Orders have dropped by half, are Americans going to have another holiday?

Entering July, the second half of the year is here. Amazon sellers who had high hopes for the next six months are panicking these days: orders seem to be even worse than in June. As the order volume declines, sellers start to sell at low prices and frantically grab orders.

Sellers’ sales are shrinking, e-commerce market growth is stagnant, and the once popular store acquisition business is no longer popular! Some aggregators have stopped acquisitions and focused on operations, but they are not as good as Amazon sellers in this regard.

Orders dropped by half, and sellers are panicking: Are Americans going to have another holiday?

Yesterday was the first day of the second half of the year. Just when everyone was cheering each other up, some Amazon sellers were complaining: orders have dropped again!

One seller reported: “I thought July would be better for me, but orders dropped by half!” More sellers encountered the same situation. One seller wondered: “On the first day of July, are orders so slow?” A fellow seller said bluntly: “Orders today are really bad!”

According to industry sellers, orders were generally slow in the first two days of July. This may be because Prime Day is approaching and everyone is waiting for the low prices during the promotion. In addition, Americans are going to take a holiday because Independence Day is coming soon.

Independence Day is one of the major legal holidays in the United States, and it falls on July 4th every year. On this day, church bells of all sizes ring out across the country, and all kinds of floats, model cars, acrobatic cars, and children's toy cars line up in a huge procession with the happy crowd. Some sellers panicked: "Why are Americans going on vacation again? Everyone is on vacation, so a decrease in orders is inevitable."

In fact, in June, many sellers reported that orders continued to be sluggish. At the end of June, a seller opened the backend and found that sales had dropped by 75%. Similar situations are as follows:

“——For several consecutive days, the order volume was cut in half almost every day;

——Complete off-season;

——The order volume is dropping so fast that it’s unbearable to watch;

——Why are there so few orders today? "

The order situation of sellers is directly reflected on the factory side. A factory blogger said that the orders of its largest Amazon seller client from April to June were one-tenth of the same period last year. This decline is like a roller coaster, falling to the bottom!

After experiencing a recent decline in orders, many sellers started to grab orders before the Member Day promotion. They significantly increased their advertising bids, with some sellers raising their advertising budgets by more than 30%. If there were no orders, they would double their bids. The original bid of $0.5 was raised to more than $1.

According to insiders, before the Member Day promotion, sellers generally increase their advertising budgets, some two weeks in advance, some a week in advance. One seller was helpless: "Ad clicks are painful, but seeing a few scattered orders, I still can't reduce the budget."

In addition to raising bids, many sellers continued to sell at low prices in the battle to grab orders before Member Day. Relying on this model, seller T's orders increased instead of decreased and are still rising.

The seller introduced that the orders for the entire store have increased, but most of the orders are basically for low-priced products, and they only get orders if they are sold below the market price. If they are sold at normal prices, it will definitely be difficult to sell. The seller has to make less profit to survive. It is currently very difficult to achieve high profits through Amazon. In the past, everyone could eat their own food, but now they can only scramble for food. There will definitely be people who cannot grab the food and cannot eat enough.

Due to poor sales, sellers have been reducing prices or increasing advertising costs to boost sales. This is the current situation on many e-commerce platforms, and this change has been reflected in the capital market.

As of mid-June, the market capitalizations of e-commerce platforms such as Amazon and Shopify have dropped significantly from their peak last year, and e-commerce stocks have been on the sidelines. It is not difficult to see that American investors lack confidence in the e-commerce sector, and these sentiments come from the performance of the e-commerce market.

Not only the stock market, but also the Amazon store acquisition business that was extremely hot last year has begun to cool down.

E-commerce growth stagnated, store acquisitions no longer hot

According to Marketplace Pulse data, Amazon aggregators raised $5.1 billion in the first half of 2021, but in the first half of this year, the figure was only $2.2 billion, a decrease of nearly 60%. The capital race to launch and fund new aggregators has also stopped.

In the first half of 2022, only 12 new aggregators announced funding, which together attracted $1 billion in investment, compared with 22 new aggregators in the first half of last year and 17 in the second half.

(Amazon aggregator financing situation)

Low interest rates, explosive growth in e-commerce, low P/E ratios, and a lot of news about the top aggregators drove much of the investment in 2021. But now that sentiment has dissipated, capital has become more expensive, e-commerce growth has stagnated, and rising costs have squeezed profit margins, and P/E ratios have been rising as of the end of 2021.

In fact, leaving aside the macro issues, some aggregators are performing worse as Amazon sellers than the sellers they acquire. Before the acquisition, they often say they will provide more money and resources to improve the performance of the acquired stores, but money is not the only solution. As sales shrink, if Amazon aggregators are not sellers, they may be nothing. Obviously, operational capabilities are much more important than M&A experience.

While acquisitions are still going on, the industry is adjusting and correcting mistakes, such as its debt covenants and the fact that most of the funds raised have not yet been put to use. For some, this means pausing acquisitions; for others, it means accelerating transactions amid market uncertainty; and for others, it means retaining founders and teams rather than just buying assets. Recently, news of layoffs at some aggregators has been coming in.

From its initial enthusiasm to its current cooling, the Amazon store acquisition gold rush has attracted more than $15 billion in less than two years, most of which ($12 billion) came from 2021, and this year's financing figures will be significantly reduced.

With reduced capital investment and a more challenging e-commerce business, aggregators are required to invest more energy in operations. In the industry, some acquirers have informed sellers that some of their peers have stopped acquisitions and started to refocus on operations, and have extended olive branches to sellers, hoping to acquire stores with higher profits, stable growth and non-extreme seasonal sales.

On the one hand, capital investment is reduced, and on the other hand, e-commerce operations are facing increasing challenges, which requires aggregators to invest more energy in operations. In the industry, some acquirers have informed sellers that some of their peers have stopped acquisitions and started to refocus on operations, and have extended an olive branch to sellers, hoping to acquire stores with higher profits, stable growth and non-extreme seasonal sales.

Both the sluggish acquisition business and the stagnant growth in e-commerce sales are closely related to the reduction in online shopping by consumers, and judging from the current situation, this trend may continue.

This week, the final revised data released by the U.S. Department of Commerce showed that the U.S. real GDP fell by 1.6% on an annualized basis in the first quarter of 2022. American economist Peter Schiff warned that the United States will face an economic crisis more serious than the 2008 "Great Recession".

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