Is the "off-season" a normal thing? Sellers: Come to the European site to experience hard times

Is the "off-season" a normal thing? Sellers: Come to the European site to experience hard times

At any time, it seems that we can always hear : "This year is the best year in the next ten years."

 

In 2022, Ren Zhengfei published an article in Huawei's internal forum, in which he said: " For the global economy, the next ten years should be a very painful historical period, and the global economy will continue to decline. " At that time, this warning of a market winter in the next ten years caused panic, and most people believed that this was indeed the case.

 

From the perspective of cross-border e-commerce sellers, Ren Zhengfei's concerns are coming true.

 

Apart from the daily order volume, judging from the traditional year-end peak season data in Europe and the United States, most sellers say that each year is worse than the previous year. “It seems like the explosion of orders was a thing of the last century…”

 

Although Amazon Prime Day data shows that both sales and sales volumes have increased during the annual promotion, sellers say that they are increasingly unable to feel the Prime Day atmosphere. "In the past, we would start the stocking up sprint early, but now the goods at the beginning of the year are unsold to the point of PD."

 

Compared with the past two years, global inflationary pressure has eased, but consumers are still tightening their purse strings and reducing non-essential spending, and sellers' order volume has also dropped sharply.

 

Among them, sellers in the European market seem to have a harder time than those in the North American market.

 

A survey initiated by a seller showed that more than 40% of sellers said that they had completely abandoned the European market in 2023 and only focused on the US market; more than 30% of sellers focused on the US market and used Europe as a supplementary market. Many European sellers that Ennet had contacted earlier also withdrew, either switching to other markets such as North America, or completely withdrawing from the cross-border circle.

 

Is the European market about to be abandoned by sellers?

 

“European sites are too difficult to handle”

 

If you use one word to describe the US site and the European site, the answer of many cross-border sellers is - " The US site is competitive; the European site is difficult ."

 

There is a particularly common phenomenon that there are fewer and fewer discussions about the European site on various social media platforms. When asked about those who no longer update content, they all said that they have lost the desire to share and complain due to the decrease in orders.

 

“—earn 10 dollars in the United States and fill a hole in Europe for 20 dollars;

——I thought orders would start to pick up after the global economy was liberalized, but they are not even half as good;

——We don’t ask for an increase, we just ask for a smaller drop;

——Orders fell by 20 points in the same period this year, and costs rose by 10 points. So what?

——The tiny amount of visits and orders made me doubt that the European site in the past few years was just a dream;

——The guys at the European station have also been doing charity for a while;

——Advertising fees, various taxes, and monthly financial accounting reports are quite exciting;

——The "niche place" most loved by cross-border people is now extremely difficult to pass;

——The European sellers who are still holding out are heroes;

..."

 

It is obvious that the European market , which was a "hot commodity" a few years ago , has now changed from fertile to barren in the eyes of sellers. The most intuitive thing is "more exports and less imports" .

 

A seller who has been in the European market for 10 years said frankly that the potential of the European market has not yet been fully unleashed, but because the threshold is relatively high and the competition is small, and the purchasing power of local consumers is not weak, " our European site stores have always performed better than the US site, and the profit margin is much higher . "

 

But the good times will not last forever. Since 2020, the seller's journey to the European site has encountered various obstacles, and business in this fertile land has become increasingly difficult. He said that 2020 was worse than his first year of cross-border e-commerce entrepreneurship.

 

"The US site is not so bad, and the decline in orders is not as large as that of the European site. In 2020, the overall revenue of stores on the European site fell by more than 200%, which was much higher than that of the US site, and profits also plummeted . Since 2021, there has been some improvement, but this improvement is based on the performance in 2020. It has not yet returned to the growth level before 2020, and it is difficult to recover in the current market environment."

 

The seller is still struggling with whether to abandon the European site and focus only on the US market, or consider the blue ocean of Southeast Asia.

 

Some sellers who are still on the European site have the same idea as the sellers mentioned above. They believe that they are struggling in the European market now. The continued sluggish sales and extremely unstable marginal environment have increased their uncertainty in operating in the cross-border e-commerce market. Moreover, although the global epidemic has been relaxed from last year to this year, the economy has not improved significantly, and the slowdown in inflation has not boosted the order volume. Therefore, they believe that orders on the European site may continue to decline for a long time.

 

In addition to the decline in orders, they also believe that the sharp rise in costs is the reason why the European station is under increasing pressure.

 

"In the past two years, our costs have skyrocketed. Orders have been cut by more than half, but profits have dropped a lot. We are just struggling to hold on. Even if we cut prices, the order volume cannot increase at all. The path of 'small profits but quick turnover' does not work in Europe."

 

" Our order volume did increase slightly compared to the previous year, but once we added the withholding tax, our overall profit dropped by 20% in an instant . "

 

In recent years, the pandemic has caused frequent obstacles to ocean shipping, which in turn has led to a surge in freight rates. Since then, the pandemic has eased, but geopolitical conflicts have occurred frequently, and ocean shipping costs have remained volatile and high, and even "one box is hard to come by". In order to ensure inventory and shelf space, sellers still have to choose to ship even in the face of high prices.

 

At the same time, compliance requirements on the European site are becoming increasingly stringent, taxes are getting higher and higher, and even many sellers have received tax payment notices in the past few years.

 

Just at the beginning of this year, a large number of European sellers received tax due notification emails , spanning the period from 2019 to 2020. Some sellers even received multiple emails, and the amount of tax due was as high as hundreds of thousands of pounds.

 

Cross-border super sellers are also deeply involved in this tax backlog storm , for example:

 

In 2022, SDEBV , a subsidiary of Ninebot, commissioned the Turkish supplier CYCLETRON to produce a batch of E-Bikes . CYCLETRON provided relevant certificates for localized production and was responsible for completing the localized production of the batch of products . However, the Dutch Customs and Finance Department believed that the production activities had not been taxed, and required SDEBV to pay a total of 8.2586 million euros in back taxes and interest ( equivalent to approximately RMB 64.7037 million ) ;

 

SKL , a subsidiary of Xinghui Holdings, received a tax payment notice from the Italian tax department. The tax years involved are 2017-2021. The Italian tax department believes that the company has not paid VAT in full from 2017 to 2021, and therefore needs to pay taxes and fines totaling more than 6.4244 million euros ( equivalent to approximately RMB 50.3332 million ) .

 

Sellers have reported that EU tax audits are becoming more frequent and stricter, especially in countries with strict tax requirements such as the UK and Germany . In addition , Amazon has also begun to conduct strict inspections of local European accounts . Failure to make up the difference in time will most likely lead to store closure.

 

" When I run the European site, I get into new anxieties every day. In comparison, the decline in orders is nothing. What I fear most is the sudden "old bills. " "

 

Judging from the traditional year-end peak season data, many European sellers also said that they have not sung the song of harvest for a long time. In previous peak seasons, all categories would see a surge in traffic and order volume, but now it has become more moderate. The US site has a small area of ​​​​order explosion, while the European site is generally bleak.


8 years of European competition, now difficult to break through

 

It is always said that "happiness comes from comparison". Perhaps compared with the above sellers, Aiden, who has been running the European site for 8 years, is relatively "lucky".

 

"Every year is worse than the last," Aiden sighed.

 

In 2014, Aiden, who graduated with a degree in international trade, chose a cross-border e-commerce company that matched his major. He worked on the Wish platform and then switched to the Amazon platform. From being responsible only for the US site to also taking care of the European site, Aiden has accumulated two years of experience in cross-border e-commerce.

 

"If you want to work on your own in cross-border e-commerce, it is best to find an operations job for a year or two and learn some basic operations of this industry in other cross-border e-commerce companies. This way, you won't be confused when you start your own business and can avoid some basic pitfalls," said Aiden.

 

After two years of working experience, Aiden finally started his "dream of becoming a boss". In 2016, Aiden left Shenzhen and started cross-border business in Dongguan.

 

"I chose Dongguan because firstly, the cost here is not as high as in Shenzhen, and secondly, there are many factories here, so it is very convenient to purchase."

 

Shenzhen, Dongguan and Guangzhou have always been the permanent bases for foreign trade and cross-border people. Shenzhen is a well-known cross-border e-commerce capital, and Dongguan has many factories and a wide variety of products, so it is not surprising that Aiden chose Dongguan to realize his cross-border entrepreneurial dream.

 

On the other hand, the hottest market for cross-border e-commerce has always been North America. Even in 2016, when global cross-border e-commerce was booming, Europe was not as good as the United States. Therefore, the vast majority of sellers will choose the US market.

 

But Aiden resolutely chose to focus on the European site. He said that after working in a cross-border e-commerce company for two years, he knew how fierce the competition in the US market was. Although it was still easy to "make money" at that time, he wanted to choose the relatively "small and beautiful" European market . "There are so many countries on the European site. I believe that it will be comparable to the US market in time."

 

In the first year, Aiden’s Amazon Europe store did not make much profit. After working hard for more than six months, he still lost 20,000 yuan by the end of the year. However, he was not discouraged. He believed that it was normal to make losses in the early stages of starting a business. The most important thing was that the number of orders in the store was growing normally and the operation was in a smooth stage.

 

Compared with other cross-border entrepreneurs, Aiden has never taken any chances. He is cautious enough to deal with patent issues before products are put on the shelves, tax issues of the store, and various compliance requirements of the European site to ensure compliance in every link.

 

This stems from his experience in operations, when his company's European store lost 200,000 yuan due to patent issues, and several European stores were closed by Amazon due to non-compliance issues.

 

In the second half of the second year ( 2017), Aiden's store officially started to make a profit. "I made 110,000 that year!"

 

" As long as the European site gets on the right track and the store profit model is healthy, the profit will be much higher than that of the American site ," many European site sellers told Ennet.

 

Aiden also felt this deeply. "This is why I chose the European site. Although the threshold is higher than that of the US site, and various compliance issues seem to be a headache, the competition is relatively less intense. The most important thing is that the profit is considerable. It is not an exaggeration to say that the profit of the same product in the European market is more than three times that of the US market . "

 

As of 2019, Aiden has achieved cumulative sales of 22 million in the European market.

 

He thought things would gradually get better, but an epidemic broke out in 2020 and the ship of fate deviated.

 

Taking a three-year cycle, Aiden's store sales "only" increased by 75% from 2020 to 2022, with cumulative sales of less than 40 million.

 

"My goal was to double the sales, but we only had 6 million in sales in 2020. 2021 was the best year for sales. Our energy and heating products experienced a small boom, with sales exceeding 20 million that year."

 

This also means that in 2022, his store's sales fell again compared with the previous year. Aiden admitted: After the performance began to decline in 2022, it has not recovered until now. It is a blessing as long as the sales volume can be maintained not much different from the previous month.

 

It is worth noting that Aiden said that although sales increased in the second three-year period, the profit margin actually dropped by 10 percentage points. Now in the third three-year period, the profit margin has dropped by 5 percentage points compared with the previous three-year period.

 

Sales expectations were not met and profit margins fell. He joked, "There were so many people who were ambitious at the beginning, and now there are so many people like me who are trying to save costs and save lives."

 

Aiden did not achieve the established sales target in 2023. In terms of both profit and revenue, the trend was quite different from that of previous years. He attributed it to four aspects:

 

1. Inflation has not eased, and consumers are under great pressure to spend;

2. The European market has cost pressures such as VAT, EPR, UKCA, and tariffs ;

3. International shipping costs and Amazon platform delivery fees have repeatedly increased ;

4. Compliance requirements in the European market are becoming increasingly stringent.

 

Based on the above, he said that many sellers on European sites are not having an easy time now as before.

 

Will you abandon the European site and switch to the US market like other sellers? Or will you consider both?

 

"I haven't had this idea for the time being. First of all, the US market is very internally intensive. Secondly, I think it is quite saturated. The profit margin is not as high as that of the European site. In addition, I don't think I have enough energy, so I still have to focus on the European site for now."

 

Indeed, in recent years, the price war in the US market has been in full swing, with sellers repeatedly lowering prices and even selling goods at "0 profit" in order to clear inventory and reduce costs.

 

However, as for whether he has confidence in the European market, Aiden also said that everything is unknown in the future, "It is difficult to have an accurate direction of the market now."

 

The European market can only accommodate big sales?

 

In fact, many people have said that Europe is now "eliminating" small and medium-sized sellers, and only big sellers can gain a foothold. It is difficult to comment on this statement, but judging from the financial reports of big sellers, they are indeed doing well in the European market.

 

Like many small and medium-sized sellers, most of the listed big sellers focus on the US market, and some even only serve the US market. Among them, Zhiou, which was just listed last year, seems like an "outlier" because its main market is Europe.

 

Judging from Zhiou’s prospectus and latest financial annual report, the European market contributed more than half of its total revenue.

 

From 2020 to 2023, Zhiou's revenue from Europe reached 2.391 billion yuan, 3.575 billion yuan, 3.065 billion yuan and 3.729 billion yuan respectively, accounting for 60.26%, 60%, 56.99% and 62.31% of its total revenue.

 

 

In addition to opening stores on Amazon and eBay in the United States and Europe, Zhiou has also entered ManoMano, Europe's first e-commerce platform focusing on the home DIY and gardening markets. The platform's business covers many European countries including France, Italy, the United Kingdom, Germany, Belgium and Spain.

 

From 2020 to 2022, Zhiou's revenue on the ManoMano platform reached 122 million yuan, 173 million yuan and 144 million yuan respectively, accounting for 3.71%, 3.58% and 3.33% of online B2C sales revenue.

 

Zhiou has also settled in Cdiscount, the largest full-category e-commerce platform in France, which was founded in 1999. From 2020 to 2022, its sales revenue on the Cdiscount platform was 93 million yuan, 100 million yuan, and 80 million yuan, respectively, accounting for 2.82%, 2.28% and 1.84% of online B2C sales revenue, respectively.

 

In Germany, Zhiou has entered OTTO, the largest fashion and lifestyle platform in the country. In 2022 and 2023, the channel brought in revenue of 138 million yuan and 250 million yuan respectively, and the proportion increased from 2.57% to 4.18%. In its 2023 annual report, Zhiou stated that its business on the OTTO platform has developed rapidly, contributing to a year-on-year increase of 80.99% in main business revenue, and the proportion increased by 1.61 percentage points.

 

The strong growth of European business directly or indirectly drove the year-on-year growth of Zhiou's net profit by more than 65% in 2023.

 

In order to continue to deepen its presence in the European market and improve delivery efficiency, Zhiou has also built an overseas warehousing layout of "self-operated warehouses + platform warehouses + tripartite cooperation warehouses", and built self-operated warehouses in Germany, the United Kingdom and other places. As of the end of 2023, Zhiou's self-operated warehouses in Germany, the United States, China, and the United Kingdom will have a total area of ​​more than 280,000 square meters.

 

In terms of third-party warehouses in Europe, Zhiou continues to optimize and set up new forward warehouses in markets such as France, dispersing the distribution pressure of the German central warehouse directly shipping to the whole of Europe, and gradually increasing the proportion of shipments from forward warehouses in France, Spain and other countries, so that most of its spontaneous delivery time in Europe can be achieved within 3-4 days.

 

It can be seen that it has made huge investments in the European market, which also verifies its continued "buying of stocks" in the European market.

 

Not only Zhiou, but also super sellers such as Suntech and Anker are optimistic about the European market.

 

As Suntech's second largest market, the revenue in Europe will be 954 million yuan, 959 million yuan, 556 million yuan and 499 million yuan in 2020-2023, respectively, accounting for 18.17%, 17.24%, 11.34% and 7.64% of the total revenue.

 

Although the proportion has declined, when accepting institutional research , Savi Times also stated that it had proactively reduced its European business due to fluctuations in the European political and economic environment, so its revenue growth was not obvious . It will gradually increase investment in 2024. In the first quarter of this year , the European market has reversed the downward trend and returned to positive growth .

 

From 2020 to 2023, the European market brought Anker revenue of 1.823 billion yuan, 2.542 billion yuan, 2.829 billion yuan, and 3.68 billion yuan, respectively, accounting for 19.49%, 21.02%, 19.85%, and 21.02% of the total revenue, with a slight increase in the proportion. But last year, Anker's revenue in the European market increased by 30.07% year-on-year.

 

Compared with small and medium-sized sellers, big sellers may be more able to withstand the various stringent conditions of the European market and have relatively stronger risk resistance, but they also suffer from the high costs of the European market.

 

Taking Zhiou as an example, in 2021, the average actual settlement price of Zhiou's ocean freight on the European route increased by 250.82% compared with 2020, resulting in a significant increase in its main business costs. From 2020 to 2022, the proportion of ocean freight in the main business costs was 6.83%, 15.59% and 16.58% respectively.

 

Since the first quarter of this year, shipping costs on European routes have been rising again. Under the condition of relatively weak consumption, both small and medium-sized sellers and large sellers are generally facing the pressure of falling prices, high costs, and reduced actual consumption willingness and ability in the European market.

 

Will the European market improve? Will small and medium-sized sellers be unable to break through the bottleneck of order volume for a long time to come? Will the "off-season" mode become the norm? Whether it is the Black Friday online promotion or the holiday peak season such as Christmas, are they all "twilight seasons"?

 

With the reality of slowing growth, can cross-border sellers see a rebound in the European market or even the global market? Can they find opportunities amid the crisis?

Seller

European Station

<<:  Sales increased 8 times within one year of its launch, and it has now become the number one company on Amazon.

>>:  Another BUG! A large number of Amazon seller accounts cannot log in

Recommend

What is Pleo? Pleo Review, Features

Pleo is a developer of expense management tools f...

What is Gtech? Gtech Review, Features

Gtech Jiaying Technology is a technology service p...

What is Pull&amp;Bear? Pull&amp;Bear Review, Features

Pull&Bear was founded in 1991. From the begin...

eBay: Notes on changes to EU VAT regulations in 2021

On March 10, eBay China’s official website releas...

What is All4sales? All4sales Review, Features

<span data-docs-delta="[[20,{"gallery"...

Prying up the orders of multiple sellers! Another single product is popular

With the development of artificial intelligence, ...

The epidemic has stimulated hot sales of office furniture in Southeast Asia!

Since the outbreak of the pandemic, people’s work...

Online food orders in Russia increased 177% year-on-year

According to Wildberries , food sales on online p...

Big sales lead the way! The cross-border industry begins a new round of layoffs

This year, the cross-border e-commerce industry i...

What is Hykolity? Hykolity Review, Features

Hykolity is a platform dedicated to selling LED la...