Cross Border E-commerce Inventory in 2022: Power to Cross the Cycle

Cross Border E-commerce Inventory in 2022: Power to Cross the Cycle

The year 2022 is a year when the world is accelerating out of the epidemic haze. As for cross-border e-commerce, it has gone through a period of ups and downs in just three years.

In 2020, the online economic demand will explode, and the whole industry can be said to be gold everywhere; The Amazon account blocking event in 2021 has brought short-term pain to the entire industry, which is thinking about how to spread risks and become more compliant; By 2022, the brutal growth of the industry will come to an end, followed by a big wave like reshuffle.

At the end of December 2022, with the gradual opening of entry and exit restrictions, cross-border e-commerce stations are at new nodes. This also gives another meaning to the inventory and outlook at the end of the year and the beginning of the year.

General trend: global stagflation and differentiation

In 2022, the central banks of major economies will shrink monetary policies one after another, and the economic growth of emerging markets will also be significantly weak. The annual economic growth will be high in the first place and low in the second.

According to the data of the Asia Pacific Economic Cooperation (OECD), in the second quarter of 2022, the growth rate of the world economy fell to 0.1% on a month on month basis. In the third quarter, the global economy rebounded under the pull of China and the United States, but the economies of major economies, including the United Kingdom and Japan, were depressed. The world purchasing managers' index (PMI) fell below the 50 boom and bust line in August, and fell to 48 in November, reaching a 29 month low. More and more signals indicate that the global economy is facing greater challenges in the fourth quarter.

Europe and the United States: consumption upgrading and downgrading coexist

In the United States and Europe, due to rising inflation, households' spending on food and necessities has increased, while the number of non essential consumer goods has decreased. High inflation has directly eroded consumers' wallets, which has also led them to lower their expectations for the future.

A report released by the University of Michigan shows that in August 2022, the U.S. consumer confidence index fell from a high near 100 at the beginning of the year to 96.2, almost the lowest level since 2009.

In the context of declining consumer confidence, consumer habits have also changed. Peng Jiarong, founder and CEO of North America Chuangxun, said to Xiaguang News Agency that European and American consumers themselves paid more attention to the sense of experience. As life gradually returned to normal, European and American consumers began to go out and return to offline consumption.

In the case of uncertain economic expectations, consumers became cautious, and they no longer hoarded a lot of goods, which directly led to overstocking of stores. Public data shows that Wal Mart's inventory in the first half of 2022 is 31% higher than that of last year, and Amazon's inventory is 64% higher than that of last year.

Yu Mingyang, the managing director of Celtic Asia, believes that since 2020, the global online penetration rate has increased rapidly, including in Europe and North America. Although the entire e-commerce has been affected by the offline economic rebound, many consumers who did not purchase online have formed the habit of online shopping, so the overall demand is increasing. Of course, from the perspective of businesses or supply chains, the situation in recent years is not entirely favorable. In 2022, we will see many sellers affected by the rise of raw materials.

Perhaps it is precisely because of the declining trend of inflation and consumer confidence in North America that Pinduoduo chose to enter the US market on a large scale last year and launched the cross-border e-commerce platform Temu. Relying on the fission mode of "cutting a knife" and the low price strategy, just one and a half months after the launch, it surpassed Amazon and became the first download of shopping apps in American app stores.

In fact, many sellers began to consider turning to Shein, Temu and other platforms for cost considerations, or using the one-stop logistics and warehousing system provided by Shopify to establish their own independent stations.

A North American seller said that although Amazon also has FBA (Fulfillment by Amazon) services, the price is still high. In addition to this cost, the seller also needs to bear the first transportation, commodity promotion costs, sales commissions and other costs.

FBA is a one-stop performance service for third-party sellers launched by Amazon. Through the establishment of a centralized commodity storage and intelligent and efficient deployment system, the seller pays the fees, and Amazon completes the processes including storage, sorting, distribution, customer service, return and replacement.

"If we cooperate with Shein in clothing, we basically only need to deliver the goods. Of course, there are no small sellers working with Shein now. Temu is more worry free. The platform directly purchases and sells goods to the United States. The merchants don't care about anything. Some merchants will use Temu as an inventory clearing channel, so they will accept losses. In addition to the subsidy policy of the platform, the price of Temu is so low." said the above North American seller.

The current success of Temu seems to have overturned the perception of many sea going enterprises. Many insiders have expressed similar views to Xiaguang News Agency: the North American market has high customer price and strong brand awareness, so the North American market is the highland of many sea going enterprises. Temu's model has become popular in the United States, which also shows the trend of consumption degradation in developed economies.

However, some investigations in the United States believe that the impact of the epidemic on different income groups is uneven. A Deloitte survey shows that in the past three years, the expenditure of low-income groups has been almost half of their past expenditure, while that of high-income groups has doubled two years ago.

Yu Mingyang said that the gradual return of the economy to normality is not an overnight process. The recovery of the supply chain will take a longer time. In this process, many enterprises will be eliminated naturally. When new enterprises enter to fill the market space, it will take a longer time to build trust with partners and form a new order. The eliminated enterprises are related to every employee and family, and the change of income in turn affects the willingness and confidence of consumption.

This also means that, perhaps in the next few years, consumption downgrades and upgrades are occurring at the same time. There will be market space for both the cost-effective commodity route for European and American white-collar workers familiar to Chinese sellers in the past and the popular consumption downgrading route in 2022.