With 9.9 free shipping being popular and the US dollar exchange rate falling to 6.3, why don’t cross-border philanthropists raise their prices?

Recently, the price war on Amazon is in full swing. In many categories, because the top sellers and new sellers have slashed prices, sellers who stick to the original price have seen their orders drop and their rankings lost, so they are forced to join the price-cutting army. Looking around, unbelievably low-priced sales such as $8.9 desks with free shipping and $2.9 outdoor sprinklers are spreading.

But yesterday, the last straw that broke the camel's back for sellers' profits came. Yesterday, the US dollar exchange rate against both onshore and offshore RMB fell below 6.4, and the US dollar exchange rate entered the 6.3 range. Some financial experts analyzed that the RMB exchange rate against the US dollar may rise to 6.2. The US dollar exchange rate fell to a three-year low, and the financial pressure increased again. Can sellers still resist raising prices?

The US dollar exchange rate has become a hot topic and has fallen to 6.38

Yesterday, the onshore RMB exchange rate against the US dollar rose above the 6.40 mark, reaching a high of 6.3919, the first time since June 2018; at the same time, the offshore RMB exchange rate against the US dollar rose above the 6.39 mark, reaching a high of 6.3754, also a new high since June 2018.

The People's Bank of China authorized the China Foreign Exchange Trading Center to announce that the RMB exchange rate in the interbank foreign exchange market on May 26, 2021 was 6.4099 yuan per US dollar, up 184 basis points from the previous trading day, approaching the 6.3 yuan era. The topic of "RMB to USD exchange rate approaching the 6.3 yuan era" became a hot search.

After the opening of today's market, the US dollar exchange rate continued to fall, reaching a low of 6.3861 against the onshore RMB and 6.3715 against the offshore RMB, while the sellers' exchange rate was even lower. Compared with the sellers who cried to exchange currency at 6.39 two days ago, the sellers who exchange currency at the current exchange rate may not be able to cry anymore.

In just one year, the withdrawal of 100,000 US dollars shrank by 79,000 yuan

How much loss does the falling exchange rate cause to sellers?

On May 27 last year , the US dollar exchange rate was as high as 7.17, which was already a highlight moment. A full year later, the US dollar exchange rate fell to 6.38. Taking the withdrawal of 100,000 US dollars as an example, the seller's exchange loss has expanded to 79,000 after one year. For sellers with larger sales, this is obviously a huge loss.

The falling US dollar exchange rate has made sellers anxious:

"I haven't asked for the payment from Amazon yet. I'm heartbroken to see the exchange rate. If it drops further, the exchange loss will be too high!"

"I waited and watched from 7.1, thinking it would reach 8, so I was secretly happy. Then it got a little better at 6.49, and then it flatlined at 6.3."

"I just held on to it from 6.5 until I withdrew it at 6.43 two days ago."

“When I withdrew cash today, it was 6.38. It felt like I was taking money out of a beggar’s pocket.”

"6.37 is too much. So, don't you have any plans to raise the price?"

As for the current exchange rate trend, some sellers believe that it may continue to fall in the next two years, so they should withdraw the money as soon as they have it, because the later they withdraw the money, the worse it will fall.

What do professionals think? Mingming, deputy director of CITIC Securities Research Institute, pointed out that the central bank's tolerance for RMB exchange rate fluctuations has increased, which means that the RMB will have more room under the current appreciation trend. He believes: "The RMB exchange rate still has the momentum to strengthen, and the RMB exchange rate against the US dollar may rise to 6.2."

With 9.9 free shipping being rampant, can sellers still resist raising prices?

The exchange rate has been falling all the way, and some sellers can’t help it: Why don’t you raise the price when it’s like this?

Some sellers believe that the only option now is to raise prices. "Anyway, I have already been slowly raising prices by a few dollars, and the number of orders is still growing. On average, there are 5 more orders per day in the past 7 days. I will continue to raise prices in the future," said one seller.

Even though the exchange rate is at a high point, some sellers dare not raise prices. “I dare not raise prices. If I raise prices by 5 cents a day, I’m afraid the order volume will drop.” The sellers’ concerns are not unreasonable. Price cuts are everywhere, so how can we raise prices?

How serious is the price war in categories?

Seller feedback:

"Some sellers are offering desks for $8.9 with free shipping. All top 100 desk sellers are losing money."

"2.99 for an outdoor sprinkler, that's crazy."

"There is a price war in all six categories I am in. I have 20 items for $11.99, and the lowest is 30 for $6.99."

In addition to the low-price stimulation caused by newcomers, another reason is that old sellers retaliate by shipping goods beyond warehouse capacity, and the speed at which the goods are delivered cannot keep up with the speed at which they are put on the shelves.

Will you join this wave of price war?

An Amazon seller with seven years of experience said: "I don't fight with my peers in a price war, because I don't have inventory pressure anyway. I don't spend a lot of money on advertising to get orders, and people can buy or not." At present, his two stores have 30,000 to 40,000 active listings. All sites are open and all are self-delivered, so there will always be something to sell. I, a micro seller who fights alone, don't expect to make a lot of money. I just want to make 30,000 to 40,000 yuan a month. When the market is good, I can make 60,000 to 70,000 yuan.

"What's the purpose of doing business on Amazon? It's to make money," he said. Many sellers agreed.

The operational difficulty is increasing, and logistics also faces challenges.

Some Amazon warehouses are already in a semi-paralyzed state, and sea freight will increase by 20% in June

This year, logistics prices in various channels have remained high, especially ocean freight prices, which have continued to rise. Ocean freight prices have been soaring recently and are likely to continue to rise.

Yesterday, a seller reported that several freight forwarders have quoted that the shipping costs in June are nearly 20% higher than this month. Because there are much fewer shipping spaces than this month, and several shipping companies have stopped their entire lines, it is recommended to book shipping space two weeks in advance. The seller is puzzled: Over the years, summer is usually the slowest off-season, and the shipping costs are also at a low point in the year. It is hard to imagine what the freight rates will be like at the end of the year ?

Combined with the recent situation, the sellers concluded that the voyage was extended, the exchange collection slowed down, and the profits evaporated at sea !

The price increase comes as the shipping situation continues to deteriorate due to insufficient port staff and further reduction in shipping capacity. Shipping giant Maersk warned that the ports of Los Angeles and Long Beach in the western United States are still strained by long waiting times for ships, which currently average between one and two weeks. The situation at the Port of Oakland is even more severe, with waiting times now extending to three weeks.

Delays at West Coast ports have had a severe impact on liner schedules, with effective capacity on the trans-Pacific trade dropping dramatically as ships are unable to return home in a timely manner.

Maersk said 20% of capacity from Asia to the US West Coast has been lost. It now expects to lose 16% of Asia-Pacific capacity between now and the end of June, and 13% between now and the end of August.

"Due to the lack of capacity, competition among shippers is forcing prices to rise," said freight forwarder Flexport, which expects demand that has driven record levels of U.S. imports from Asia to continue into the summer and fall peak season. "On June 1, we will see logistics prices rise again," said Anders Schulze, vice president of Flexport.

In addition, Amazon's storage capacity restrictions in the United States have further deteriorated the logistics situation. Industry insiders said that the current situation is that many Amazon warehouses are basically paralyzed or semi-paralyzed.

Sellers’ intuitive feeling: the replenishment cycle is much longer than before. As a result, the inventory that originally only needed to be prepared for one month has become required to be prepared for two months, or even longer.

The US dollar exchange rate continues to fall, logistics costs have been rising, Amazon's inventory capacity has been reduced again and again, raw material prices have risen and procurement costs have increased significantly, advertising clicks are high, off-site discounts are large, and differentiated products are hard to find ... One problem after another is coming, and some sellers are saying "I can't breathe, the cross-border e-commerce market in 2021 is too magical!"

For many small and medium-sized sellers, the key word this year is not to rush forward, but to survive steadily. The big sellers in the industry may have a premonition of this and are already taking action . Those who can survive to the end will be the winners.

Exchange rate, profit, Amazon