The longest "Black Friday" in history is coming to an end, but this year many cross-border sellers say their business did not meet expectations.
Cheng Xue was originally a traditional clothing factory owner.
Starting from 2022, as the "Four Little Dragons" of cross-border e-commerce, SHEIN, Temu, AliExpress, and Tiktok Shop, stir up trouble in the international market and gradually adopt a "full custody" investment strategy with zero cost and zero threshold, a large number of Chinese "factory style" clothing sellers flock to them and embark on the path of exporting through platforms.
Low price is the trump card of emerging e-commerce platforms. During the period of wild growth on the platform, most participants enjoy the pleasure of the traffic dividend period. As long as you follow the platform's instructions to distribute goods, you can make a big profit. "Cheng Xue, who entered the market precisely, received a lot of dividends, and her annual business revenue once exceeded tens of millions of yuan.
However, the ceiling of the low threshold entry mode is also beginning to emerge soon. The problems of a large number of light and small items lowering the value of pallets and the lack of clear competitive advantages for high-value products are gradually emerging.
On the eve of the "Black Friday" shopping festival, the veteran e-commerce giant Amazon launched a low-priced mall called "haul", which means that the competition among cross-border e-commerce platforms is becoming increasingly fierce, and a platform wide "low price war" has inadvertently begun. Platforms are seizing more market share by relying on "roll" prices, while also imposing more restrictions and high standards on merchants who have joined.
Cheng Xue and many cross-border fashion professionals have felt unprecedented pressure. Many of them lack experience in cross-border e-commerce and voluntarily give up their pricing power in order to quickly enter the market, doing business while paying tuition fees. For these merchants, if they don't lower their prices, there will be no traffic, but if the prices go down, the profits will also be gone.
At this critical "crossroads", a large number of small businesses have already been pushed to the elimination line of the game, but on social media platforms, there are still clothing enthusiasts who hope to enter the game and share the big cake of going global. Cheng Xue felt somewhat helpless about this, "Cross border e-commerce is not easy to do now
Cheng Xue is not an exception. Since the beginning of this year, several clothing sellers have told Time Finance that cross-border business is becoming increasingly difficult. Some of them are old cross-border clothing players who have been struggling for 8 years and have decided to liquidate and leave; After paying a considerable amount of tuition fees, some still choose the All in platform; Some have started to reduce their investment scale and remain cautious.
Engage in a price war
The entry and rule changes of every cross-border e-commerce platform are affecting the nerves of small and medium-sized sellers. They always maintain a high sensitivity to market trends, hoping to actively adjust and try to avoid their already small ships from running aground in the near sea.
Nianyun, a cross-border e-commerce practitioner born in the 1990s, is a typical wave chaser.
In 2015, after graduating from college, he and his friends started selling dresses and shirts on AliExpress platform. The model is very simple. First, use someone else's image to list the product. If someone places an order, we go to the Thirteen Rows and Shahe Wholesale Market to pick up the goods and send them out through a third-party cross-border logistics agent, "Nianyun said.
With the unique clothing manufacturing industry chain in Guangzhou and the professional background of team members in network system management, Nianyun's business quickly took off. 100 orders per day, at that time, it was already very good for high priced products like women's clothing! "Recalling the first peak of orders, he was very excited. It was also at this time that Nianyun had the idea of deeply cultivating in the cross-border e-commerce industry.
The cross-border e-commerce market is changing rapidly, and after only two years of entrepreneurship, Nianyun has adjusted its business model.
This adjustment is to address the issue of supply-demand imbalance. Originally, Nianyun went to a third party to pick up the goods, but this mode often made him encounter the dilemma of "out of stock when the order is out of stock". Some styles that sell well often have no stock or missing sizes, and the platform's requirements for timeliness are becoming increasingly high. Relying on the delivery model has gradually lost its competitiveness
Nianyun wants to take the initiative in his own hands. In 2017, he decided to invest 1 million yuan to establish his own clothing factory. By building his own factory, he not only has independently designed styles, but also his own brand and trademark, and his supply is no longer passive.
Nianyun's cross-border e-commerce business model is still evolving. He has not only tried various entry modes on AliExpress, but also expanded his store into Southeast Asian e-commerce platforms Shopee and Amazon.
With the outbreak of online consumption in the international market, some emerging cross-border e-commerce platforms have emerged, bringing new changes to the industry.
In 2022, Temu, a cross-border e-commerce platform under Pinduoduo Group, extended an olive branch of full custody model to numerous Chinese factories. Merchants who settle in only need to "supply goods". After pushing payment, sending samples, and passing the review, the merchants will provide the products to the platform, and the subsequent operation, cross-border logistics, performance, and after-sales are all the responsibility of the platform. After 2023, in addition to Temu, cross-border e-commerce platforms such as SHEIN, AliExpress, and TikTok Shop will all launch a fully managed model.
Nianyun recalled that at that time, cross-border clothing merchants were struggling with rising logistics and warehousing costs year by year, which was good news for clothing merchants.
He said, "Clothing is non-standard, usually a style has many colors and sizes, and the clothing itself does not have an advantage in volume and weight. Logistics and warehousing costs account for almost one-third of the sales price. In 2015, the shipping cost for each small package sent to the United States was about 30 yuan, and now it should be offered for 60 yuan
After the emergence of the fully managed model, even if the business gross profit margin is lower than before, Nianyun will lose its pricing power and still decide to enter the market. Because he found that the decision-making balance of overseas consumers had tilted.
The full custody model is priced by the platform, and such platforms typically have much lower pricing for goods compared to other platforms, demonstrating a significant price advantage in competition. If we don't do it, other platforms may not have (order) volume, "Nianyun said.
At the beginning, the unexpected order volume brought considerable revenue to Nianyun. But with the influx of more and more similar merchants, under the platform's price comparison mechanism, the supply prices of products in Nianyun stores to the platform are being pushed lower and lower.
Just this year, as the new platform passed the initial stage of wild development, more demands followed one after another. The high return rate and increasing platform penalties have gradually become a concern for small and medium-sized sellers on Nianyun and other platforms.
Until the middle of this year, Nianyun's business even faced profitability issues, and he was surprised to realize that within a year of entering the market, the proportion of orders for his full custody business had exceeded 50% of the overall business. Direct exit will suffer huge losses, and after weighing the options, we can only gradually cut losses by reducing the number of new listings.
But a new problem has arisen. Under the mechanism stipulated by the platform, stopping new stores will significantly reduce the exposure of products on the platform, which will directly lead to a significant decrease in sales. At present, Nianyun's business on platforms such as AliExpress is unable to fill this gap, and he has to make the decision to close the factory.
Nianyun never expected that a decision to follow the trend would lead to a hasty end to her 8-year entrepreneurial journey.
He said, "Low price competition has caused irreparable damage to the entire cross-border e-commerce industry ecosystem. The constantly changing platform policies have made the investment risk of business increasingly high. If you have to rely on luck to sell a piece of clothing, then this business is not worth it
Playing games while paying tuition fees
In 2023, the "Four Little Dragons" of cross-border e-commerce will expand overseas and promote the rapid development of the domestic cross-border e-commerce industry. This year, the import and export volume of China's cross-border e-commerce increased by 15.6% year-on-year to 2.38 trillion yuan, of which the export volume increased by 19.6% to 1.83 trillion yuan.
A large number of merchants without cross-border e-commerce experience flock to Liu Tong, who is one of the vast army of going global. We specialize in segmented categories of women's clothing in China and only got to know about it when we saw our peers making money on cross-border platforms. When we entered the market, we had no concept at all, just heard from the platform's investment promotion that we didn't need too much extra cost to obtain incremental growth
For clothing merchants with domestic business, there are seasonal and aesthetic differences between the overseas market and the domestic market. The inventory of out of season goods in the domestic market can also be cleared through cross-border e-commerce.
Liu Tong, who only joined the cross-border platform in July 2023, is not the first batch of people to eat crab. But the competition in his niche track was relatively small, and Liu Tong quickly fulfilled his wish. "At the peak overseas, there were 500 pieces per day, with sales of over 10000 yuan. At the peak of orders, the monthly revenue could reach 500000 yuan, and the net profit exceeded 100000 yuan
But he soon realized that the full custody model was not as beautiful as he had imagined, which cost him a lot of tuition fees.
Firstly, the stocking requirements for fully managed cross-border e-commerce are much higher than those for domestic platforms such as Taobao and Pinduoduo. Liu Tong said that each store he opened has about 100 different styles. Each platform has a stocking quantity requirement of 'at least 50 pieces'.
Platform quality inspection has become a major hurdle and has also increased implicit costs.
Liu Tong said, "All products need to go through quality inspection and be stored in the warehouse, but the platform will return many products for various reasons such as color difference and size. Often, the reasons for these products being returned are difficult for us to recognize, and some even have no reasons. The communication channels for appeal are also very single. A merchant basically only connects with one platform buyer, but each buyer needs to face many merchants at the same time. It is normal to not find someone and not reply to messages for a day or two
Under the full custody policy of cross-border platforms, the gross profit of the same product is only 1/5 of the domestic market. The problem of price suppression also occurs from time to time. According to Liu Tong's calculation, due to the low prices offered by some styles by the platform's price checker, the costs cannot be covered, so some loss making styles have been voluntarily terminated for supply.
Long payment terms have also become a challenge for Liu Tong. The payment period for cross-border e-commerce is at least one month, and some goods may have been sold two months ago and only be credited this month. Because they are sold to different countries, the delivery address is far away, and buyers confirm late, it can lead to an increase in the payment period
But Liu Tong is already luckier than many sellers. When there is a surge in demand and a shortage of supply on the track, there is a subtle change in the discourse power between him and the platform. According to Liu Tong's recollection, buyers have voluntarily raised the supply prices of some products, and the gross profit margin of these products has risen from 10% to 40%.
Although both Liu Tong and Nianyun are currently facing difficulties in their business, their choices are not entirely the same.
Liu Tong still believes that cross-border e-commerce is the incremental market he wants, "I still need to look at the traffic and order volume between platforms
Just this time, Liu Tong is not as blind as before, but more comprehensively studies the policies of different platforms, compares the differences in entry conditions and entry modes, hoping to find the most suitable way for his business to survive, and can fully bloom on platforms such as AliExpress, Amazon, SHEIN, etc.
The myth of sudden wealth is not that easy anymore
The fierce competition between platforms has brought about a chaotic battle of cross-border e-commerce business models. From the disruption caused by the full custody model to the decline of traffic dividends, it has only been a little over a year. As competition gradually intensifies, platforms begin to learn from each other and delve into the depths of their competitors.
Since the beginning of this year, Temu has launched the "semi custodial model" that traditional overseas cross-border platforms such as Amazon excel at, and in November, the recruitment of American sellers has also changed from requiring invitation codes to being unconditionally open; Amazon announced that it will open a low-priced store entrance on its main website, launch a "fully hosted model" similar to Temu, SHEIN and other platforms, and launch a low-priced mall called "haul"; SHEIN has officially launched the "semi managed mode"; Even domestic e-commerce platforms Taobao and JD.com have made new attempts in cross-border business.
In the new round of competition for merchant resources among platforms, many small and medium-sized merchants lacking market competitiveness are gradually being marginalized.
Wang Fei was originally a seasoned Taobao seller.
In 2012, she and her lover decided to enter the e-commerce women's clothing track and enjoyed the first wave of online shopping dividends in China. Wang Fei recalled, "My partner and I decided on the elegant women's clothing track and were responsible for designing and making boards. We collaborated with factories to produce large quantities. At that time, pigs could fly in the wind, and competition was not fierce. As long as we were linked to e-commerce, we could do it
However, in recent years, the online business of women's clothing in China has plummeted, becoming an important reason for Wang Fei's decision to enter cross-border e-commerce. After the growth of other low-priced platforms, I often see stolen pictures of styles in the store being sold at lower prices and lower quality, making it difficult for consumers to distinguish. The return rate of women's clothing on the platform has also been steadily increasing, and sales have declined. However, our operating costs are getting higher and higher, and there is not much profit left, "she said.
Before being exposed to the fully managed cross-border e-commerce model, Wang Fei had a failed experience in B2B operation of Alibaba International Station.
Wang Fei has formed a new team of about 10 people to enter Alibaba International Station, but traders like her who do not have factories are considered "halfway out" in Alibaba International Station and find it difficult to find a living space.
The low quality of orders has always been a problem for her. "There are few customers who actually place orders, and many customers who make patterns. Often times, we can't even earn back the pattern fee." Once, Wang Fei and her team made nearly 20 samples according to a foreign customer's request, but in the end, the customer only selected two, and the entire order did not exceed 200 pieces.
These orders have all increased Wang Fei's procurement costs. Raising prices leads to customer dissatisfaction, and low prices make no money at all! The platform's entry fees, promotion fees, and operating personnel costs cost 80000 to 100000 yuan per year, but only 30000 to 40000 yuan are earned back
After persisting for a period of time, the business of Alibaba International Station was shut down by Wang Fei.
Afterwards, Wang Fei regrouped and entered the full custody platform, feeling that BTC cross-border e-commerce was another world. So, according to the platform's requirements, she deliberately changed the main business of cross-border business to Muslim women's clothing that better meets the needs of overseas markets.
Experienced Wang Fei also foresaw the risks of the full custody model. "Although the order volume is high, there is extreme price pressure during the review process, with a profit of only three or five yuan per piece of clothing, and the result is a refund only mechanism. In the case of full custody, merchants have almost no say, so I am not like many people who do not care about costs and sell in large quantities
Despite this, she was still unable to extricate herself from issues such as platform's strong price suppression and fines, resulting in losses of hundreds of thousands of yuan.
So, when the semi custodial trend hits again in 2024, Wang Fei hesitates and says, "The threshold for semi custodial services is quite high. For the clothing category, overseas warehouse inventory can easily cost millions or even tens of millions of yuan
She said that the clothing production capacity in the market has long been overcapacity, and small and medium-sized businesses, especially those like her who do not have their own factories, find it difficult to simultaneously have low prices and high quality. Nowadays, the consumption patterns are not clear, and the more intense the price war between platforms, the more limited the survival space for merchants. The cross-border e-commerce industry no longer has the myth of sudden wealth, and is even a business of '10 bets, 9 losses'
(At the request of the interviewee, Cheng Xue, Nianyun, Liu Tong, and Wang Fei are given pseudonyms.)