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Amazon’s Sellers in China are struggling to survive as orders plunge

On March 1, 2020, In Guangzhou, Lao Zhao convened a monthly meeting of all employees in his office. The results revealed some anomalies. Sales fell 20% faster in February than they did in January-a range of 10% or so used to be normal.

As the owner of a cross-border e-commerce business, Zhao saw such abnormal numbers and immediately looked into the cause. “But at the time I understood it as a seasonal variation.” “In retrospect, there may be two parts to it,” Zhao said.

Another answer looms: the side effects of the global pandemic are brewing in the cross-border e-commerce industry. Amazon, the world’s largest e-commerce platform, is in the firing line.

Amazon’s updated policy since March has been telling.

On March 17, notify the seller in the United States and European sites, amazon, priority system will receive daily necessities, medical supplies and other goods have higher demand into the operations center, for the above goods category, will temporarily stop create operations center library application, the warehousing restrictions will continue until April 5.

Inventory is the process by which goods are shipped from a seller to Amazon’s operations center, and the suspension of inventory means that the seller’s next sales phase is in doubt — at the moment, they can only sell items that are still in stock in Amazon’s warehouses, not replenished or restocked.

On March 22, Amazon directly suspended FBA (Amazon Deliver) orders for non-essential items on its Sites in Italy (Amazon.it) and France (Amazon.fr), but third-party sellers can still deliver goods to consumers through the self-delivery service. During this period, orders already generated will not be affected, and goods previously stored will no longer be charged storage fees.

Admittedly, due to the need for epidemic prevention and control, offline consumption has been severely hit by a certain increase in online consumption.

Amazon has already said it will hire an additional 100,000 full-time and part-time workers in the US to work in warehouses and delivery. At the same time, in the us stock market four consecutive circuit breakers, three major stock indexes plunged, many technology companies fell below 20%, Amazon with a 10% or so decline is called the “US stock safe haven”.

But overall, transportation, logistics, manpower and other aspects of efficiency are all obstructed. Even if the e-commerce industry receives positive stimulus, the platform can only abandon the car to protect its future when its operating capacity is overwhelmed.

Sellers who understand the seriousness of the pandemic understand these policies on humanitarian grounds, but they do little to save their businesses.

Listen to the artillery on the line
“We had very high hopes and good plans for this year, but they were completely disrupted by the pandemic.” Lao Zhao said that because of the epidemic, he had to “listen to the artillery sound” near the front line.

Mr. Zhao has a team of about 20 selling leather goods and clothing to middle-aged men. Through The Amazon platform, his products can be shipped to the United States and five countries in Britain, Germany, Italy, France and Western Europe. For the past three years, the company has been doubling its annual revenue. In 2019, Lao Zhao’s company’s revenue has reached tens of millions of yuan, with a gross profit margin of around 10%.

Unlike domestic businesses, Zhao’s business was barely affected in January and February, when the epidemic was at its worst. The feeling of cross-border e-commerce should be more in step with the spread of the global epidemic.

“In early March, I sensed a slowdown in orders.” “By early March, the situation and policies were changing from day to day with the outbreak,” Zhao said.

In his recollection, the most impressive node is amazon’s two policy releases.

On March 17, employees received a backstage notice that amazon was suspending construction of the warehouse, which would only accept six categories: health and home, groceries, baby products, beauty and personal care products and appliances, industrial and scientific products, and pet products.

That meant zhao’s company could no longer send goods to Amazon’s warehouse for the better part of a month. In fact, the rule will not have an immediate effect on most sellers’ business. “Because we actually have enough inventory overseas right now to sustain sales.” “It just heightens the panic,” Zhao explained.

Until March 22, when Amazon stopped taking orders for non-essential items on its Italian and French sites, a large number of links were taken down, which had an almost immediate impact on Italian and French sellers.

Lao Zhao’s links to the two countries are now on sale. Although this is not a devastating blow to his scattered business layout in Europe and America, it has gradually become a boiling frog.

Lao Zhao company usually in Amazon Europe site orders, can be relatively easy to maintain in a day 500 orders or so. But in March, they fell by 10-20% almost every day. During the ten days from March 16th to March 25th, the number of orders gradually dropped from 251 to 156, struggled to 242 and then dropped to 178 again, which was not warm.

In addition to Lao Zhao, there are a large number of small sellers are going it alone.

In a certain Amazon seller group that jiemian news reporter entered, almost every day, small sellers communicate their sales situation, ask everyone whether the product link is removed, and express their anxiety.

“(The notice was just issued on March 17) AT that time, I didn’t build the database successfully, and I felt terrible.” One small seller of home and pet toys on Amazon told Jiemian.com that her orders had fallen to 50 percent of their normal level. “We were out of stock for almost a month, and now it’s completely cold.”

Mr. Zhao is not hopeful about amazon’s “April 5” recovery deadline. “We need to be ready for at least two to three months.” “In terms of orders throughout the year, I feel a lot of things are irreparable,” Zhao said. I’m not going to buy a spring dress in winter, am I?”

With double growth out of the question, Mr Zhao’s only hope now is to at least break even.

“I no longer have profit as my primary goal. My biggest responsibility and mission this year is to make sure that my employees don’t get hurt more financially by this.” “That’s probably something I care more about right now,” he said.

Find ways to maintain cash flow
For some, poor sales in the coming months have become a given, leaving them with only two options: give up or carry on.

For volume-based sellers, it is still possible to survive the crisis as long as they can maintain stable orders and aim for small losses or no profits — but above all, they will face higher freight costs and lower delivery efficiency.

Their few options now are international express delivery services such as DHL, UPS and TNT, or domestic logistics companies that specialize in cross-border e-commerce.

Due to the significant reduction of international flights, the common feature of international express delivery is the rising air freight costs, “almost one price per day”. Many logistics companies that do the first FBA shipment (from China to Amazon’s FBA warehouses) have stopped accepting air waybills and only accept small parcels of less than 2kg.

A salesman in Shenzhen FBA Tou Cheng company told jiemian news reporter that according to the current situation of 1-2 yuan per kilogram increase every day, a large air freight order will make him lose money. “If the bottom price is 65 yuan (per kg), I accept 68 yuan when the deal is done, but by the time the customer gets the package, the bottom price may be 70 yuan, and I will lose two yuan!” He said that some time ago, his colleague received air waybills for Shanghai, Zhejiang, Ningbo and other places, and had lost two or three thousand yuan.

Meanwhile, due to the queues for flights, the time limit for air freight has been extended from 10 days to about 15 (including warehousing); Rail and sea freight have been less affected, with the age of rail shipments to Europe remaining 15 to 20 days (excluding warehousing).

Sea freight prices are still between rmb6.5 and RMB8.5 per kg, according to the salesman. “It hasn’t gone up much.” “But if air freight can resume,” he said, “prices will definitely go up if sea freight can’t.”

Even though there are logistics channels, small and medium-sized sellers on Amazon’s platform are still afraid to continue shipping while the epidemic is still in turmoil.

“There is still a lot of stock in the market recently, but the small sellers may not have enough capital, so they can’t deliver the goods.” Another FBA salesman said, “Because the cost of overseas storage is too high, if you just send the goods, Amazon sends another message saying that you still can’t receive the goods on April 5, you are stuck with the goods.”

“We can’t help you with this money (storage costs), because the current epidemic, our logistics industry also needs sufficient cash flow.” He said.

Since the resumption of work in March, logistics practitioners have also witnessed the plight of a number of small and medium-sized sellers. On the one hand, their orders are falling, and on the other, finding new customers is not as easy as it used to be. When the aforementioned sales brother visited the old customer on the phone, he was directly told that business had stopped because his auto parts could not be stored. “He said the best solution is to give up.”

In addition to hard work and giving up, some sellers are also seeking new ways, such as opening up new cross-border e-commerce platforms (AliExpress, Lazada, etc.), or turning export sales into domestic sales. There are even some speculative sellers began to collect a large number of masks, temperature guns, alcohol cotton and other sources of goods, transformation to join the export army of epidemic prevention materials, this is another story. However, according to the interface news reporter to understand, the first two roads have their own certain difficulty.

Entering the new platform, from registration, review to distribution and operation, it will go through a certain cycle and a new mechanism, requiring sellers to have the ability to respond quickly and solve problems. As a matter of fact, some sellers have already engaged in “grey business” such as account transfer and qualification borrowing.

Cui Lili, professor and director of e-commerce Research Institute of Shanghai University of Finance and Economics, told Jiemi.com that platforms such as Wish, ShopPee, Aliexpress and Lazada have different customer groups and market areas of advantage. “At this time, different products are selected for different markets. As well as the certification and adaptation of products in the countries where they are sold, businesses need to spend more energy.”

And the saturation of the domestic e-commerce market, it has been difficult to accommodate new players, they are also difficult to keep up with the changing marketing methods in a short time, more want to turn to domestic sales of sellers usually can only start from wechat business.

The most capable of fighting, may not be able to carry it
In Zhao’s impression, there are only a handful of companies with hundreds of thousands of employees in the whole cross-border e-commerce industry, and more of them are individual sellers with teams of more than ten or twenty people like himself.

This year he admitted that he had given up radicalism in favour of “practicing internal skills”. As the workload dropped, he put forward three requirements for employees: first, do the basic work well, including product improvement, packaging optimization, website optimization and so on; Secondly, the improvement of the company’s internal management system to make up the loopholes of the past system; Then product development and reserve.

In terms of cost control, he only gave up renting one office on March 20, saving 20,000 yuan of monthly rent. The monthly labor cost is around 150,000 yuan, which he has not adjusted yet. He also promised that there would be no layoffs during the epidemic.

The logic for not laying off employees is simple: “At this time, everyone is in a difficult situation, and the industry is in a recession. If my employees lose their jobs, they will still have to go out to find jobs in this industry, because these are the only jobs they have been able to do for the past few years, and they will not find suitable jobs in this situation.”

“I still maintain that companies are more resilient than individuals.” He said.

“Open source” is his biggest challenge. In the past, once the company established a project after investigation, it would set up a special fund and be more aggressive in ordering, promotion and operation. In the following purchase, maybe the target of 1000 pieces will be adjusted to 100 pieces, and the development efficiency of the company is bound to be affected.

But risk management is more important now, “thinking about survival as well as the chance to live well.” “But how well we live in the future depends on how well we live now.”

Zhao had also worked for eight years. Before his resignation, he had been an engineer with an annual salary of more than 500,000 yuan in a foreign-funded enterprise in Shanghai. When he went into business at the age of 30, he experienced the bitter taste of losing his savings, disbanding his team and starting all over again.

After three years in the cross-border e-commerce industry, Zhao has witnessed some people moving from family workshops to office buildings or industrial zones, growing rapidly and accumulating wealth with the development of cross-border e-commerce.

“It’s a very young group of people making things, very willing to fight and work hard, and a lot of the myths are made by them.” In his opinion, most of the people who have done well in this industry are post-80s and post-90s, “the best may still be post-80s, but there are quite a few post-90s people who have also done well.”

Still, Zhao feels the epidemic will hit them hard.

“I’m sure a lot of people can’t handle it.” Lao Zhao thinks small sellers have been attacked from both sides. During the outbreak in China, factories shut down, resulting in a shortage of goods, and many small sellers were unable to stock up. When domestic factories resume work, they face the dilemma of no overseas orders.

“So for the industry as a whole, I think the impact is quite significant.” Lao Zhao said, “For the big seller is his capital chain, for the small seller is income.”

According to the General Administration of Customs, the number of domestic private enterprises with import and export achievements reached 406,000 in 2019, an increase of 8.7 percent over the previous year. In 2019, imports and exports of private enterprises reached 13.48 trillion yuan, up 11.4 percent and accounting for 42.7 percent of China’s total foreign trade, up 3.1 percentage points from 2018.

Zou Zhiwu, deputy director of the General Administration of Customs, said at a press conference on Jan 14 that the data means private enterprises have surpassed foreign-invested enterprises to become China’s largest foreign trade operator for the first time.

Amazon released on March 27, the latest news, said the United States stand FBA commodity warehousing process, the priority policy of necessary goods in the April 5 still use in the future, and said that because of the uncertainty of the outbreak, amazon operation center can not be sure the exact date of complete recovery operations, “at the same time we are adding more goods to necessities list.”

The day before the interview, Lao Zhao just made an appointment with an old friend of the same industry for dinner. They were happy when they met, but zhao knew that 70 to 80 percent of their business was in Italy. “I wondered why he was so happy.” Laozhao says.

“I can’t help it now but be happy.” “The friend replied.