Guangdong's big sellers may drop 2,000 employees! Cross-border layoffs are on the rise

Recently, the first quarter financial reports of the top sellers were released, and the situation of "increased revenue but not increased profits" is very common. The situation of small and medium-sized sellers is not optimistic either. Some companies have seen a decline in profits or even serious losses, and are facing an operating crisis.

Industry insiders revealed that every day there are large trucks taking away furniture downstairs of Shenzhen Bantian International Center because some companies can no longer operate. In order to maintain profits and normal operations, some companies have begun to drastically reduce their staff. Last year, a top-tier retailer in Guangdong had sales of over 10 billion yuan, but its profits were in the red. In order to reduce costs and transform to a value-driven company, the company will lay off 30% of its employees, involving more than 2,000 employees.

In order to avoid leaving the table, some sellers have adjusted their strategies, such as cutting unprofitable categories and changing to cheaper offices. However, with the upgrading of platform regulation and the increase of multiple fees, the Amazon flywheel is pushing sales-oriented sellers into the abyss , and the sentiment of "de-Amazonization" is getting stronger and stronger. In addition to changing sales channels, many seller companies are also seeking transformation, moving from sales-driven to value-driven.

Cross-border e-commerce companies are laying off employees

Last year, the popular cross-border e-commerce industry experienced a frost.

Due to factors such as inventory backlog, soaring freight costs, and low-price competition, many sellers have found that their sales have hit new highs, but their profits have been greatly reduced or even negative. A decline in revenue is acceptable, but serious losses may make it difficult for the company to continue.

One seller said frankly that none of those who entered the market last year made money. "During the epidemic, I saw many people who were enthusiastic about doing cross-border e-commerce, but finally left with their heads down. They entered with hundreds of thousands of yuan in their pockets, but left with their pockets cleaner than their faces."

An industry insider at Bantian International Center revealed that there are large trucks taking away furniture downstairs every day because the company can no longer operate. Those who can take away furniture are not bad because they have money to pay the rent, and the property management allows them to take away furniture, while those who can't pay the rent can't even take away furniture. "Many people in our entire park have no money to pay the rent. Second-hand furniture sellers in Shenzhen no longer accept second-hand furniture because there are too many second-hand furniture."

One seller made it clear that he would give up his illusions this year and keep the current situation . To maintain profits is to maintain the bottom line of survival. Companies in the industry have listed "cost saving" as the top priority, and internal cost-cutting has also become a top priority.

March and April are the peak seasons for job hopping, but this year is very unusual. Many operations remain on hold, and some companies are actively persuading employees to resign. The reason is simple: moderate staff reductions can reduce expenses immediately without causing major damage. In Guangzhou and Shenzhen, news of layoffs is increasing.

It is understood that a certain Guangdong seller had sales of over 10 billion last year, but in sharp contrast to its revenue, the company's profit for the whole year was negative and it was in a loss-making state overall. Recently, an epidemic broke out in its location, and according to the lockdown requirements, 80% of the company's employees were forced to stay at home. Under huge operating pressure, the company plans to lay off 30% of its employees, reduce marketing costs and transform the company. The layoffs are mainly aimed at non-profit departments and will involve more than 2,000 employees.

In early April, Mr. Liu, a cross-border seller, laid off 80% of his company's employees, leaving only more than 100 people to continue operating. In the past year or so, his company has lost more than 30 million yuan, and it is still unknown when it can return to profitability. "The entire industry is losing money, and the top companies have lost hundreds of millions of yuan." Mr. Liu feels powerless about this situation. After the company suffered losses, he has been reflecting on his mistakes and insisting on improvement, but the losses are still continuing.

Industry insider "Uncle Kua" pointed out that Amazon sellers are in a serious state of internal competition. Those who can't compete start to compete with their employees, and the saved wages become the company's profit. He mentioned a company: "The original 1,000 square meter office was changed to a 500 square meter one, saving 40,000 yuan in rent this month. The company originally had several thousand people, but they reduced 1,000 people without any delay, saving 7 million yuan in labor costs this month. Currently, there are few recruitment information for them on recruitment websites."

It is not just the cross-border companies in Guangzhou and Shenzhen that are laying off employees.

Affected by the epidemic, Shanghai has been under lockdown for many days. A local operator said that the company does not pay commissions during the work-from-home period, and only has a basic salary of more than 2,000 yuan, and has to hold 4 meetings a day, with a lot of work. Even so, his company is still trying to lay off employees. "I plan to stick to it until the end of the month, at most after the May Day holiday, and I don't want to work even if the lockdown is not lifted by then."

( A blog post from this operation )

In addition to direct staff cuts, cross-border companies are also cutting costs by applying for credit terms, comparing three companies, etc., and service providers in the industry have already felt the impact.

A cross-border e-commerce company expressed its hope for monthly settlement to a logistics company. If this is not possible, it will change the logistics company. The latter reluctantly refused: "It's only 1 yuan profit, and they have to guarantee delivery, and monthly settlement. Forget it, let others make money. Using the principal to gamble on a profit of about 5% is probably worse than investing in A-shares."

Another seller weighed the pros and cons several times when registering a trademark, and the service provider joked: "You would have made the decision last year. Why are you still concerned about this little money now?" Obviously, the circumstances are different.

Recently, the first quarter financial reports of listed cross-border e-commerce companies have been released in droves, and the phenomenon of "increased revenue but not increased profits" is very common. In the first quarter of this year, Anker Innovations' revenue was 2.865 billion yuan, an increase of 18% year-on-year; its net profit attributable to the parent company was 199 million yuan, a year-on-year decrease of 2.74%.

This is the case for the top sellers who have relatively abundant funds, and the profit situation of small and medium-sized sellers is even more pessimistic. People in the industry have recognized the fact that good sales are superficial, but they are no longer the standard for measuring whether a company's business is successful. The ultimate goal of sales is to make a profit.

At present, cross-border companies have begun to make various adjustments to maintain profits, including reducing staff and product lines, changing offices, etc. The industry crisis that has been going on since last year has finally become fully apparent.

The industry takes a sharp turn, and sellers cut low-value categories to survive

The cross-border e-commerce industry has gone from being very popular to being unpopular in just one year. This sudden turn has caused many people to suffer back injuries.

In 2020, the epidemic put global e-commerce on the fast track. Sellers who tasted the sweetness stocked up a large amount of goods, hoping to replicate the success of this year. However, most people overlooked one point - this is sales data under abnormal circumstances.

In 2021, consumer purchasing power in overseas markets such as Europe and the United States has declined, and shopping demand has shifted offline. The e-commerce sales situation is far from that of the previous year. Sellers' previous excess inventory has begun to be unsold. In addition, new sellers who have heard the news and "picked up gold" want to pry open the market with low prices. The price war on Amazon has begun to show signs of happening.

Immediately afterwards, a rectification campaign lasting half a year was launched on the platform, which uprooted the top sellers in multiple categories such as 3C. In order to recover as much capital as possible, the blocked companies sold their goods at low prices. There was an oversupply of goods on the platform, and the selling prices became even lower. A large number of sellers were drawn into the price war. This price war, which was based on the rising costs of many operating costs, has continued to this day.

This year, the situation facing cross-border e-commerce is even more severe.

Amid the Russia-Ukraine conflict, orders in the European market have fallen one after another, and the exchange rates of many foreign currencies have fallen; on the market side, the previous e-commerce craze overdrew shopping demand, and coupled with the intensifying inflation in Europe and the United States , people began to cut unnecessary spending; and with the frequent domestic epidemics, cross-border companies' shipment preparations and daily operations have been affected, and sellers must work harder to cope with it.

How to survive better? Sellers have begun to adjust their strategies, such as cutting low-profit categories and cautiously exploring new categories.

"Cross-border Lao Zhang" said that at the end of 2020, he decisively cut off all uncompetitive and unprofitable product lines, and strictly required the team to start with product differentiation and adopt all compliant operations. He laid a good foundation last year and made a good start this year. In the first quarter, his company's GMV increased by about 50% year-on-year, and the profit margin also increased.

As the company is heading in a good direction, employee confidence has been boosted. Zhang said that March is the peak period for resignations every year, but this year the team is very stable, no one has resigned, and the company has even expanded slightly. At a time when sellers are generally downsizing, it can be said that it is rising against the trend.

Another seller said that at the end of the previous year, his team members were not satisfied with the status quo and wanted to expand into new categories. They rushed into new categories with great enthusiasm and have lost more than 1 million yuan so far. Although they can afford the loss, it is like cutting meat with a blunt knife, which is very uncomfortable. He decided to give a deadline, and if there is still no improvement by the end of this year, he will cut it off.

However, sellers have different opinions on adding or removing categories. Some focus on one or two categories, while others decide to explore new categories due to increasingly fierce competition in current categories. Should they hold their ground or continue to attack? Many sellers are wavering and have difficulty judging where the exit is and where the swamp is.

"I used to believe in specializing in one category and digging deep, but when I came to Amazon, I found that it was becoming less and less effective. I could only try multiple categories and then dig deep vertically." A seller lamented that this year it is more difficult to launch new products than ever before, and some categories have been spoofed by peers. In order to maintain sales growth, he began to return to the front line to promote new products himself.

Due to the platform’s management upgrades for sellers and their own development bottlenecks, many companies have begun to seek transformation.

Amazon's flywheel is pushing sales-oriented sellers into the abyss

The main purpose of sellers adjusting their business is to save declining profits. After all, after all the hard work, if the profit turns out to be negative, it will all be in vain.

The beginning of the profit decline is related to a variety of factors, but many industry insiders believe that Amazon’s account suspension and the increasing number of new sellers entering the market are the main reasons for the decline in profits.

Seller Wang Liang introduced that after Amazon banned their accounts, some veteran sellers fired the first shot in a price war. Due to the pressure to clear inventory, they began to slash prices. In order to maintain their rankings, some sellers whose accounts were not affected were also forced to cut prices. A price war quickly engulfed the market.

The traffic reshuffle brought about by the account suspension wave and the high demand abroad during the epidemic have inspired some new sellers. But when old sellers fall one after another, will it really be an opportunity for new sellers?

In September last year , Xiaotian started selling on the Amazon platform. At that time, he had been operating on the domestic e-commerce platform for 5 years and his brand had gained a certain degree of popularity. He wanted to expand overseas markets through Amazon and further increase sales. However, half a year later, the Amazon department has not been able to get off the ground. In addition, the various costs required for sales are high, and now this department is still in a loss-making state.

Xiaotian is not an isolated case. Many novice sellers are hit hard by reality, but they are still struggling. Some of them entered the market with capital, trying to get a share of the cross-border e-commerce market. At the beginning of their business, they were brainwashed by some training institutions: "You can use the spiral strategy, first reduce prices, and then raise prices after the ranking rises." But it is easy to reduce prices, but it is not easy to raise prices.

Amazon is happy to see sellers competing by reducing prices. Lower commodity prices mean more customers, more customers mean more sellers, more sellers mean larger sales scale and more sales channels, larger sales scale and more sales channels mean that the supply chain will be optimized, which will further reduce commodity prices, and further reduction in commodity prices means more customers ...

This may be Bezos' flywheel, which he has pushed around and around for years, faster and faster.

As a seller on the Amazon platform, you need to face pressure to survive under the flywheel. In the past two years, facing the increase in various fees, sellers are helpless and powerless. Especially under the wave of account suspension, the previous order-brushing model has been blocked, and many sellers have begun to increase advertising investment. Many Shenzhen sellers said that the proportion of advertising-sponsored products on Amazon's search page has increased significantly.

Research firm Tinuiti released Amazon's advertising benchmark report for the first quarter of 2022. For the first time since the fourth quarter of 2020, sales revenue from Amazon's sponsored product ads grew faster year-on-year than sellers' spending on the ads.

The report shows that Amazon's sponsored display advertising campaign spending increased by 92% in the first quarter of 2022, a significant increase from 31% in the fourth quarter of 2021. In the first quarter of 2021, sponsored display advertising accounted for only 2% of Amazon's total advertising spending, but in the first quarter of 2022, this proportion has risen to 4%.

Advertising investment is only part of the cost, and other costs are also rising. Some sellers said that the price of raw materials has risen, and the cost of purchasing products has risen rapidly; under the epidemic, the proportion of sea freight has increased from 2%-3% to 15% now; the instability of the exchange rate of the US dollar, euro and yen is also pushing up costs and constantly squeezing the profit margins of sellers...

Many sellers are used to using the percentage of sales costs to measure the overall situation. Since last year, many sellers have reported that the advertising, storage and transportation costs on the Amazon platform account for more than 30%. With the increase in fuel surcharges and other fees this year, sellers' sales costs will undoubtedly increase.

On the one hand, prices are seriously involuted, and on the other hand, costs are rising. Some Amazon sellers are in a dilemma. They used to sell products without losing money, and as sales and reviews accumulated, they further boosted product sales. Now this idea is obviously not feasible. In the price red ocean, it is difficult to sell old products, and new products cannot be promoted at all.

Obviously, more sellers who simply take goods and resell them are lost in the price involution. When losses become the norm, how long can the sellers hold on?

An old seller asserted: " The second half of this year will be even more difficult for Amazon sellers than expected ." Many peers agree with this view. At a time when sellers' profits are constantly being devoured, perhaps Amazon's flywheel is pushing sales-oriented sellers step by step into the abyss.

Chinese sellers are exploring new ways to “de-Amazonize” and brand

At present, domestic Amazon sellers are seeking new ways to reduce their dependence on Amazon, and the sentiment of "de-Amazonization" in cross-border e-commerce is growing.

"In the future, Chinese foreign trade companies should avoid relying on Amazon," wrote Hong Yong, an associate researcher at the Ministry of Commerce, in an article published in the overseas edition of People's Daily . The article also listed various cases in the past year where Amazon banned accounts, froze sellers' account funds, increased advertising fees, and prohibited access to customer data.

In fact, many sellers have begun to implement "de-Amazonization". They are actively exploring other e-commerce platforms, independent sites and other channels to save themselves by deploying multiple channels.

In addition to changing sales channels, many seller companies are also gradually transforming from sales-driven to value-driven.

As cross-border e-commerce has developed to date, most Chinese cross-border companies are still at the level of sales-oriented companies. They select good products and sell them abroad through third-party platforms such as Amazon. Amazon's customers are in their own hands. The platform does not even allow sellers to contact customers directly. Customers belong to the platform, and sellers rely on the platform for sales.

In order to further increase sales, some Chinese sellers will open a large number of accounts, distribute a large amount of goods, and regard selling as the top priority. As platform policies tighten, once an account is blocked for violating the rules, other accounts will be implicated. These sales-oriented companies with a selling mindset are directly strangled by Amazon.

Currently, more Chinese Amazon sellers are withdrawing from the previous distribution model, cutting off some unprofitable products, focusing on developing several or one profitable product line, getting rid of the distribution model, improving labor efficiency, and conducting refined operations. Following this direction, some companies will gradually lay off some non-profit departments to reduce costs, and news of layoffs in some industries has spread like wildfire.

In fact, when looking at the thinking behind layoffs by large cross-border sellers, we cannot simply and crudely conclude that the company is failing. Perhaps it is more likely that the company is in a critical period of transformation. During this period, they are making overall plans, streamlining unprofitable departments, and further increasing investment in research and development, so as to achieve the transformation into a value-driven and brand-driven company.

If they don’t transform, perhaps this era really won’t accommodate them! Only value-driven, brand-driven, and technology-driven companies have a future.

In the past two years, we have witnessed the glory of cross-border industry service providers. There has been a constant stream of financing and listing news for these technology-driven companies, and the cash flow on their accounts is more stable than the outside world can imagine.

Some leading sellers who have increased their investment in R&D and built their own brands are also doing well. Anker Innovations is a recognized brand leader in the industry. As of the end of 2021, the Anker main brand has been selected as one of the top 50 Chinese overseas brands by Brand Z for five consecutive years. The brand has gained a certain degree of recognition abroad.

The foundation of building a strong brand is the product, and Anker Innovations is willing to invest in product research and development. In 2019, 2020 and 2021, the company's R&D investment reached 394 million yuan, 567 million yuan and 778 million yuan respectively; R&D expenses accounted for 5.92%, 6.07% and 6.19% respectively. As of December 31, 2021, Anker Innovations had a total of 1,605 R&D personnel, accounting for 45.44% of the total number of employees.

Strong R&D capabilities have helped Anker Innovations gain high brand recognition overseas. In contrast, other well-known top sellers on the Amazon platform, although their company names are well-known, few people actually know their company brands. Consumers ultimately recognize the platform or the brand.

At present, the leading sellers in many industries are also further increasing their R&D investment, and then using product strength to drive brand strength and build their own core advantages. There will always be bumps and stumbles on the road from a pure sales-oriented enterprise to a brand-oriented enterprise. As a seller, you cannot only see pessimistic emotions such as layoffs, but you should follow the new demands of the moment and be brave enough to explore new ways of cross-border expansion.

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