Orders dropped to 1/5, the peak season is over

As the Christmas holidays arrive in Europe and America, the number of orders from cross-border sellers has dropped. This year’s last holiday season will be a watershed for the number of orders, announcing the end of the peak season and the arrival of the off-season. Sales will enter a period of lows, and some sellers have already entered “holiday mode” in advance.

Looking back at 2023, some sellers are happy while others are sad. Some sellers have further increased their sales, but their profits are only the same as last year, while some sellers have slightly reduced their sales but increased their profit margins. For the planning of 2024, sellers tend to have conservative growth targets, while hoping to find new growth opportunities.

The overseas popularity of SHEIN, Temu, and TikTok platforms has exploded. Under the siege of multiple parties, Amazon can no longer rest on its laurels. Some analysts believe that SHEIN and Temu represent the third iteration of China's overseas business and have built a "China marketing" network; in the post-smartphone era where user attention is currency, TikTok has already stood on the high ground of social e-commerce. Next year, observing and judging whether to join these new platforms will be an important task for cross-border sellers.

The peak season of volume drop is over, sellers summarize 2023

Since last Friday, sellers have noticed that orders have begun to decline. Overseas users were busy with Christmas carnival over the weekend, and the order volume continued to decline. As of today, it has been halved. Sellers have consistent feedback, but the decline is different:

“This sales decline is horrible.”

"Our sales have become 5/5."

"I took a look at the ERP backend in the middle of the night and saw that sales had been cut in half again and again. I became anxious again."

"It dropped 20% on Friday and was cut in half on Saturday. If it drops further, I'll just go home for the New Year."

"The foreigners are all on holiday, so the orders are slow today."

"It has been cut in half. I wish everyone a happy new year in advance."

After Christmas, this year's holiday season sales have basically come to an end. Sellers know that the decline in orders is a normal sales cycle, but the sudden drop in sales has returned to normal, which is still a stimulus. It will probably be the end of the month before the long recovery period of orders will begin. Sellers who have been busy for a long time during the peak season can take the opportunity to rest. Some sellers said that their work in 2023 is basically finished and they are ready to take a holiday.

In fact, compared with last year, the decline in orders this year came earlier. For example, in the past few days, some sellers said that they were still experiencing a surge in orders at this time last year, but this year they are already in dire straits. "The peak season for Amazon is over. Last year, the category was booming until January 15, when traffic began to decline. This year, it entered the off-season 20 days earlier."

With sales already at this level, sellers temporarily slowed down first-line sales, reviewed the overall situation in 2023, and began to develop new products for the coming year and prepare inventory for the first quarter.

Although sellers have repeatedly lamented that the market is too competitive this year, with sales but no profits, some sellers have still completed a new round of wealth accumulation. This topic has been discussed a lot on Zhiwubuyan:

"The transformation in 2023 was quite successful. We haven't set an expectation, but at present, we have made 40 ( W ) profits. The biggest achievement in 2023 is the positioning of the products. In 2024, we will strive to maintain 50 and strive for 100."

" I have saved 100 , and my total expenses are 80,000. I hope that next year will be better . I have been working on my own for almost four years. This year, I earned 1.15 million from Amazon, and I made about 50,000 to 60,000 from funds and stocks. My expenses are about 70,000 to 80,000. I currently have a savings of about 3 million. Next year's goal is to earn more than 1.5 million. Come on! "

"Small seller, earning 140,000 yuan."

There are also sellers who are dragged down by inventory or low prices. "I feel sad when I mention this. At the beginning of the year, it was -450,000, and at the end of the year, it was -550,000." "This year's profits have plummeted, and the two products we launched have not been promoted." "I just hope to survive in 24 years. I have already lowered the expected income of the old products to see if I can launch two new products to make up for the profits." The sellers lamented that 2023 was gone in the blink of an eye. They wanted to calculate the situation this year in detail, but they dared not do it.

The company's overall performance is an important concern for sellers.

Seller @Amazon Wuye summarized that the company Amazon's performance in 2023 will be similar to that in 2022, close to two small goals, with sales volume falling by 10%, average order value rising by 15%, advertising accounting for 6% of the overall revenue, and peak season storage fees accounting for about 2% of the monthly sales, and the profit margin is slightly better than last year.

On other platforms, Temu's orders dropped from 600 orders per day to 300-400 orders per day. The reason is that the support period for new products is limited. After they are sold well, new suppliers will flock to them. The profit level is average, and it is mainly used as a clearance channel. This is also the consideration of many Amazon sellers. Shein third-party platform and Walmart currently have monthly sales of about US$10,000, with decent growth. They plan to continue to launch new products next year, mainly focusing on their existing products, and strive to achieve US$50,000 per month with a profit margin of 20%.

Seller @跨跨老张 reviewed the sales target set at the beginning of the year and was able to basically achieve it. However, due to the increase in marketing costs and the decrease in average order value, the profit was barely the same as last year. In this year's competitive environment, the performance is acceptable. Overall, in this year's peak season, October was a bit lagging, but the next two months were still in line with expectations.

Some people also failed to sell, and overstocking was a major reason. One seller lamented that although the inventory of the US site had been reduced a lot this year compared to last year, there was still too much in the end, and the result was that they could not sell all the products, which reduced profits and increased financial pressure . This situation was further amplified during the peak season.

Another seller had a similar situation. He had too much inventory this year, and spent a lot of money on advertising to consume most of the inventory. However, the profit during the peak season shrank significantly. If it weren't for the profit from the new products, the total profit would be very bad, which made him decide to reduce the emphasis on seasonal products: "I wait for the peak season once a year, but the results are not satisfactory because I didn't manage the inventory well. I can't rely too much on seasonal products next year. The risk is too high and the pressure is too great. I have been very nervous in recent weeks. It's too difficult."

2023 is coming to an end and plans for the new year are beginning to be put on the agenda.

Conservatively set 2024 targets and start a new round of stocking

Lao Zhang previously analyzed that 2023 and 2024 will be two difficult years for the industry. As long as we can hold on, the subsequent economic recovery process will also be a golden period for cross-border business to re-enter rapid growth. With the improvement of the Fed's interest rate hike, rising wages for European and American consumers and increased returns in the capital market, it is expected that consumption of non-essential goods will gradually increase. This is a positive signal.

For 2024, Lao Zhang said that there should still be a relatively conservative growth target, while at the same time looking at some new growth possibilities and making certain preparations for a full recovery in 2025.

From a competitive perspective, more and more sellers are making improving supply chain capabilities their top priority.

In the past two or three years, Lao Zhang's company has gradually established its own factory and disassembled and independently produced its main products. This has greatly improved the controllability of the production cycle and also allowed it to gain the initiative in pricing when communicating with external suppliers.

"The establishment of my own factory has also, to a certain extent, promoted the development of the product line. For sellers with relatively simple production processes, it is still worth a try." Lao Zhang said. In his opinion, in addition to mastering the operation methods, strengthening the ability to control the supply chain is also crucial for cross-border people.

As the first stop in 2024, sellers are already preparing goods for sales around the Spring Festival.

"This year's Chinese New Year falls on February 10th, and many factories were closed for holiday on January 25th, and did not resume work until after the Lantern Festival on February 25th. It takes another week or two to recruit people, place orders for production, and ship goods, and another month to pack and ship. Time flies." Taking this factor into consideration, some sellers have already prepared stock according to four months' demand.

Several factories have recently issued holiday notices, with some of the Spring Festival holidays lasting nearly a month. A Shenzhen supplier informed that if there are plans to pick up goods before the New Year, they must confirm production before December 25, 2023 (Monday). Orders after that will be delivered after the New Year. Customers are advised to make order plans in advance.

In addition to continuing to consolidate their operations on platforms such as Amazon, many sellers will face another question next year: should they join a new platform that is gaining momentum?

As many players compete, the multi-channel model will become the mainstream

With the rapid rise of new platforms such as SHEIN , TikTok , and Temu, competition between platforms and sellers will become more intense in 2024. The industry will become more and more competitive, and sellers who stick to a single platform will face an increasingly difficult environment and declining profit margins. However, by adapting to the multi-platform situation, they can seize new growth opportunities.

What is the current status of the major platforms? Do sellers need to make a layout? Marketplace Pulse’s summary of US e-commerce in 2023 can be used as a reference.

Amazon takes credit

Amazon accounts for 40% of U.S. e-commerce spending . According to internal Amazon forecasts obtained by The Wall Street Journal, Amazon will deliver 5.9 billion packages in the U.S. in 2023 , surpassing FedEx and UPS for the first time in terms of the number of packages it sends out. In 2018 , the number was only 1 billion.

Although the customer base is large, the rising costs have caused dissatisfaction among sellers.

According to statistics, Amazon pockets about 50% of sellers' revenue, compared to only 40% five years ago, as Amazon increased fulfillment fees and advertising costs also rose. According to data provided by FBA sellers, a typical Amazon seller pays a 15% commission, 20%-35% Amazon fulfillment fees (including storage fees and other fees), and up to 15% Amazon advertising and promotion fees. The total cost varies by category, product price, size, weight, and the seller's business model.

Over the years, Amazon has built three major advantages : rich categories, low prices, and fast delivery. It is generally difficult for competitors to beat Amazon in all aspects. The platform continues to invest energy in the flywheel, making it turn faster and faster. As a result, Amazon has gained more market share and has become the main driving force for the growth of US e-commerce for a long time.

In this process, Amazon seems to only focus on how to achieve lower prices and faster logistics, and does not pay attention to other aspects. For example, it does not constantly adjust itself to adapt to changes in the consumer environment, and the shopping style of the platform remains unchanged. Many new sellers will be surprised by Amazon's simple website display and background functions. In 2007, Western e-commerce was just a search bar, and until now, most shopping still starts and ends by entering keyword search queries. Frequent bugs also make sellers question the nature of Amazon as a technology company.

Some people once thought it was almost impossible to steal shoppers from Amazon, after all, many users are Prime members, and their default shopping option is Amazon. But this year, three new challengers, SHEIN , TikTok and Temu, have entered the market in different ways, and Amazon cannot easily suppress them. In the long run, can Amazon still sit on the throne with absolute advantage?

However, the emergence of new platforms will make Amazon friendlier to sellers and invest more in the shopping process, which is good for sellers, buyers and the market. Amazon's US site drastically reduced the commission for clothing sellers, which is a typical event.

On January 15, 2024, Amazon will reduce the sales commission for clothing products priced below $15 from 17% to 5%, and the commission for products priced between $15 and $20 from 17% to 10%. For Amazon's business, where various expenses have soared year by year, the platform's proactive concessions this time are of great significance.

The industry generally believes that Amazon's move is to respond to the rapid growth of platforms such as SHEIN. The platform reduces the share of low-priced clothing to give sellers more pricing space and compete with other platforms. This is the platform's response method when competitors other than Amazon's dominant position emerge.

But Amazon should not only focus on the clothing category. SHEIN has launched a third-party seller market to become a full-category platform. Many well-known sellers and brands on Amazon have begun to sell through SHEIN . Amazon should pay attention to more than just SHEIN.

The soaring SHEIN and Temu, the third iteration of China's overseas business

SHEIN and Temu are the most popular and influential shopping apps at the moment. By the end of this year, they ranked first in downloads in half of the world's 50 largest economies. Downloads do not represent revenue, but they represent trends.

The industry believes that these two represent the third iteration of China's overseas business - the first was "Made in China", with domestic suppliers manufacturing for overseas brands; the second was "Sales in China", with Chinese sellers selling through platforms such as Amazon; the third is the current "Marketing in China", with Chinese platforms responsible for logistics, promotion and other aspects. Chinese factories that used to produce products for retailers such as Walmart or brands such as Nike can now sell products directly to shoppers through platforms specially built for them. This year's popular full-hosting model is like this.

The emergence of these new platforms is eye-catching. Temu has only been online for a year and has not yet fully proved its strength. However, SHEIN has gone further and done a bigger job on this concept, and is a representative of "Chinese marketing". SHEIN is not just a platform that provides friendly-priced goods. It has a strong marketing force on social networks. For example, the number of fans on Instagram exceeds the total of Amazon, Walmart and other platforms.

Thanks to the seemingly unlimited financial support of its parent company Pinduoduo, Temu may be the fastest retailer in history to grow from scratch.

These new retailers are breaking out of Amazon's "sandbox". Currently, SHEIN, Temu and AliExpress have a combined monthly web traffic of more than 1 billion times, which is about half of Amazon's traffic in the United States and twice that of Walmart.

How fierce are SHEIN and Temu's overseas offensives? They have even raised the air freight prices from China to Europe and the United States.

Foreign media reported that the surge in demand for fast fashion and e-commerce products from SHEIN and Temu in Western countries has caused a sharp rise in air freight prices from Europe and the United States. Some overseas logistics companies wanted to negotiate prices with airlines, but were told that "Chinese e-commerce giants are using their capacity" and the latter were even willing to pay twice the cost to "guarantee delivery."

In November, the increase in e-commerce cargo from China to Europe and the United States led to a 5% year-on-year increase in global air cargo volume. Shein and Temu were the main reasons for the increase in cargo volume and freight rates. The monthly increase in spot freight rates from China to the United States was 11%, reaching US$4.46 per kilogram; the air freight price from China to Europe also rose by 9% from a month ago, rising to US$3.96 per kilogram.

"This year, the air freight market in south China in particular has been relatively strong in recent months, largely driven by strong e-commerce business," said Wilson, editor of air freight data provider TAC Index. On most routes, e-commerce may account for around 40% to 50% of freight volume, and in some cases even up to 70%.

Even in Japan, these Chinese platforms are very popular.

As prices in Japan rise, clothing and daily necessities from Chinese e-commerce platforms are more affordable and more popular among local consumers. Temu entered the Japanese market in July this year. In recent months, it has been the most downloaded shopping app in Japan's iOS and Google Play almost every day. It took only 121 days to break through 4 million downloads, showing its explosive strength.

TikTok takes the lead in social e-commerce

Consumers’ interactions with the internet have exploded recently in terms of functionality, reach, and time spent on it. The way many people shop has changed from logging onto Amazon on their desktop to placing an order to spending hours scrolling through social media and looking for products to buy.

Attention is the currency of the post-smartphone era , and social media networks such as Facebook, Instagram, and TikTok account for most of this attention. Usually, social media platforms are used as advertising channels and then linked to external e-commerce websites, but TikTok completely breaks this model.

In September this year , TikTok officially launched its in-app e-commerce platform TikTok Shop in the United States. The platform's best-selling products have sold more than 100,000 units per month. During this year's Black Friday online promotion, the high sales on the platform surprised the industry's sellers, who realized that TikTok Shop's sales capacity should not be underestimated.

Unlike other e-commerce platforms, the best-selling products on TikTok are not from well-known brands, and the stores with the largest sales are not hypermarkets. The best-selling products on TikTok are all viral (or pushed to viral) products, such as the Unbrush hair brush alone, which sold 700,000 units by the end of the year. This means that small and medium-sized sellers can also gain a place in TikTok Shop.

TikTok has been in Southeast Asia for a long time, and social e-commerce is highly developed here. TikTok Shop has also become a convenient channel for domestic sellers to enter Southeast Asia. One seller said that he has been working on TikTok Malaysia for more than a year and has achieved some success. Although the process was hard, the results are pleasing.

In the next few years, the Amazon platform will still be the focus of most cross-border sellers, but positive feedback from the industry after trying out new platforms continues to come in. Exploring these new channels has become a general trend, and sellers are likely to catch another express train here.