The US is giving out money again! Are Amazon sellers seeing a surge in orders?

As inflation in Europe and the United States intensifies, more consumers are beginning to pay attention to some low-priced goods. Walmart and Target have cleared their inventory at low prices, and Biden's recent passage of the inflation bill seems to have no effect on reducing inflation. This may further impact the business of cross-border sellers.

In addition, Amazon increased its peak season delivery fees, and the epidemic in Yiwu disrupted sellers' holiday season stocking rhythm. There are still many uncertainties in cross-border e-commerce in the second half of this year. However, the factors that are beneficial to sellers in the peak season have already emerged. Compared with last year, this year's cross-border freight costs have dropped, the US exchange rate has improved, and sellers' related losses will also be reduced accordingly.

The number of orders has obviously rebounded, and sellers are saying: Is the United States giving out money again?

Recently, many Amazon sellers reported that orders have surged, and this phenomenon is not just a small increase. One seller asked: "Have Americans given money again? Why are the orders so strong today?"

Another seller encountered the same situation and said: "Today's orders increased by 200. Is it because the peak season is coming, or because the United States has given out money? Could it be that the inflation that everyone expected has dropped, and Americans have started to resume consumption?"

In fact, not only orders have increased, but some sellers have also seen an increase in traffic. One seller said that traffic has rebounded in August, which is much better than in July, and this is not an isolated case.

Even though some sellers have seen their performance pick up, the proportion of sellers with poor orders and traffic is still larger. Many sellers feel that: "August is not as good as July, conversion has dropped by half, and orders continue to decline." The specific situation of a colleague is: 200 to 300 orders on normal days, 500 to 600 orders on member days, and then it has continued to decline, and now it has only 20 to 30 orders.

In various information channels, we see Amazon sellers often mention topics such as declining orders and reduced traffic. According to insiders, this decline in orders is generally relative, and few people are really "unable to survive." And those who are doing well will basically not come out to say that they are doing well. They are more likely to make money quietly, and will only say that it is average when asked by their peers.

Just like the sellers whose orders have surged recently, they are already on their way to the peak season. The reason for the increase in orders is also related to their speculation that people in many states in the United States have received or are about to receive a tax refund.

According to foreign media reports, several US states are currently providing additional subsidies to eligible residents. In August, 16 US states, including California, Colorado, Delaware, Massachusetts, and New Jersey, formulated their own stimulus plans to better help the people.

New Jersey Governor Phil Murphy signed legislation allowing eligible New Jersey residents to receive checks of up to $500 as part of a middle-class tax rebate that provides a child tax credit to families who claim at least one dependent when they file their 2020 income taxes.

Maine single filers and couples can get $850 and $1,700, respectively, thanks to new legislation signed by Governor Janet Mills.

California Governor Gavin Newsom said in June that millions of Californians will receive inflation relief later this year as part of a new tax rebate program to help the middle class. Between late October 2022 and mid-January 2023, eligible individuals will receive a maximum of $1,050 in relief.

Illinois residents saw the state 's $1.83 billion family relief package, which launched in early July and included a suspension of the 1% grocery sales tax until June 30, 2023, as well as a sales tax cut to stimulate back-to-school shopping season spending.

South Carolina Governor Henry McMaster signed a new bill in June that will soon give eligible residents income tax rebates of up to $800, with the money expected to be delivered in November and December.

Because of a 1986 Massachusetts law, the state must return excess taxes to taxpayers. That means many residents could get a piece of the state's estimated $2.5 billion in surplus cash. Massachusetts Governor Charlie Baker said residents will get a 7% refund on their 2021 state income taxes, or about $250 for someone making $75,000 a year.

This time, other states in the United States are also offering tax refunds. The scope of this tax refund is very wide. Residents of most states will receive a tax refund this fall. With money, spending power will return. The arrival of unexpected money may become a huge driving force for American consumption.

Is the inflation bill signed by Biden actually useless?

When the American people consume, the new consumption situation that has emerged is that low-priced and small-volume products are obviously more popular. Some giants are also offering discounts to gain more sales, including Walmart and Target.

Walmart Chief Financial Officer John David Rainey said U.S. consumers are increasingly looking at smaller quantities, opting for smaller packages and buying products such as canned tuna and beans instead of beef. They are also more often choosing to pay with credit cards rather than regular debit cards.

Rising energy, food and housing prices are keeping consumers away, but that's good news for discounters. Walmart is attracting new customers from higher-income groups, gaining market share. As a result, the company reported total revenue of $152.9 billion in the second quarter of this year, up 8.4% year-on-year and above the market estimate of $150.99 billion.

Walmart's e-commerce sales grew 12% in the second quarter. However, operating profit fell 6.8% due to price discounting, lower demand for higher-margin products such as electronics and apparel, and higher labor costs.

Another US retailer that has adopted a low-price strategy is Target. Yesterday, Target also announced its second-quarter results. Its revenue for the second quarter was $26.037 billion, up 3.5% year-on-year, slightly lower than market expectations; its net profit was $183 million, down 89.9% year-on-year; and its diluted earnings per share was 39 cents, lower than the market expectation of 72 cents.

The company said the profit plunge was mainly due to the impact of significant price cuts on goods and active inventory clearance. Products that performed strongly in the second quarter included food and beverages, beauty and household necessities.

Speaking of the reasons for the drastic price cuts, Chief Financial Officer Michael Fiddelke said Target had to act quickly to clear out excess inventory, prepare for the holidays, and survive the economic downturn shrouded in inflation.

"We could have avoided a significant decline in profits, but if we didn't aggressively deal with excess inventory, we would have hampered our long-term growth potential," Fiddelke said.

Walmart and Target's clearance of inventory and price cuts just meet Americans' psychological expectations of buying products at low prices. As inflation intensifies, consumers are more cautious about spending money and will stop some unnecessary expenses. Currently, nearly 600,000 British households have canceled their Amazon Prime subscriptions before the price increase.

Inflation has affected the consumer confidence of people in Europe and the United States. In order to ease inflation, US President Biden recently signed the " Inflation Reduction Act of 2022", which officially came into effect on the 16th local time.

The Democrats claim that the bill can ease inflation and reduce the deficit, but many foreign media have published articles saying that relevant experts almost unanimously believe that the bill will have no effect on reducing inflation, but will instead aggravate inflation or cause the US economy to further decline.

A budget model from the University of Pennsylvania's Wharton School concludes that over the next decade, "the bill's impact on inflation will be statistically negligible."

Economists have long noted that the burden of inflation is heaviest on the working class, the poor, and retirees on fixed incomes. However, much of the bill actually has nothing to do with the working class. The biggest beneficiaries of the relevant provisions can only be American corporate giants and wealthy Americans living in wealthy coastal areas.

The bill appears to reduce inflation and develop the economy, but in reality it is not the case. After the bill is implemented, the working class will continue to suffer from high inflation, and will find it difficult to enjoy the subsidies stipulated in the bill, and will have to bear an additional tax burden of more than 20 billion US dollars.

Inflation and price cuts by US retail giants will hit sales of cross-border sellers, and increased costs will make the situation more difficult for sellers.

Amazon delivery fees have risen 30% in the past two years

Yesterday, Amazon US notified sellers that this year's holiday season supply chain operating costs will increase, so it will follow other carriers and charge holiday sales peak season delivery fees from October 15, 2022 to January 14, 2023. For products sold using Amazon Logistics in the United States and Canada, the corresponding fee is an average of $0.35 per item.

Amazon said that during the peak season, the freight volume is concentrated, and the industry's order processing and delivery costs will increase. Previously, the platform itself borne these rising costs, but seasonal costs continued to break new highs, so it decided to charge this peak season surcharge during a specific period of time each year. The platform also stated that even after the price increase, its delivery fee is still very cost-effective among its peers.

But the sellers are obviously not buying it. Because the US dollar rebounded, the profit statements of sellers on the US site looked better, but now they say that the gains brought by the exchange rate have been taken away by the platform.

For example, Amazon will implement a peak delivery fee for apparel products, during which the shipping weight will be calculated based on the larger of the product weight or volume weight for all standard-size and oversized products weighing more than 0.75 pounds.

A winter clothing seller said that he sent out the goods last year when the first leg was the most expensive, but the return rate last year was much higher than in previous years. As the product value was high, he did not want to sell it at a low price. He had to bear the storage fee for a year and planned to sell it this winter. As a result, the storage fee tripled, and now the delivery fee has increased during the peak season. Should he sell it at a loss or not? He was very depressed.

According to Marketplace Pulse, Amazon has increased delivery fees by more than 30% since 2020. A series of small fee increases add up to a significant increase, and Amazon is passing on its growing costs to third-party sellers.

Figure 3

( Amazon FBA fee changes since 2018)

According to the new fee adjustment rules, Amazon will charge sellers $5.06 for shipping 1 pound of goods during the holiday season, while the cost of delivering the same product in 2020 was $3.48, an increase of 45%. In terms of the volume of items, the delivery cost of smaller items will be about 30% higher, and large and heavy items will be 20% more expensive.

In fact, in the past two years, USPS, FedEx and UPS have increased fees and introduced peak holiday surcharges. For Amazon, many third-party logistics providers have also been increasing their fees, and delivery within and outside FBA has become more expensive. But the frequent price increases still make sellers angry.

First, on June 1 last year, Amazon increased the cost of delivering 1 pound of items by 77 cents. Then on January 18 of this year, the fee increased by 27 cents; in April, Amazon added a 23-cent fuel and inflation surcharge. Then, most recently, Amazon is going to increase the cost of the holiday sales season by 31 cents. The total cost has increased by $1.27 during this period. Not only that, storage fees also increased at the beginning of this year.

After the holidays, the comprehensive delivery fees that sellers need to pay will drop, but this is only temporary. Overall, Amazon is gradually increasing the fees every year, and even if the factors that caused its price increase this year no longer exist, these fees are unlikely to drop significantly.

Most sellers have already adopted FBA logistics as the default delivery method, and these cost increases are bound to affect everyone. Considering the cost increase, sellers will respond by raising prices, which ultimately means that consumers will have to pay more for their purchases. Yesterday, many sellers have expressed their intention to raise prices, putting profits first.

Despite the continued impact of inflation, increased delivery costs and other unfavorable factors, for many sellers, the two factors that had the greatest impact on cross-border business last year and in the first half of the year have eased, and the pressure from this aspect has decreased.

The unfavorable situation of cross-border sellers has improved

In the past two years of operation, high freight costs and high exchange losses have always been two major obstacles that have weighed on sellers' profits.

The home furnishing giant Lejia has a high demand for stocking through shipping channels, and shipping costs remained high in the first quarter. The weighted average price of 40HQ high cabinets rose from approximately US$6,000 per cabinet in the first quarter of 2021 to approximately US$15,000 per cabinet in the same period this year, resulting in shipping costs accounting for 14.45% of its cross-border e-commerce business revenue during this period.

During this period, the average exchange rate of the US dollar rose from 6.51 to 6.36, and the average exchange rate of the euro rose from 7.86 to 7.12, both of which had a significant impact on the company's earnings.

However, the pressure from these two aspects has changed.

In the first half of the year, the year-on-year growth rate of China's export container freight index has slowed down. In July, the average value of China's export container comprehensive freight index released by the Shanghai Shipping Exchange was 3239.69 points, an average increase of 0.4% over the previous month; the average value of the Shanghai export container comprehensive index reflecting the spot market was 4061.29 points, an average decrease of 3.8% over the previous month.

Specifically, freight rates on Europe-Europe routes hovered at high levels in July, with the average freight index for China's exports to Europe and the Mediterranean routes being 5052.54 points and 5901.71 points, up 0.1% and down 2.8% from the previous month respectively; North American freight rates adjusted, with the average freight index for China's exports to the West Coast and East Coast of the US being 2585.83 points and 2959.03 points, down 3.5% and 1.8% from the previous month respectively; freight rates on Japan routes fell slightly, with the average freight index for China's exports to Japan being 1194.50 points, down 1.9% from the previous month.

In the freight market, due to the decrease in sellers' shipments, sea freight prices have been reduced repeatedly and are at a low level, and air freight prices have also dropped significantly. For sellers with shipment needs, transportation costs can be greatly reduced compared to before.

On the other hand, the performance of various exchange rates has also changed.

From June 2020 to February this year, sellers in the US market experienced a long period of continuous decline in the US dollar exchange rate. Every time the exchange rate fell, some people regretted why they did not withdraw cash earlier. After mid-April, the US dollar exchange rate ushered in a strong rebound, breaking through the 6.8 mark at its highest point. On August 17, the onshore RMB exchange rate against the US dollar closed at 6.7757 yuan at 16:30, up 162 basis points from the previous closing price.

It is reported that due to the unexpected reduction in the policy interest rate by the central bank, the short-term RMB exchange rate flexibility has increased. Recently, the offshore USD/RMB exchange rate broke through the 6.8 mark during the intraday trading and then fell back. The onshore RMB exchange rate also approached 6.8. Whether it can break through this mark has also become a recent focus of the industry.

However, except for the U.S. dollar , which has remained high since its rise in April, other currencies commonly received by cross-border sellers, such as the euro and the yen, have shown a downward trend in exchange rates this year, which has doubled the pressure on sellers targeting Europe and Japan. Among them, the euro-RMB exchange rate has continued to decline since August 2020, and has fallen below a new low in the past two months.

Data from the China Foreign Exchange Trading Center showed that the mid-point of the RMB exchange rate in the interbank foreign exchange market on August 17 was: 1 US dollar to 6.7863 RMB, 1 euro to 6.9025 RMB, 100 yen to 5.0526 RMB, and 1 pound to 8.2103 RMB.

Some are happy while others are sad. While sellers receiving USD are relieved, sellers in the European and Japanese markets are frowning. In addition, due to factors such as European tax reform and the conflict between Russia and Ukraine, some sellers are reducing their business in the European market and investing more energy in the US market. However, the latest peak season delivery fees have just poured cold water on sellers in the US market, and sellers in the US market are also somewhat discouraged.

Now that the peak season is approaching, Halloween products are starting to increase in volume on online platforms such as Amazon, and Christmas products are also being ordered one after another. Many sellers are still preparing Christmas products. Yiwu can be said to be the source of Christmas supplies in the world, but the local epidemic has recently caused many factories and logistics transportation to stop operating, disrupting the sellers' preparation rhythm.

Some cross-border e-commerce sellers in Yiwu reported that their residential areas were still under lockdown, and several sellers who purchased goods from Yiwu also said that local suppliers were temporarily unable to deliver goods. However, the latest news from the Yiwu Municipal Government shows that there have been no new cases in the community for three consecutive days, there are no high-risk areas in the entire region, the medium-risk areas will be adjusted to three, and the silent management areas are gradually shrinking. The overall epidemic situation is improving, and we will go all out to resume work and production, and the full unblocking of the cross-border chain is just around the corner.

According to eMarketer research data, the US holiday season achieved the strongest retail growth in more than 20 years in 2021. Total consumer retail spending increased by 16.1% year-on-year to $1.221 trillion, physical store sales soared 17.3% to $1.017 trillion, and e-commerce increased by 10.4% to $204.2 billion. Among them, Amazon, Walmart and eBay are in the lead in retail traffic.

In 2022, holiday retail sales are expected to grow 3.3% to $1.262 trillion, with e-commerce growing 15.5% to $235.86 billion. The peak season remains a major opportunity for sellers.

Amazon

Meiya

Orders rise