The gross profit margin of cross-border e-commerce is systematically collapsing, and the era of relying on poor information and spreading goods is over.
The larger the scale, the more concentrated the risk, and it may return to zero as soon as the platform rules change.
Companies that truly live well regard e-commerce as a means rather than an end, and accumulate a moat that cannot be taken away by the platform through technical barriers, user assets or ecological lock-in.
E-commerce is the testing ground and entrance, and brand and user relationships are the results.
I have seen too many cross-border sellers with hundreds of millions in turnover, but when the accounts are calculated at the end of the year, the net profit is so thin that it makes people panic.
It’s not that they don’t work hard, it’s that the road itself has changed.
The gross profits of cross-border e-commerce are systematically collapsing.
We made money in those years because of poor information.
Around 2015, when selling a Bluetooth headset on Amazon, the gross profit could reach over 50%.
Because European and American consumers don’t know that Chinese factories can produce such cheap and usable products, and Chinese factories don’t know how to sell directly to European and American consumers.
Cross-border e-commerce platforms are the channels that connect this information gap.
The money earned at that time was essentially a dividend given by the times, not real competitiveness.
During the bonus period, the model is very simple: find a category, sell it, sell it, and collect money.
But what now?
The same Bluetooth headset is sold by 300 sellers on Amazon. The price is not much different, but the advertising fee is three to five times more expensive.
Platform commissions are rising, logistics costs are rising, return rates are rising, and exchange rates are still fluctuating.
You spend a lot of money to get an order, and after all costs are calculated, the profit margin may be only 8%, 5%, or even lower.
This is not a problem of a certain category, but a structural problem of the entire cross-border e-commerce industry.
The road of “getting bigger and bigger” has come to an end.
Many people’s first reaction is: Go bigger and spread the costs.
This logic has been established in the manufacturing industry, and it has also been established in the retail industry. However, in today’s cross-border e-commerce, the larger the scale, the more concentrated the risks, not the safer it is.
The reason is simple: the process of making you bigger is to place more bets on the same platform.
If Amazon’s rules change once, your tens of millions of inventory may become unsaleable overnight.
Once the TikTok Shop algorithm is adjusted, the traffic you have worked so hard to accumulate can be reset to zero.
Platform account closure, tax compliance, overseas warehouse liquidation, if there is a problem in any link, the larger the scale, the more severe the loss will be.
How many “big sellers” will be destroyed by Amazon’s account ban wave in 2021?
Not small sellers, but precisely those sellers who are the largest and most dependent on the platform.
Scale is a double-edged sword.
On a platform where you have no control over the underlying rules, scale magnifies not only profits but also vulnerabilities.
What is the problem?
Think of e-commerce as the result.
The goal in most cross-border sellers’ minds is to “sell something”, what is the GMV, how much is the order, and what is the ranking.
E-commerce is the end point, and selling goods is everything.
But if you are just selling goods, you will always be able to compete with others on price, advertising, and supply chain efficiency, and run on an increasingly narrow track.
Companies that really live well regard e-commerce as a means, and there are other things behind it.
For example, Dreame sells sweeping robots and vacuum cleaners. It is actually a technology company. Its core assets are high-speed motors and self-developed algorithms. Amazon, Tmall, and the official website are their sales channels, not everything they own.
The technical barriers are there, others can’t make the same product, so they can set a higher price, and the gross profit is much higher than that of similar products.
There is also Bagsmart, a luggage company in Xiamen. There is no high technology, but they have achieved the ultimate in user operation.
Users who buy their products have an exclusive membership system, email interactions, and communities, and their repurchase rate is much higher than the industry average.
What they care about is not how much the sale cost, but whether the user will come again in the future.
E-commerce is the entrance, and user relationships are the assets.
VeSync (Chenbei Technology) sells smart homes, but what they are really building is a smart home ecosystem.
The device is the entrance, and the APP is the moat.
Once a user uses their product and binds it to the APP, it will be difficult for them to switch to another one.
No matter how the platform changes, the users are still theirs.
What is e-commerce?
It is a tool to test the market.
E-commerce platforms give Chinese sellers a very low-cost opportunity: you don’t need to open a physical store overseas or build a complex distribution system to sell products to consumers around the world, and you can quickly see market feedback.
This is the greatest value of e-commerce: verification.
You release a new product and run it on Amazon for three months. You can see what kind of users are buying it, why they buy it, what they are dissatisfied about, and which features they care about most.
This information is priceless.
However, many sellers only regard this as a channel for selling goods, and do not turn the data into a basis for decision-making in the next step.
After selling this one, replace it with the next one, continue to shop, and continue to increase sales.
So after the means, what should be the result?
The answer to this question is different for each company, but there are just a few general directions.
First, brand.
A brand is not a logo or a nice name, it is the amount of money that users are willing to pay for you.
When you sell headphones for $99 on Amazon, and someone next to you sells them for $59, and users still choose you, this is a brand.
It allows you to break out of price competition.
Building a brand is slow and expensive, but once established, the barriers are very high.
Second, technical or product barriers.
Only when others can’t make something can you sell it at a high price.
This requires continuous investment in research and development, and many cross-border sellers are unwilling to do it because they think it is slow and uneconomical.
But if you look at the companies that have survived the longest, they almost all have their own product moats.
Third, user assets.
How many “old customers” you have determines how stable your business is.
User assets include: mailing lists, independent site members, APP users, and community users.
These are assets that do not depend on the platform and are your own.
The platform can block your account, but it cannot block your accumulated user relationships.
The cross-border e-commerce industry does not have no opportunities, but the opportunities have changed.
The era of relying on poor information, distribution of goods, and scale to win is basically over.
Companies that will live well next will definitely be those that regard e-commerce as the starting point and brand, technology, and user relationships as the real goals.
E-commerce is an entrance, a testing ground, and an amplifier, but it is not the end in itself.
If you are still considering “selling more orders” as your most important goal this year, think about it, what will you have left in five years?
