China Economic Weekly reporter Li Yonghua reports from Changsha, Hunan
“This year’s foreign trade business is obviously weak. Yesterday, I heard a friend doing CNC machine tools and a friend doing stainless steel handrails say that this year’s business is difficult to talk about, the amount of orders is declining, and the amount of customer orders is also declining.” On April 2, Ma Huiguang, a Ningbo native who has been engaged in foreign trade services for decades, said.
Cross border e-commerce is particularly difficult. Zeng Yuanli, an Sinotrans Limited(601598) employee engaged in freight business, “March should have gradually entered the peak season and recovered, but on the contrary. The market was too optimistic last year, and many orders were empty. After receiving the orders, the overseas warehouses were full, and because of the shipping congestion, many goods landed after January 6, and missed last year’s Christmas peak season. Many goods could not be sold until this Christmas, which then seriously affected the shipment of this Christmas season.”P align = “center” sea freight has halved the relative high, but it is still very expensive
September 2021 is the peak period of sea freight rise in recent three years. At that time, according to the data provided by Zeng Yuanli, from June to early September 2020, sea freight continued to rise, and the price of 20 foot standard container from China’s eastern coastal port to the west coast of the United States rose from US $1000 to US $10000, reaching US $15000 at the highest; The prices of other routes also soared, and the sea freight price to the Middle East rose from $300 to $4500.
Since then, the price of ocean freight on the US west line has been reduced. On March 31, 2022, Zeng Yuanli said that the current sea freight price of the western US line is about half of the high point. Even so, it’s still expensive compared with before.
Zhang muyao is the head of a high-end ceramic product export enterprise. She told China Economic Weekly, “because of the epidemic, the sea freight is now rising ‘Bang Bang’. The transportation cost of one cabinet is almost the same as the price of those goods. The sea freight has increased by 3 to 10 times than before. When the American route was the highest, it has increased by more than 10 times. Only the freight in Southeast Asia is not so expensive.”
While the sea freight soared, it was “difficult to find one container”, and many people also fired containers. However, since the fourth quarter of last year, the extreme tension of containers has gradually been alleviated.
Liao Yong, a cross-border logistics in Huizhou, Guangdong, said that in the first quarter of this year, containers were not as tight as in 2021. Ships could meet the traffic volume and match the position.
Nevertheless, the soaring performance of Cosco Shipping Holdings Co.Ltd(601919) ( Cosco Shipping Holdings Co.Ltd(601919) . SH), the world’s third-largest liner company, in the first quarter of this year shows that the rise in shipping prices brings ultra-high profits. According to its performance forecast, the EBIT in the first quarter of 2022 was about 39.3 billion yuan, a year-on-year increase of about 19.45 billion yuan, a year-on-year increase of about 98%. Moreover, this is a further surge above the year-on-year increase of 799.52% in its net profit in 2021.
On March 31, Cosco Shipping Holdings Co.Ltd(601919) at the time of issuing the 2021 report, it was judged that since the beginning of 2022, the container shipping market has continued the overall trend of high-level operation in 2021, the demand is still flexible, and the continuous congestion of global ports has put pressure on the supply of effective transport capacity. The tense situation of market supply and demand is difficult to be significantly improved in the first half of 2022.
Among the miserable cross-border e-commerce, Tiza Information Industry Corporation Inc(300209) ( Tiza Information Industry Corporation Inc(300209) . SZ) may be the saddest one. In response to the letter of concern from the Shenzhen Stock Exchange, the company said that in 2021, the operating revenue of the company is expected to lose 1.8-2.5 billion yuan, of which the loss of cross-border e-commerce export business is about 1.2-1.5 billion yuan. However, the company’s annual revenue is expected to be only 1.6-1.9 billion yuan Tiza Information Industry Corporation Inc(300209) said that cross-border logistics prices and timeliness fluctuated frequently, posing a great challenge to the ability of cross-border e-commerce enterprises to cope with the rapid changes in the market environment.
Cross border e-commerce Guangdong Saca Precision Manufacturing Co.Ltd(300464) ( Guangdong Saca Precision Manufacturing Co.Ltd(300464) . SZ) also claimed that the overall cross-border logistics rate increased significantly, and the overseas storage fee and tail delivery cost increased continuously.
Guotai Junan Securities Co.Ltd(601211) research report believes that the international freight price has been corrected since 2022, but the current geopolitical conflict has caused great uncertainty in the supply and demand of sea and air transportation, as well as the capacity and freight rateP align = “center” overseas positions burst. Everyone is fighting a price war and has no money to earn
The rise in sea freight is only one of the headaches for cross-border e-commerce. What is more important is the inventory waiting for low-price sale in the warehouse.
Anker Innovations Technology Co.Ltd(300866) is one of the leading cross-border e-commerce enterprises. Its third quarter report in 2021 shows that the revenue in the first three quarters was 8.425 billion yuan and that in the third quarter was 3.054 billion yuan. However, by the end of the reporting period, the company’s inventory reached 3.021 billion yuan, a year-on-year increase of 90.10%. The company said that this was mainly due to seasonal changes in the company’s sales and taking the initiative to increase the preparation of products.
According to the analysis of an executive of a cross-border e-commerce enterprise, this year, high inventory is difficult for every enterprise in the industry to digest, which is a great business risk, and many enterprises burst their positions.
Liao Yong told China Economic Weekly that according to his understanding, many cross-border e-commerce enterprises have stranded a lot of goods in American warehouses. Some enterprises even have 70-80% of their inventory, and most of them are summer product inventory. “If we fight a price war, we have no money to earn.”
The impulse under excessive optimism has led to today’s bitter wine.
In September 2021, some people in the industry described the popularity of cross-border e-commerce in an interview with China economic weekly and said, “in the cross-border e-commerce platform, it is no exaggeration to say that you can sell anything you grab.”
Tiza Information Industry Corporation Inc(300209) once said, “In 2020, affected by the epidemic, the huge development potential of cross-border e-commerce export industry was stimulated, and many enterprises in the industry, including Youshu ( Tiza Information Industry Corporation Inc(300209) subsidiary), achieved rapid development. Based on the optimistic estimation of the follow-up development of cross-border e-commerce business at that time, combined with the objective conditions such as unstable material flow and supply chain, Youshu has prepared a large amount of goods since 2020, and the purchase price is relatively high.”
However, the U.S. market brought about by large subsidies is unsustainable. According to Zeng Yuanli’s analysis, Europe and the United States, especially the United States, have given so many subsidies to deal with the epidemic. Americans have money in their hands and can’t go to physical stores to consume, so e-commerce is very popular. However, more than two years later, Americans bought everything they should buy, and there was no extra money in their hands, so their purchase demand was limited. “Also, Europe and the United States have liberalized epidemic control. We haven’t gone to physical stores for more than two years. We must go shopping. There are fewer online orders.”
Goods that cannot be thrown out also incur high storage costs in overseas warehouses. Ma Huiguang revealed that in some American ports, someone leveled an open space as a temporary site, not even a warehouse. “Stacking a container costs 500 yuan a night, RMB.”
According to Liao Yong, the cost of overseas warehouse in Houston is US $30 / m2 per month.
Based on this calculation, the cost of a storage area of only 1000 m2 is as high as 30000 US dollars per month.
In addition, the Amazon Title storm of “mass destruction” of many cross-border e-commerce leaders in 2021 has not completely subsided. At the end of April 2021, patoson, a subsidiary of cross-border communication ( Global Top E-Commerce Co.Ltd(002640) . SZ, which has been renamed as ” Global Top E-Commerce Co.Ltd(002640) “), which was originally the “first share of cross-border e-commerce”, was exposed that the main account was heavily fined by Amazon due to bill swiping, the filing of its brand mpow was cancelled and the funds were frozen. Since then, more Amazon big sellers’ accounts have been frozen, such as Aoji technology, Yiwu Huading Nylon Co.Ltd(601113) ( Yiwu Huading Nylon Co.Ltd(601113) . SH) tongtuo technology, Guangdong Saca Precision Manufacturing Co.Ltd(300464) subsidiary Shenzhen Zebao, etc.
St Huading said in its 2021 performance pre loss announcement that due to the impact of the Amazon incident, the sales of stores involved in multiple brands were suspended by Amazon and the funds were frozen, resulting in a sharp decline in the operating revenue and gross profit of tongtuo technology in the second half of the year and a loss in the e-commerce sector. However, the company did not disclose specific financial data.
Guangdong Saca Precision Manufacturing Co.Ltd(300464) 2021 performance forecast said that the company’s performance in the second half of the year was impacted by the Amazon Title event, and the expected revenue of the consumer electronics sector in 2021 decreased by 46% year-on-year. Therefore, Guangdong Saca Precision Manufacturing Co.Ltd(300464) plans to make provision for goodwill impairment of about 600 million yuan for Shenzhen Zebao’s asset group and about 400 million yuan for inventory falling price of Shenzhen Zebao’s ending inventory.
On April 1, Tiza Information Industry Corporation Inc(300209) Dong Mingjun said when talking about Amazon’s title that the company was continuously maintaining close communication with Amazon platform and appealing.
Under the pressure of multiple costs, cross-border e-commerce companies have to choose to liquidate and dump goods Guangdong Saca Precision Manufacturing Co.Ltd(300464) said that the sales scale continued to rise in the first half of 2021, with more inventory. In the second half of 2021, sales slowed down due to the closure of stores and brands. In order to recover cash flow, the company reduced prices and promoted sales.
Tiza Information Industry Corporation Inc(300209) said that the competitive environment faced by the company was more intense, the sales prices of some high priced products in the early stage were passively lowered, and the overall gross profit margin was also continuously lowered. In order to accelerate the return of funds, some enterprises in the industry choose to quickly destock through price reduction and promotion, resulting in a more intense competitive environment in the industry.
In the secondary market, investors also choose to stay away from cross-border e-commerce Anker Innovations Technology Co.Ltd(300866) share price has dropped from a high of 205 yuan / share in early 2021 to a low of 63.8 yuan / share in March 2022 The share prices of cross-border e-commerce companies such as Guangdong Saca Precision Manufacturing Co.Ltd(300464) , Tiza Information Industry Corporation Inc(300209) , Xiamen Jihong Technology Co.Ltd(002803) ( Xiamen Jihong Technology Co.Ltd(002803) . SZ) have also fallen sharply in recent yearsP align = “center” if it’s not easy to do this year, it doesn’t mean it’s not easy to do next year
When the whole industry goes down, it does not mean that there are no opportunities. In Liao Yong’s opinion, “if it’s not easy to do this year, it doesn’t mean it’s not easy to do next year.”
On the whole, cross-border e-commerce is in the ascendant and highly supported by policies. This year’s government work report pointed out that we should accelerate the development of new forms and models of foreign trade, give full play to the role of cross-border e-commerce, and support the construction of a number of overseas warehouses.
In the past two years, China has issued a number of domestic policies to encourage foreign trade, including the establishment of a new cross-border e-commerce pilot zone, tax reduction and exemption from value-added tax, as well as simplifying the customs clearance process of cross-border e-commerce goods at several customs to support the development of cross-border e-commerce.
Roland Berger, a consultancy, believes that in 2021, the transaction scale of China’s cross-border export B2C e-commerce market has been close to 2.5 trillion yuan; With the product positioning of “low price and good quality” made in China going deep into the minds of overseas consumers and emerging business formats such as live e-commerce and social e-commerce going to sea, China’s cross-border e-commerce is expected to maintain a growth rate of 15 ~ 20% in the next five years and stabilize the development momentum.
Guotai Junan Securities Co.Ltd(601211) research report said that from the perspective of e-commerce retail sales, the overall retail sales of e-commerce in major countries in Europe, America and the Asia Pacific region experienced a rapid growth of more than 15% from 2019 to 2020. However, the e-commerce industry in Southeast Asia, Eastern Europe, the Middle East and other countries is still in the initial stage or rapid development stage.
Zeng Yuanli also said that this year, the European and American markets are mainly clearing and dumping goods, but the Southeast Asian market still maintains rapid growth.
Roland Berger analyzed that there are many trend opportunities for cross-border e-commerce, such as the upgrading of the model from sellers relying on overseas e-commerce platforms Amazon and eBay to independent stations with brands; From 3C, shoes and clothing to domestic beauty and food, it is expected to become a hot category in the next step.
Liao Yong introduced that this year, the trading orders of traditional Amazon’s household goods decreased, but the products in green travel increased rapidly, such as electric bicycles and batteries, and the profits were relatively high.
When the market is cleared, the anti risk ability of big capital and big brand is stronger; After clearing, it is easier for “the leftover is the king” to gain market advantage.
Xiao Feng, who is engaged in foreign trade supply chain in Huizhou, Guangdong Province, remains optimistic. Xiao Feng said that the normal year of foreign trade depends on the second half of the year. Halloween, Thanksgiving, Black Friday, online Monday and Christmas are all periods of strong consumption. “The first half of the year does not make money, but depends on the second half of the year.”.
Zeng Yuanli said that after the baptism of the market, many enterprises began to change the original asset light mode. Some invested in docks and some built their own warehouses to cope with new changes in the market.
Wang Anqi, the Secretary of cross-border e-commerce Hunan Huakai Cultural And Creative Co.Ltd(300592) ( Hunan Huakai Cultural And Creative Co.Ltd(300592) . SZ), said that the company is optimistic about the future development of cross-border e-commerce business. Its cross-border e-commerce subsidiary Yibai network has developed an intelligent information system, which can deal with the common inventory backlog, capital shortage risk and operating efficiency pain points in the industry, and greatly improve the inventory and capital turnover rate.
Tiza Information Industry Corporation Inc(300209) formulated an ambitious plan after the huge loss, and its latest performance evaluation index of employee stock ownership plan is set as that the year-on-year growth rate of operating revenue is no less than 30% Tiza Information Industry Corporation Inc(300209) said that the company urgently needs to recover its market share and maximize the share vacated after the market reshuffle through the growth of operating revenue.
Guotai Junan Securities Co.Ltd(601211) analysis said that with the intensification of competition and capital investment, the industry concentration is expected to further improve. Leading enterprises of cross-border e-commerce will reduce costs through scale effect and enhance competitive barriers by strengthening supply chain and brand strength, so as to occupy more market share.
(Zeng Yuanli, Liao Yong, Zhang muyao and Xiao Feng are pseudonyms at the request of the interviewee)
