Ten thrilling moments of cross-border e-commerce in 2022: 1 billion funds were withheld, and the platform laid off employees around the world

Text | Qianwen Ren Editor | He Yang

Compared with the momentum of 40.1% year-on-year growth in 2020 and 24.5% year-on-year growth in 2021, the growth rate of mainland cross-border e-commerce exports in 2022 has further slowed down - preliminary estimates are an increase of 11.7% to 1.55 trillion yuan.

Some people say that for entrepreneurs, the cross-border e-commerce track no longer has the myth of becoming rich overnight. 2022, full of uncertainty, is a year for cross-border e-commerce to return to rationality and find endogenous growth momentum after running wildly.

This year, although it did not have the far-reaching changes of Amazon's large-scale ban in 2021, there were also events that frustrated the confidence of merchants by waving the "zero of funds" guillotine PayPal to sellers on independent websites, the US Trademark Office sanctioning tens of thousands of Chinese sellers' trademarks, the plummeting shipping price and "one ship is not full", the stock prices of DTC leaders plunged collectively, and the head platform laid off employees and strategic contraction. At the same time, the birth of Pinduoduo's overseas e-commerce platform Temu and the news of the IPO of successive cross-border e-commerce companies have made the industry see some new hope.

A grain of ash of the times, falling on everyone's shoulders is a mountain. While the global economic downturn has brought "powerlessness" or "oppression" to cross-border e-commerce people, I believe that those enterprises that adhere to long-term principles can still cross the cycle.

Looking back on 2022, Ebang Power sorted out the ten most important industry events in an attempt to commemorate the cross-border e-commerce people riding the wind and waves along the way.

From "one container is difficult to find" to "one ship is difficult to fill", sea freight rates have plummeted dramatically for a year

In the past year, the price of maritime transportation has ushered in a volatile decline, which can be described as falling from the beginning of the year to the end of the year. By the end of September, China's export container freight index was below the highest level in June 2021. Among them, the average container price of the US-West route fell by more than 80%, falling to $3,100 a container in September and falling to $1,500 in early November. According to data released by the Shanghai Aviation Exchange on December 23, the Shanghai Export Container Freight Index (SCFI) has fallen for 27 consecutive weeks, and the decline has widened from 1.3% in the previous week to 1.44%, and all other long-distance routes have continued to fall except for the rise in freight rates on the Mediterranean route. The World Container Freight Index (WCI) shows that up to now, the WCI index has stopped falling for 42 consecutive weeks and has begun to recover, but it is still down about 77% compared with the same period in 2021.

At present, the average loading capacity of export container shipping is only 70%. According to a number of container shipping companies, sea freight rates will continue to decline in the short term, and the entire shipping industry is also in recession due to the slowdown in the global economy and market demand.

The rise in sea freight rates to the fall reflects the trend of the cross-border e-commerce industry returning to rationality from the era of "abnormal prosperity". The imbalance between supply and demand in the market, the global recession, inflation, and explosive inventory growth are all important reasons for this trend. This is both good news and bad news for sellers. The good news is that the cost of overseas logistics is reduced and will not rebound; The bad news is that for enterprises with "dreams of going overseas", the foreign trade situation is still grim, inventory is still under pressure, and it is bound to be unable to bypass more uncertainty.

Shares fell 80%, global layoffs were 10%, and the myth of Shopify's growth rate was shattered

At the end of July 2022, on the eve of the second quarter earnings report, the CEO of Shopify issued an open letter, admitting that he had misjudged the trend of continuous growth of e-commerce and announced the first large-scale layoff of Shopify since its inception (laying off 10% of the total number of employees worldwide). He claims that this is a necessary means that he has to take. In order to "cleanse" overly specialized and repetitive roles, layoffs spread to all departments of the company. As soon as the news came out, Shopify's stock price fell 14% on the day.

The layoffs are Shopify's effective optimization and cost control of personnel redundancy caused by rapid growth in the past two years. At the same time, it can be seen that Shopify's growth decline and strategic contraction are actually the epitome of the cooling of the cross-border e-commerce independent website market after nearly two years of rushing.

In fact, since the revenue growth rate in the second half of 2021 fell back to less than 50%, Shopify has not returned to the high-speed growth era of 2020. Revenue growth in the first quarter of 2022 hit the lowest in seven years, and revenue growth continued to slow in the second quarter, with Shopify's share price plummeting nearly 80% from its peak so far, completely falling back to pre-pandemic levels.

There is no doubt that Shopify's explosive growth in the past two years has largely benefited from the promotion of online retail by the epidemic, but with the full recovery of the offline retail market, Shopify is facing the challenge of pulling new products and declining GMV growth of merchants. Shopify also said that "dashed growth bets" may affect its strategic direction in the coming years. Therefore, with the self-built fulfillment system SFN, increasing offline POS business, and stepping up traffic channels, Shopify is making heavy and widening through a number of measures, and striving to turn a new growth flywheel in the future.

Nearly 1 billion yuan of funds were "cleared", and independent station sellers rushed to PayPal Shanghai headquarters

There are many sellers who have frozen their accounts for 180 days and "cleared funds overnight", and it is not uncommon for the amount to involve hundreds of thousands or tens of millions. What made the seller even more frightened was that during the account freeze, the appeal was fruitless and the complaint was all lost. Some sellers said that Chinese sellers were roughly "stolen" by PayPal about 1 billion yuan. By July, a total of 49 PayPal accounts had been debited twice, with a total of 69.0252 million yuan.

The main reasons given by the PayPal are those for violating the law, or selling counterfeits, infringing (PayPal or third parties) trademarks, patents, intellectual property rights, etc. In this regard, the unanimous consensus in the industry is that PayPal this "ban" move is to crack down on "station group" sellers with empty packages and wrong goods.

In this turmoil, there are many sellers who believe that they have been wronged and wrongly injured, and many companies have even suffered heavy losses and stopped their businesses. To this end, on June 8, a seller's rights defense action was staged in front of the PayPal Shanghai headquarters.

Multinational sites were closed, high-level salaries were abandoned, and Shopee withdrew from Southeast Asia

Shopee, which has been making great progress in the global market in the past two years, ushered in a "sharp brake" in 2022.

In early January, Tencent announced that it would reduce its stake in Sea (Shopee's parent company) by more than 14.49 million Class A shares, reducing its stake in Sea from 21.3% to 18.7%, and Sea's market value immediately lost more than $140 billion a few days later, and then fell below the $100 billion mark. In early March, Shoppe suddenly announced the closure of its French station, just over four months after its opening; Soon after, Shopee withdrew from the Indian market, which had been in the Indian market for 6 months; In mid-June, Shopee closed its Spanish site, leaving only Poland in the European market that Shopee entered in 2021; In September, Shoppe announced its complete withdrawal from the Argentine market and closed its local operations in Chile, Colombia and Mexico, leaving only its cross-border business.

In addition to the retreat in Europe and Latin America, the news of Shopee layoffs and salary cuts from time to time has also caused heated discussions in the industry. In 2022, Shopee announced that it will optimize operational efficiency on a global scale, and has carried out three rounds of global layoffs, affecting teams in Thailand, Singapore, Mexico, Argentina, Chile, and Spain, and a total of about 7,000 jobs in 2022, accounting for about 10% of its total workforce. In addition, at the end of 2022, Li Xiaodong, founder of Shopee's parent company Donghai Group, once again announced that he would freeze the wages of most employees this year and reduce bonuses to cope with the deterioration of the global economic environment in 2023.

Increasing costs and losses have indeed made Shopee show fatigue. In the first quarter of 2022, the turnover of Shopee's e-commerce business decreased by 4.4% year-on-year, and the high cost of logistics and marketing expenses caused Shopee to suffer a loss of US$810 million; in the second quarter, the loss further increased to US$931.2 million; in the third quarter, although revenue and loss improved to some extent, the adjusted total Ebitda loss was more serious than the US$165.5 million in the same period in 2021, reaching US$357.7 million.

In the context of the global economic downturn, Shopee is changing its strategy of expanding the global market by burning money vigorously. It can also be seen from actions such as opening up local delivery models to cross-border stores, increasing commissions for some categories, collecting deposits, and reducing seller subsidies that Shopee is striving to improve profitability, optimize the platform ecology, and pay more attention to the development of high-value merchants.

Tens of thousands of trademarks of Chinese sellers "thunderstorm" one after another

In August 2022, the United States Patent and Trademark Office (USPTO) issued a Statement of Reasons Order to a trademark agency in Shenzhen, stating that the company violated laws and regulations by using the name of a deceased lawyer to file a trademark application, and provided evidence of suspected fraud, involving 2,200+ trademarks; In September 2022, the US Trademark Office announced that two well-known trademark agencies in Shenzhen were prominently listed, and more than 13,000 trademarks represented and submitted by them were also at risk of lapse; In mid-December, in the latest sanction list of the United States Patent and Trademark Office, a trademark company in Xiamen represented more than 6,000 trademarks among the sanctions.

At present, these three incidents are in the public announcement stage, and there is no final conclusion. However, the occurrence of these incidents also means that Chinese companies may encounter stricter scrutiny when registering US trademarks in the future, and the entire US trademark agency registration industry will also be greatly impacted. If the cross-border seller "wins", in addition to facing the risk of the trademark involved being deleted by the USPTO, once it is confirmed that there is a false situation, its Amazon store may also be implicated, ushering in unpredictable losses.

For cross-border sellers, due to Amazon's policy, completing a U.S. trademark registration application is a key to opening up the U.S. market and obtaining Amazon brand protection. As a result, in recent years, a large number of trademark applications from China have poured into the US Trademark Office, and "problematic trademarks" have been flooded in order to quickly apply for them, and vicious competition from IP agencies has flooded the market. With the gradual strictness of global market regulation and the intensification of competition, only players who truly understand the rules of the market game and comply with the law will not be swallowed up by the sudden wave of risk.

Pinduoduo's overseas e-commerce platform Temu was born

On the first day of September 2022, Pinduoduo's overseas e-commerce platform Temu was officially launched. Following the strategies of domestic Pinduoduo such as "breaking through the bottom price of the industry", "cutting a knife" social fission, and tens of billions of subsidies, Termu can be described as sweeping the US market and becoming the biggest dark horse in the cross-border e-commerce business community in 2022.

"Kill hemp overseas!" Since its launch in early September, Temu has become the most downloaded free shopping app on the Google Play Store in just half a month (September 17); On October 18, it topped the US iOS App Store shopping app download list, surpassing Amazon, SHEIN and Walmart, with a cumulative number of download users of nearly 800,000 and daily active transaction users of about 60,000; In November, it topped the list of US shopping app downloads, with 6 million installs; In less than four months since its launch, Temu has reached 10.8 million installs in the U.S. and is the most downloaded mobile app in the U.S. between November 1 and December 14.

Temu has become one of the most talked about platforms in the industry, and has also attracted many cross-border e-commerce big sellers, including Yibai Network and Hi Baobao. Behind the rapid rise, a large reason is the platform's vigorous burning of money to attract traffic and subsidies (according to China Merchants Securities, Temu's loss in the first year will reach about 5 billion yuan). Therefore, since its establishment, there have been endless controversies around Temu, and many people are speculating about how far Temu's low-price model can go.

It can be seen that Temu, which has now completed the initial traffic accumulation, has gradually begun to squeeze profits inward, in addition to reducing freight subsidies, policies on product selection, product quality requirements, punishment measures, and product scoring have also become stricter. In other words, Temu has begun to adjust its models to improve profitability and move in the direction of the platform model, and the industry is looking forward to Temu's "inevitable battle" with SHEIN.

Meta's advertising business declined, with the largest layoffs in history

Net profit has been cut, advertising business has been frustrated, and the top 20 companies in the world by market capitalization have fallen - Meta in 2022 has really passed a "cold winter".

This chill can also be seen from the financial report data. In the third quarter of 2022 alone, Meta's revenue fell by 4.47% year-on-year, and its net profit fell by 52% year-on-year, becoming the first time in a decade that Meta experienced a four-quarter consecutive quarter of net profit decline, which also caused Meta's stock price to plummet by 24.56% in a single day. Overall, Meta has seen consecutive quarters of revenue decline, and free cash flow fell to $1.73 billion from $12.562 billion in the fourth quarter of 2021.

The decline in advertising revenue, the continuous decline in profits, and the continuous expansion of metaverse losses have all made Meta "fatigued". Meta attributed the decline to Apple's policy adjustments, which caused Meta's personalized advertising business to suffer, with the average price per display ad falling 18% year-over-year and is expected to cost it $10 billion in ad revenue each year. At the end of October, Apple's policy of charging users and advertisers up to 30% on paid "promoted" posts on apps such as TikTok and Meta's Instagram was undoubtedly "worse" for Meta's advertising business.

In fact, since 2022, Meta's market value has evaporated by more than $500 billion. Due to the pressure on the business, a number of Meta executives, including COO and CFO, have left one after another. As a result, since September, after the growth of Facebook and Instagram slowed, Meta began layoffs and team restructuring plans, and in November announced that it would cut 11,000 people (13% of the company's total workforce), making it the largest layoff since the company's founding.

Today, the metaverse business has not yet risen, and the Reels short video business, which was bet on at the beginning of the year, has not really worked, while the traditional social media business has reached a growth ceiling. What's more, TikTok, which Meta sees as its biggest competitor, is still on the lookout. In the face of internal and external troubles, Meta is experiencing the darkest moment since its establishment, and at the same time, it is also a big test for cross-border sellers trapped in traffic.

Amazon lays off workers and shrinks its business to prepare for the winter

In 2022, the growth rate of the giant Amazon will also slow down significantly.

As early as the third quarter of 2022 earnings announcement, there was news that Amazon will lay off 10,000 employees, but from the latest official announcement, the number of layoffs is finally as high as 18,000, most of which involve Amazon Store and people, experience and technology (PXT) departments. It's also the largest number of layoffs ever announced by a tech company. Amazon CEO Andy Jassy said that "these changes will help Amazon pursue long-term opportunities with a stronger cost structure."

Over the past year, Amazon's performance has not been satisfactory. After posting its first quarterly loss in seven years in the first quarter of 2022 and the lowest revenue growth rate in nearly 20 years, the second quarter again posted a net loss of $2.028 billion. In the third quarter earnings report, Amazon's net profit fell 9% year-on-year. Among them, sales in the international market decreased by 4.9% year-on-year, and the operating loss showed a trend of 171% year-on-year loss; The North American market also turned from profit to loss, with a loss of US$412 million, down 147% year-on-year; In addition, cloud computing business grew at a slower-than-expected pace since 2014. Amazon's stock price also fell nearly 50%, losing more than $840 billion in market value for the year.

Amazon had to shrink. In addition to layoffs at the end of the year, Amazon closed 68 physical stores as early as the end of March; Repeatedly implemented measures to reduce storage capacity, successively shut down telemedicine services, delivery robots and other projects; From September to October, the retail business and the recruitment of the entire company were suspended; At the same time, the construction of several large warehouses and distribution centers was postponed, and dozens of warehouses were closed; In addition, due to India's unprofitability, it also shut down its food delivery, edtech business and e-commerce wholesale website business in the Indian market; At the end of October, the fabric website fabric.com which had been acquired for 14 years was closed again...

Amazon is clearly already making the best preparations to survive this "economic winter". Of course, the story of Amazon e-commerce will continue, and after a series of adjustments, some analysts predict that its profitability will increase significantly in 2023.

Market value cut, US DTC brand collective "collapse"

Over the past year, the magic of DTC's going to sea seems to be gradually failing.

The most intuitive manifestation is that some American DTC brands have ushered in a collective "crash". Warby Parker, a DTC glasses brand founded in 2010, reported a net loss of 32.2 million in the second quarter of 2022, and by October, its market value had shrunk by nearly two-fifths; mattress DTC brand Pueple's revenue fell 21% in the second quarter, with a net loss of $8.3 million, compared with a net profit of $2.6 million in the same period last year; Footwear brand Allbirds' sales in the second quarter increased by 15% year-on-year, but the net loss expanded by 287%, and the total loss in the first half of the year was $51 million, exceeding the total loss in 2021; In addition to a 20% year-on-year decline in revenue, the second-quarter revenue of Grove Collaborative, an environmentally friendly daily chemical brand, also fell 12% from the previous quarter...

In March 2022, according to the analysis of DTC listed companies with a market value of more than $800 million by Big Technology, most of them had problems such as shrinking revenue, declining profits, and losses. The decline in profits was accompanied by layoffs, with Allbirds announcing an 8% layoff ahead of the second-quarter earnings report, and Glossier and Warby Parker both laid off jobs.

As a latecomer who rushed to learn and imitate, the "fall" of the American DTC brand is not only a self-reflection and reshaping of the DTC model, but also a warning to Chinese overseas brands - increasing revenue without increasing profits is definitely not a desirable path, returning to the essence of consumer brands and finding the driving force for real sustainable growth is the last word.

A number of large sellers have IPOs, and China's capital market may usher in the sector of cross-border e-commerce brands

Although the ban on Amazon has dampened industry confidence, in 2022, the IPO of several established cross-border e-commerce companies is like a shot in the arm, giving the industry new expectations.

Saiwei Times successfully passed the meeting on June 17 and may become the first A-share cross-border e-commerce share. Previously, since its sprint IPO was accepted on December 18, 2020, it has gone through four rounds of inquiries and one review center opinion, and also suspended its listing twice in April and September 2021.

On July 20, Zhiou, which is positioned as a global Internet home furnishing brand, finally became the second cross-border e-commerce company to IPO in 2022 after three IPO terminations and five prospectus revisions.

On the day of Double 11, the cross-border e-commerce clothing brand that had applied for three listings was silent, and finally realized its dream on the Hong Kong Stock Exchange and became Amazon's first clothing seller.

The road to listing has twists and turns, in addition to the influence of the general environment, it is also inseparable from the hidden worries of their respective models. Previously, the problems questioned in the Saiwei era mainly stemmed from the hidden dangers of its multi-account and multi-store opening and Amazon dependence; Zhiou Technology has problems such as "relatively low proportion of R&D and doubts about the rationality of cooperation with outsourcing processing manufacturers"; There are also pressures such as high dependence on Amazon, a single market, and high inventory.

But in any case, the success or IPO of these three cross-border e-commerce companies is of great significance. It represents that under the great change and reshuffle of the industry, the old cross-border e-commerce forces that were criticized for spreading goods and starting without brands were finally recognized by the capital market after experiencing the pain of self-transformation. This will also encourage more cross-border e-commerce sellers to invest in the road of branding and compliance.