After Amazon banned its name for 250 days, the Shenzhen cross-border seller fled for life and death

【Ebang Power News】How to evaluate Shenzhen's status in cross-border e-commerce? Seventy percent of Amazon's three-way sellers are from China, and another seven percent are from Guangdong, while Shenzhen accounts for about 50 percent of them.

Cross-border e-commerce mostly tests courage and is popular with gambling. Under the pressure of high inventory, many sellers do not hesitate to gamble with capital in order to obtain cash transfusions. Driven by profit and capital, some people are lucky enough to become "reckless heroes", especially in Shenzhen.

Shenzhen sellers "Bantian Five Tigers" (Lansi, Zehui, Baoshijia, Male Wolf and Egg Picker) and "South China City Four Less" (Tongtuo, Aoji, Saiwei, Youkeshu), many of which have large sellers, with annual sales of billions of results, become the leader of "gambling culture".

A year ago, this sense of blood veining was amplified to the extreme. At that time, Shenzhen rumored that "reselling fascia guns to earn two sets of Shenzhen Bay mansions a year" drove more people to invest in cross-border e-commerce. All indications seem to be that the industry is ushering in a very unusual outbreak.

But under the gloss, there are also unknown vulnerabilities. They often lack the right to self-pricing because of the homogeneity of their products, so that their profits are cannibalized by the rising costs; they expect to become the next Anchor, but because the profits of the VAM agreement are required, the R&D investment is often less than half of the latter; a seller with annual sales of 1 billion yuan remains at about 200 million yuan in inventory.

This has created a unique vision of cross-border e-commerce - big sellers are like superb players who step on a tightrope, and need to be careful to grasp the balance of funds, sales and pushing new ones.

On April 30, 2020, Amazon banned the name, and the balance was completely broken. Players who are trapped in the "stock game" end up failing. For more than 200 days, layoffs, factory lawsuits, and asset sales have been staged continuously, and many aftermaths have subsequently begun to spread.

Change is not necessarily a bad thing, and the grass and rivers also need a complete change. The new order may be established in chaos, and the opportunity to achieve class leapfrogging may be contained in it.

01

Stock Games:

1 billion GMV, 200 million inventory in advance

GMV is like dopamine, stimulating the central nervous system and making people excited. If you extrapolate from this, Shenzhen cross-border sellers should be the most exciting group of people. Even billions of sales, in front of tens of billions of giants such as Aoji and Anker, are not to be proud of, which shape the stereotype of the industry with nearly 10 billion sales and ultra-high gross profits.

But prosperity comes at a cost.

In the past, the cost of air freight from Shenzhen to North America was 50 yuan / kg, and the sea freight was only 8 yuan / kg, even if it rose to 18 yuan this year, shipping is still the choice of most sellers. Considering the sea time, they need to stock up a month or two in advance.

Yantian Port, founded in 1988, connects Shenzhen by railway in the west and Extends Huizhou in the east; nearly 40,000 containers circulate here every day, accounting for about half of Shenzhen's four ports (Yantian, Shekou, Chiwan and Da Chan Bay). Most of the goods of cross-border sellers in the South are shipped through this place.

In the case of the U.S.-West Route, ships cross the Osumi Strait out of the East China Sea, drift around the North Pacific for more than a month and then arrive at the ports of Los Angeles or Long Beach, where they are transferred to Amazon warehouses everywhere. The advantage of stocking in advance is that users can receive the goods after placing an order for two or three days.

Fifteen years ago, Amazon liberalized the FBA (Amazon's own fulfillment system), allowing third-party sellers' inventory to be included in the FBA network, where Amazon provides pick-up, packaging, and terminal fulfillment for merchants.

This looks like a win-win-win situation: North American users' time to receive goods has been shortened from nearly a month to 3 days; ten years later, third-party seller sales have surpassed Amazon's own sales for the first time, from less than 30% in 2007 to 56% in 2017; Amazon's GMV in the past decade has risen from $80 billion to $400 billion.

Over the years, Amazon has become the master of the game with the FBA system, firmly holding the merchants, but the hidden dangers have also been buried.

Starting from September 2021, Renqing Excellence will send data cables and mobile phone cases from Dongguan to Shenzhen Port. In his early years, Renqing Excellent sold mobile phone cases in JD.com and Taobao, and later expanded his business to more than 70 countries overseas. "Now 'Black Friday', our 20 million goods are still lying in the overseas warehouse." A person in charge of Renqing Excellence said.

Black Friday, or "Black Friday" for short, is the Christmas promotion season in the United States and has become the most important holiday for cross-border e-commerce in recent years. It starts every year on Thanksgiving (the fourth Thursday of November) and runs through the following Mondays (known as "Cyber Monday" in the industry), Christmas And even new Year's Day of the following year, spanning nearly two months.

Just like Double 11, "Black Friday" is a key moment to determine the quality of a year's harvest for cross-border sellers, and they often give a discount of not less than 25% for this purpose. In order to ensure the timeliness of delivery, the arriving seller will double the usual sales. "There are also people who ship separately, but until October, the containers are tight and can't be lined up."

The superposition of nearly two months of sea freight time means that before the November promotion, merchants have to bear the inventory pressure of nearly half a year.

What does this mean? "The equivalent of 1 billion sellers per year will have 200 million funds pressed in the warehouse all year round." A beauty seller in Guangzhou told me that 15% of the platform deduction point, 40% of the cost of goods and the return rate were removed.

As everyone in the industry knows, e-commerce relies on cash turnover to make a profit, but now there are 200 million funds that cannot be rotated in the second half of the year. Therefore, he showed concern about high inventory, "The market is good to pay back the fast capital chain can bear, otherwise it is a matter of life and death." ”

An Amazon service provider verified his claims. "Cross-border e-commerce looks like GMV is growing, but it's essentially a book number." He described GMV as a "dead number", "You seem to have made money, but it is all in the goods, and it must be sold to make money." ”

Therefore, when cross-border e-commerce companies release financial reports, savvy merchants often pay priority attention to a data - (annual) inventory turnover rate - an indicator used to measure the speed of inventory turnover, the larger the inventory turnover, the higher the efficiency.

Even if Anker, the absolute star of this industry, the annual inventory turnover rate has dropped from 5.50 times in 2016 to 3.51 times in 2019, but it is still higher than the industry's 3.05 times (ZAGG, Cross-border Pass, Tongtuo, Zebao, Aoji 2019 inventory turnover average). Apparel, like digital, enjoys the same reputation as "low inventory turnover"; the cross-border apparel brand that is preparing to be listed is "sub-silent", with an annual turnover rate of only 2.06 times.

Most people understand this and try to find a survival philosophy between sales and financial pressures.

Experience tells sellers to avoid new products on the "Black Friday". Because new products are often not easy to sell, it takes three or two months to cultivate the market, and the old ones are cleared quickly. In the past, this strategy has proven to be effective.

But on the last day of April 2021, the strategy briefly failed. Since the afternoon of the same day, the Amazon interface of 622 Chinese brands has not been displayed properly in the following months, and anyone trying to search will only appear a dog and a sentence in English "sorry, we couldn't find that page" in English.

Unexpected chaos spread in Shenzhen. Sellers must pay a hefty storage fee when goods begin to pile up in overseas warehouses around the world: Amazon charges a storage fee of $11.25 per cubic foot for shipments over 6 months old, doubling the cost for more than one year.

But that's not all that matters. At the other end, the factory's three-month accounting period (a few factories will give it to half a year) is imminent, and the payday for hundreds of people is approaching.

Cross-border sellers are under tremendous financial pressure and must find a way to clear their inventory as soon as possible.

Today, if a North American user claims that the high-end router mesh, which originally cost $140, dropped to $60, he is not necessarily sensational. Low-price dumping is regarded as the fastest way to withdraw funds, but it has also triggered a wave of price cuts in the industry, and small and medium-sized sellers have not been spared.

"After the suspension, some (sellers) were chased and blocked by suppliers, and the goods could be thrown away, or even one or two folds." Wang Xin, president of the Shenzhen Cross-border E-commerce Association, said.

According to the data of Tianyancha, the "Four Youngsters of South China City" have encountered a total of ten lawsuits, most of the supplicants are factories, and the "Four Lessers" are obviously unable to pay the final payment.

Sellers have both big sellers and factories.

"The seller directly defaulted, did not come to the factory to receive the goods, these shells printed with logos must not be used, need to be removed." But some accessories, the factory will be dismantled and digested. Zhu Nan is the head of cross-border e-commerce in a factory, and his own business has also suffered from the impact. He said: "A friend of mine who sells goods on Amazon to other platforms and sells them at half the price. Affected by this, Zhu Nan's sales fell by 20% that month.

An Amazon service provider once tried to ask a large seller for tens of thousands of dollars in the balance, according to his description of the other party from the warehouse to move a few boxes of Bluetooth headsets, and then said: "That's all left."

A year ago, the company was still celebrating sales of more than 10 billion yuan, and held a low-key "Bantian Five Tigers Annual Meeting" with other sellers. It is rumored that the topics discussed at the meeting involved "physical health maintenance" and "the difference between white wine and red wine", such as a bottle of red wine every night and sleeping until the next day, which can make the skin delicate and shiny; cross-border sellers need to rest well to have a better future.

In mid-November 2021, Ebang Power tried to contact Aoji, Youkeshu, Tongtuo and Saiwei, but was eventually rejected. "This was also the case with CCTV before it came," said a person close to the decision-making level of Aoji, "We are recently ready to continue to raise funds, and we want to keep a low profile." ”

The past two years have been regarded as an excellent time for cross-border e-commerce to go public. In August 2020, Anker went public. Anker's price-to-earnings ratio rose from 46 times in September 2020 to 86 times at the end of 2020. In addition, Aoji has also been rumored to be listed in 2021.

In October 2021, at the cross-border e-commerce expo held at the Futian International Exhibition Center in Shenzhen, a group of overseas warehouse distributors held leaflets in front of the booth in an attempt to attract customers. In front of the booth of four or five flats, there are often five or six people who stop to inquire.

After the suspension incident, this business, which was seen as sharing the pressure of inventory, attracted the attention of many sellers. But the five or six people were limited to stopping. Overseas warehouse distribution provides logistics and selection, but the scale is always limited.

"If you take the selection on the shelves, in fact, in 1688 to purchase domestic shipments can be, after all, are light and small pieces." Light and small pieces also have to be accounted for by distributors from overseas warehouses, and sellers do not make money. If it is a heavy and large piece, it must be needed for overseas warehouses, otherwise the domestic logistics cost is too high. Jia Yafei, the founder of Isseno, said that he had obtained Facebook's sixth service license in China, and in his view, doing heavy and large pieces must have product research and development or directly factory.

"Because there is no need to buy from distributors, it can't be purchased." He said.

02

Factory beats sellers?

A small home appliance dealer who stepped into cross-border e-commerce in 2016 had a net profit of 18%. Later, the factory did cross-border e-commerce to compete with it, and after three years, the dealer's net profit was only a fraction.

The head of the agency has a resounding title in the industry - "Water Brother". Shui Ge was therefore convinced that traditional sellers would be replaced by factories with lower costs, so they eventually transformed into service providers. After the suspension incident, the speed of factories to do Amazon stores has accelerated significantly, and this year, there are more than 100 factories cooperated by Shui Ge, almost 6 times that of the same period last year.

Ten years ago, Shenzhen business opportunities surged like a tide, cross-border is still in the wilderness, the test is the courage and courage of entrepreneurship, relying on sensitivity to information, foreign traders often become the first batch of "crab eaters".

In contrast, in the early days, due to the lack of talent and experience in Amazon operations, and at the same time, due to the payment method, the factory only focused on OEM. The few factories involved in foreign trade mostly follow the "exhibition economy", and face-to-face transactions are still the mainstream way to build trust. Even in 2015, Shenzhen's cross-border e-commerce factory is not enough.

Zhu Nan to overseas customers OEM computer peripherals and routers, with a certain research and development capabilities, but foundry profits are limited after all, 8% net profit is the industry ceiling, international brands will squeeze to 5%. The slightly ambitious factory is not willing to "make a wedding dress for others", so it began to look for more opportunities.

In 2014, when Zhu Nan noticed Amazon, Chinese sellers' sales on Amazon began to double.

In the same year, when the opportunity came, by supplying Youshu and Tongtuo, Amazon threw an olive branch to Zhu Nan, "looking for us to supply him (Amazon)." Today, Zhu Nan holds 2 brands with annual sales of 400 million yuan, accounting for about 40% of the company's total sales.

Since then, cross-border business has gradually shifted from the B-end to the C-end. As the myth of sudden wealth was born, the doubts of the factory were gradually dispelled, and they began to pile up platforms.

But another kind of anxiety spreads. Sensitive people began to worry that the industry is experiencing a huge wave of price cuts, the original price system will collapse, and the living space of traditional sellers will be squeezed.

Prices are indeed very easy to touch the sensitive nerves of cross-border sellers, such as the original seller's profits, which began to be used by factories for promotion. In 2019, a popular small household appliance of Shui Ge can still sell for 110 US dollars, and when the factory did cross-border e-commerce, the price of small household appliances was hit to 89 US dollars, and the factory still maintained considerable profits.

With familiarity with platform policies and vulnerabilities, operational capabilities have been regarded as an important bargaining chip for sellers. Right now, this foundation is also shaking.

In the past, young cross-border e-commerce talents have longed for fashionable and bustling office buildings, accustomed to sitting in an ergonomic chair at noon and tasting the ice-American style that was freshly made in the coffee shop across the street two minutes ago.

But in recent years, the situation has begun to change. Zhang Bingang, sales director of Xinguo Technology, moved the operation center to a newly completed industrial park. Two years ago, Mingchuang Premium found this factory and asked them to oem a mini game console, because the OEM price was too low, and this business was finally rejected by Zhang Bin.

Nowadays, there are several snack bars scattered around the industrial park, and compared to The Bao'an Xixiang in Shenzhen, where the factory is located, the traffic here is convenient enough, and it is only 4 minutes away from the nearest subway station. In a building that has just been completed, there are still extra scraps in the corners of the hall on the first floor, many floors are still vacant, and the gray steel and cement floors are all gray, and the smell of cement can occasionally be smelled in the air.

But as long as they can make money and learn skills, employees care where to go to work? At least no later than 2017, the Q&A community has already seen a question-and-answer post about "whether to go to a traditional trader or a factory-based company to do Amazon operations" appeared.

In previous years, the products of Xinguo Technology were mainly sold to offline dealers, and later after seeing the products appear on the platform, Zhang Bin quickly germinated the idea of doing cross-border e-commerce. He said, "Why don't you do this business yourself?" ”。

Zhang Bin quickly recruited 3 Amazon operators, some of whom had just left the big seller. In September 2021, Zhang Bin opened 3 Amazon stores, and now the monthly promotion cost of the site is 20,000 to 30,000 yuan.

Products, prices and operations were once seen as the core of cross-border e-commerce, and even if they enter the market a little later, factories seem to be catching up with traditional traders with a higher profile. But will factories really beat traditional sales sellers?

In Shenzhen, another way to define the strength of a factory is whether there is a brand agent. Once a blockbuster is born, dealers who come to the door to seek cooperation are often endless. At this point, the scales of negotiation are almost one-sidedly inclined toward the factory. In order to get a good product, dealers are almost willing to accept most conditions, such as price limits.

Zhu Nan had obviously tasted such sweetness. "They (dealers) came to us and we asked for price control, for example, all platforms were marked with MSRP (retail guidance prices indicated by factories)."

Pricing is a science, in order to make a product have enough vitality, factories often need to design two or more prices: channel price and terminal price. Several factories investigated by Ebang Power have layouts online and offline, and will avoid sacrificing profits for the market.

This is also Zhang Bin's experience. Xinguo Technology originally had a team of more than 30 people, mainly based on foreign trade. In its price system, the shipping price of the game console is 50 yuan, the trader adds 20 yuan to sell to the platform seller, and Amazon's terminal price is 200 yuan. After the core fruit opened an Amazon store, this pricing was retained. And in order to control the platform price of 200 yuan, he once asked the channel provider, "No matter how the downstream release, the price of the platform cannot be lower."

But experience is often tinged with blood and tears. About five or six years ago, when the myth of wealth creation began to spread, many factories were driven by dopamine to try to "enter the market at the lowest price". Zhang Bin has seen many peers sell on the platform at ex-factory price, and finally abandoned by foreign traders, and hastily ended up after losing millions.

But it is an indisputable fact that profits are falling at a rate visible to the naked eye. "More and more people are coming in, especially when factories come in, and profits do fall." Many people have expressed the same feelings.

03

Who's next Anker

In 2019, Tian Ning found an Italian chef who made a delicacy out of an air fryer and filmed a video and uploaded it to YouTube. A year later, when the outbreak broke out, a company in Zhejiang sold 600 million yuan a year with only air fryers, and the video brought up to 2 million euros (about 14 million yuan) of revenue to Tianning's store every month.

This is the first half of the story. Later, the cost of logistics and raw materials rose, the factory took the price of goods rose by 10%, the original retail price of 130 US dollars no longer has a competitive advantage, the net profit does not exceed 10%, and Tian Ning, who is unwilling to "lose money and make money", finally gave up the product.

In the past two years, various costs have generally risen, of which logistics has increased the most. In the past, containers destined for the United States and Europe could be returned in just one month. Today, containers are backlogged in the ports of Los Angeles and Rotterdam in the Netherlands, and the FEUs (containers in international units of measurement with a length of 40 feet) on each US-Europe route have risen from $3,000 to $10,000 or even $20,000.

Polycarbonate (PC), a chemical raw material, is widely used in consumer electronics due to its good transparency and high temperature resistance. Early iBook laptop casings used polycarbonate. China consumes PCs, which mainly rely on imports from the United States, South Korea and Thailand, and the price of (high-end) polycarbonate fluctuates greatly, and now the price per ton is more than 21,700 yuan, almost double the price of two years ago.

Profits are being eroded at a visible rate, and cross-border sellers seem to have no choice but to do so. If someone asks, "Can the price of the product be increased?" This kind of "why not eat minced meat" advice is very easy to attract ridicule.

"Don't we want to go up? Can it rise? One seller said.

For years, Shenzhen sellers have mostly followed a very simple pricing strategy: competitive pricing. This pricing method, dubbed "going with the flow", means that the price of any product is already predetermined before it is launched – a reference to the peer price.

Two years ago, Sun Nan considered crowdfunding a clothes dryer (similar in function) in Japan. The difference is that it is smaller, and only five adult shirts can be dried at a time. Even if the category and dryer are not exactly the same, Sun Nan still refers to the market price of 600-800 US dollars for clothes dryers in Europe and the United States. "Although it is a niche category, it will not be too far from the mainstream price, and finally it also refers to the cost price."

Sun Nan eventually set the price at $600 and received nearly 10 million yuan of crowdfunding, which exceeded his expectations.

Previously, he had tried to design "noise-canceling headphones". This new category has been targeted by star technology companies such as Xiaomi, but in the end there has been no major breakthrough. It wasn't until September 2017, when placing an order for apple chip suppliers, that Sun Nan inadvertently glimpsed an ANC (active noise cancellation) chip in the catalog labeled MFI (Apple's license to use external accessories produced by its authorized accessories manufacturers), and he finally realized that Apple would also dabble in noise-canceling headphones, which greatly encouraged him.

"At that time, we were optimistic about the noise reduction function, and then we spent a lot of energy, including many large manufacturers, and we hoped that some companies could make it, and finally Apple came in."

But in Shenzhen, there are still too few factories willing to spend money and think hard to make products and innovations. "A lot of people probably get their goods from the same factory, just stick a sign." He let out a deep breath.

Two or three years ago, Sun Nan got tired of such games and finally chose to flee.

When eBay was popular, Shenzhen sellers were interested in Huaqiang North Auction product uploads and sold at a higher price. Smart people go to the factory to pick up products, affix the logo and mark the logo; the slightest strength of the three parties to design, but often difficult to innovate, so it is difficult to touch the higher price.

When the cost of shipping increases three- or fivefold in 2020, cross-border sellers' profits become stretched thin. The price increase tests the boldness, and the answer to whether the slightly powerful big seller can raise the price is inconsistent, but in order to ensure sales, they finally chose restraint.

Over the years, the new, promotion, stockpiling, many links to test the financial strength of cross-border sellers. Some people have calculated that before a single product is listed, the brand's content production and basic promotion costs have approached 10,000 yuan (content production includes video, copywriting, and picture production, and labor costs are close to 5,000 yuan).

To this end, cross-border sellers are popular with capital betting, promising to guarantee profits during the betting period, if success is happy, failure requires shareholders to pay out of their own pockets, and the founder will even lose control of the company. Tongtuo and Youshu have both failed to bet. Therefore, Shenzhen selling is unwilling to face the loss of sales caused by price increases and thus affect profits.

Small and medium-sized players who have no hope of a markup will try to fight.

A charger seller with an annual income of more than 10 million will increase the number of new models from 10 to 20 in 2020. Generally, the seller will divide the product into the new version, the traffic model and the final model, respectively, to ensure profits, sales and destocking. Smart sellers will be cautious about choosing the new frequency, because the new means huge marketing investment and inventory pressure; considering that the new model needs a market verification period of not less than 3 months, the investment is difficult to recover in the short term.

A year later, the project leader finally reduced the annual number to two. "We wanted to try, but the profits fell too sharply, and in the end it was too aggressive." When asked about the loss, he looked ashamed and eventually chose silence.

Most companies are reducing their product lines. A mobile phone case seller once launched 4 mobile phone cases for 4 models (12\12 mini\12 Pro\12 Pro Max) during the launch of the iPhone 12. This year,13 the iPhone 13 was launched, and they only chose to make the phone case of the hot-selling model 13\13 Pro\13 Pro Max, and only 13 mini of the phone case was retained in the low-cost drainage model. As a result, they predict that inventory turnover will increase by about 30%.

But there is one company with an exception. In 2011, Yang Meng, a Hunan native who had worked at Google for five years, resigned and returned to China to start a business. Earlier, he made a software that connected Western demand with China's strong supply chain, "and the monthly revenue quickly reached tens of thousands of dollars, and exceeded the revenue at Google."

Later, a company called Anker was first known in North America, and two or three years later the company's fame also spread back to China.

The company, which has a gross profit of more than 50%, believes in the product philosophy and tries to gain user recognition through product improvements, so as to differentiate itself from competitors and gain greater pricing autonomy. Anker once launched an Apple data cable, using aramid fiber core, which is said to increase the number of folding times of the data cable from 2000 to 5000. Previously, no company had considered increasing the hardness of its data lines. On TikTok, some users tried to pull the car with this line and succeeded, so it is also called "pulling the car line".

Anker adopts a "demand pricing" strategy, which is completely different from traditional big selling, and pricing authority is often higher. Later, the cable was priced at $10 in North America, twice as high as its peers. Today, the piece generates more than $100 million a year for Anchor.

Tasted the sweetness of Anker, launched a "24K gold data cable", priced at $100, and soon sold 35,000 overseas. "We thought the pricing was too high, but we ignored the existence of another user called 'Arabs.'" Zhang Xi, vice president and secretary of the board of directors of Anker, once said it half-jokingly in a semi-private occasion.

In Shenzhen, most people will show some disdain when talking about friends, except for Anker, and even a little envy in their words. But they all understand that investing 6% of revenue in product research and development is about boldness. So they avoided the mass category and tried to seek higher pricing power in niche categories such as clothes dryers and sports equipment.

Ten years ago, with the cost advantage, Shenzhen sellers only had to move Chinese manufacturing overseas. Today, when the cost dividend gradually disappears and the tide of gold rushing gradually disappears, there seem to be only two types of opportunities: advantageous categories and traffic depressions, the former can guarantee profits and sales, and the latter means lower traffic costs.

"Everyone is looking forward to it (TikTok), bringing new traffic dividends, and hoping that he will break the competitive landscape." After the outbreak of overseas markets last year, too many people flocked to Amazon, the cost of brushing a single doubled from 40 yuan to 80 yuan, and the wages of operators briefly rose from 6,000 yuan to more than 10,000 yuan.

On the first night of the Black Friday, a TikTok UK service provider set a record for sales of more than 100,000 pounds (about 850,000 yuan) for a single live broadcast. After the news came, it was rumored that "the entire cross-border e-commerce was crazy", which was regarded as an important proof that TikTok was running through the cargo mode.

Just six months ago, TikTok secretly tried the first live broadcast of the British station in Shanghai, and finally handed over 8 singles and dozens of dollars. "TikTok officially advertised that it sold hundreds of thousands of dollars[of the goods]." An industry insider told Ebang.

Almost everyone pins their hopes on TikTok. People are looking forward to this time coming early.