, and Macy's have been hit.

On the 23rd, Macy's announced its second quarter results ending July 30, with total revenue of $5.6 billion in the second quarter, exceeding analysts' average expectation of $5.49 billion and $5.647 billion in the same period last year. At the same time, Macy's lowered its full-year performance forecast, saying that it expects consumer spending on non-essential goods such as clothing to continue to deteriorate, forcing the chain to slash prices and remove some products from the shelves.

Last weekend, Target, the second largest retailer in the United States, also announced its second-quarter results, with revenue of $26.037 billion, a year-on-year increase of 3.5%; net profit was $183 million, a year-on-year plunge of 89.9%. According to the company, the profit plunge was mainly due to the sharp price cuts and active inventory clearance.

Although it is actively clearing inventory, Target's inventory is still high , at $15.32 billion at the end of the second quarter , higher than $15.08 billion at the end of the first quarter . It is unknown whether the retailer will continue to clear inventory next.

Best Buy, the largest consumer electronics retailer in the United States, has also fallen into a growth crisis. It said that under the influence of high inflation, demand for consumer electronics products is weak. Affected by this, Best Buy is recently laying off employees across the United States to cut costs and increase profits. It is understood that Best Buy laid off hundreds of employees in the past week.

Best Buy spokeswoman Carly Charleson once mentioned: "The macroeconomic environment is constantly changing, and customers are shopping online more frequently than ever before." However, Amazon, Walmart, Wayfair and other companies that do online business are also laying off employees.

In the middle of this month, Wayfair, the largest home furnishing e-commerce platform in the United States, announced that it would lay off 870 employees, accounting for 5% of the company's global workforce and 10% of the company's team. Wayfair's layoffs are to reduce labor costs, and the layoffs are expected to save approximately $30 million to $40 million. In the second quarter of this year, its net income was $3.3 billion, down 14.9% from the same period in 2021.

Walmart also confirmed that it was preparing to lay off employees to ease business pressure. However, it refused to disclose how many employees would be affected and which departments would experience layoffs, only mentioning that the company would restructure its business. However, its second quarter performance was not bad, with revenue of $152.859 billion, an increase of 8.4% year-on-year, and net profit attributable to listed companies of $5.149 billion, an increase of 20.4% year-on-year.

Walmart's competitor Amazon has also laid off employees. From the first quarter to the second quarter of this year, Amazon reduced its staff by about 100,000, a record high. Most of the laid-off employees worked in warehouses and distribution centers.

As the cold winter approaches, the businesses of these giants are affected to varying degrees, not to mention cross-border sellers. Sellers are powerless to change the overall environment, and can only focus on improving their core competitiveness and, based on their own conditions, expand sales channels in more countries and regions, spread risks, and make survival their main goal.

Cross-border companies

Closure

Huawei