The heating category has a tough battle this year. Sellers: The low-price spiral is in place

"The weather in Europe in December last year was similar to that in Shenzhen," said Song Chuan, a seller in the heating category. As we all know, due to the impact of the Russian-Ukrainian conflict, heating products such as electric heaters, electric blankets, and hand warmers were sold out in Europe in the winter of 2022, allowing many cross-border e-commerce sellers to make a lot of money.

Based on this, in 2023, sellers continued to increase their inventory, and other people who smelled business opportunities continued to pour in. However, the market had changed at this time: Europe and the United States experienced the warmest winter in meteorological records in December 2023. As a result, a large amount of inventory was generated, and many sellers did not make any money.

According to weather forecasts, the next three years will be warm winters. However, according to industry insiders, these sellers have no intention of leaving the table, but continue to expand their inventory, hoping to squeeze their competitors out of the game through a low-price spiral. It is conceivable what kind of situation the sellers in this category will face this year.

Last year's warm winter hit, and product profits fell sharply

This year marks Song Chuan's ninth year in the cross-border e-commerce industry. One of the reasons that has kept him in this industry for so long is his keen market insight. Therefore, the abnormal sales of heating products in 2023 alerted him. So, at the beginning of the new year of 2024, he visited several suppliers one after another, but the feedback he received was much more serious than he expected.

Generally speaking, the sales cycle of heating products basically ends in February each year . However, these suppliers said that at this time of year, most of the sellers they cooperate with still have a large amount of unsold inventory, and the inventory level is almost more than 20%.

Other sellers who have sold out their products also achieved this through a low-price spiral. For example, the average price of a product on the front page was $60 in December 2022, but by December 2023, the average price on the front page was less than $50, a price drop of more than 16%.

Coupled with huge advertising expenses, the profits of most sellers have fallen off a cliff. According to Song Chuan's research on some links, the profits in 2023 fell by about two-thirds compared with 2022. And this is not all that sellers need to face. Heating products are seasonal products. If they are not sold out last winter, they will be kept until this winter. This brings two problems: one is that they need to pay a considerable long-term storage fee; the other is that in order to clear the inventory, more crazy low-price internal volume will start.

So what is the cause of all these results?

Since it is a heating product, weather is obviously a major factor. According to the National Climate Center's climate change monitoring data, 2023 was the warmest year in the world's meteorological records, breaking the warmest record, 0.14°C higher than the previous high temperature record year (2016), and the global average temperature from June to December has continuously broken the historical extreme values ​​of the same period. The average temperatures in northern and southwestern East Asia, western and southern Europe, and northwestern America have all broken historical high temperature records.

The second is economic weakness. According to a report released by the International Monetary Fund in October last year, global economic growth will slow down from 3.5% in 2022 to 3.0% in 2023 and 2.9% in 2024, far below the historical average (2000-2019) of 3.8%.

Affected by these two factors, consumers' willingness to consume heating products has greatly weakened, and the consumption surge caused by the Russia-Ukraine conflict no longer exists.

Sellers are not leaving the table this year, but are increasing their inventory to open the book?

Obviously, those who participated in this gamble last year lost badly, but they do not seem willing to leave the table. It is generally believed that the main reason for this result is that the operational plan was not well done, and more importantly, they did not join the low-price spiral team earlier, not because of the bad objective environment.

A supplier said that in the summary of 2023, his customers believed that it was because they did not actively participate in the price war that the ranking and sales volume did not rush up before the peak season in December, so that in December and thereafter, in order to clear the huge inventory, they sold crazy low prices. Therefore, this year they are preparing to continue to stock up a large amount of inventory, lower product costs, and sell at low prices before the peak season begins.

There are many sellers who share the same idea. According to Song Chuan's visit, suppliers of hand warmers and other products have already replaced their production workshops with larger ones based on the expected orders from customers. Due to the weak economy, many factories are reducing their production capacity, but these suppliers are doing the opposite. I think the demand from sellers has given them great confidence.

"2024 is destined to be a very tragic year," said Song Chuan after communicating with many upstream and downstream supply chains of winter thermal products and exchanging ideas with some fellow sellers.

The reason why he sighed like this is not only the crazy behavior of the sellers, but also because the objective situation this year is still not optimistic. Sellers who have been deeply involved in this category for a long time will find that 2022 and previous years with good market performance are La Niña years. The specific manifestation of the La Niña phenomenon is that the winter is abnormally cold. In the second half of 2022, due to the rare triple La Niña phenomenon, the world experienced a large-scale cooling. At that time, Europe and the United States experienced severe cold wave disasters. This is why electric blankets, hand warmers, electric heaters and other heating products can be sold out locally after the Russian-Ukrainian conflict caused a surge in natural gas prices.

However, the weather advantage will no longer exist from 2023. Under the influence of the El Nino phenomenon, global temperatures continue to rise. At the end of last year, the World Meteorological Organization announced that 2023 was the hottest year in human history. Not only that, the organization also released a report saying that the impact of this El Nino phenomenon on temperature may be most obvious in 2024. This means that this winter will be hotter than last year.

Moreover, according to forecasts from some authoritative meteorological agencies in Europe and the United States, the El Niño climate phenomenon is likely to continue from 2024 to 2026.

Sellers are gearing up for a low-price spiral, coupled with the pessimistic climate, and we can already imagine how fierce the competition in the winter heating category will be this year and in the next few years. Prices are never the lowest, only lower, not to mention that the price war is not only within Amazon now. For products that sell for $60 on Amazon, Temu can use its model advantages to directly lower the price to $20-30.

It is better to go with the flow than to sail against the current

As the weather is getting hotter, why not consider finding new business opportunities in "cooling products"?

During El Niño, temperatures tend to rise significantly in many areas. The phenomenon can lead to prolonged periods of extreme heat, so people must find effective ways to cool down.

According to the data from the General Administration of Customs, in 2023, China's total fan exports will reach 430 million units, an increase of more than 24% year-on-year. In addition, the extreme high temperature weather brought by El Niño has brought about a "cool economy" around the world. In addition to fans, sun protection clothing, air conditioners, air coolers, swimsuits and other products have all ushered in a peak in exports.

This year, people are still paying close attention to the El Nino phenomenon. A Google Trends search for "El Nino phenomenon" shows that its search popularity has been fluctuating and rising since mid-February, and among related queries, the search volume for "El Nino 2024" is soaring.

From past experience, we know that in hot weather, swimsuits, cooling appliances, and pet cooling products are very popular. Observing major cross-border e-commerce platforms, we can find that some products have started to sell well this year. For example, among the top 20 toys and games on the Amazon website, three are cooling products, and the most popular one is a water slide, which has reached the ninth place.

However, it should be noted that the competition in the "cooling" product market is also very fierce. If sellers want to get a piece of the pie, they need to work hard to discover new needs. For example, pets are becoming increasingly prominent in the family. For this group , sellers can develop some pet cooling products. As far as we know, the products already on sale in this category include cooling scarves, pet ice pads, pet air conditioners, etc. Sellers can discover new needs for these products.

At the same time, it is worth noting that in terms of electrical appliances, consumers in Europe and the United States prefer green and energy-saving products. In response to this demand, sellers can also innovate further.

Heating category