International logistics fuel surcharges have increased seven times in a row in more than a month. Is the era of cross-border e-commerce profiteering completely over?
UPS fuel surcharges soared from 32% to 48.5%, and Amazon simultaneously raised FBA logistics surcharges. The tsunami of logistics costs caused by oil prices has become a “profit meat grinder” for cross-border sellers.
The model that once relied on low prices and volume to make money has completely come to an end. The era of extensive management has ended, and the industry has officially entered a new stage of cost-driven transformation.
Freight costs bite back profits: a “catastrophe” for low-priced large items.
To understand the destructive power of this crisis, we must first understand the cost structure of cross-border e-commerce.
For a long time in the past, the core competitiveness of Chinese sellers has been “extreme cost-effectiveness”.
With the mature domestic supply chain system, we can keep production costs to a minimum.
As long as international shipping costs remain within a reasonably low range, sellers can make up for the meager profits on a single item through massive orders.
But now, this economic model fails.
Zhang Zhouping, executive director of Pink Think Tank, pointedly pointed out that the skyrocketing logistics freight has a catastrophic cost erosion effect for those products with low unit price, large volume or heavy weight.
Under the current freight system, the physical attributes (weight and volume) of a product directly determine its survival probability.
Take Yang Yu, a clothing seller on Amazon, as an example. Logistics freight originally accounted for more than 20% of his overall operating costs.
Calculated based on the current increase in surcharges on major logistics platforms, just a change in freight will cause his net profit to fall directly by 10%.
Today, when cross-border e-commerce is highly involved, 10% of net profit is often the life or death line for a company.
What is even more suffocating is that for the vast majority of sellers, FBA services are a rigid demand.
Without the use of official logistics, products will lose traffic tilt and customer experience will decline significantly.
Therefore, in the face of forced price increases by the platform, sellers have no bargaining power, let alone the confidence to give up their use, and can only passively bear the pressure of rising costs.
This passive pressure situation just proves that the low-price distribution model has no ability to resist risks under the impact of external costs.
The butterfly effect of the supply chain: comprehensive inflation caused by the surge in crude oil.
If you think that cross-border sellers only bear the increase in shipping costs, you are totally wrong.
The sharp rise in international oil prices is like knocking down the first domino, triggering cost inflation in the entire overseas industry chain.
Ding Lingfeng, general manager of a sunshade equipment company in Shanghai, has a deep understanding: The surge in crude oil has pushed up the price of raw materials such as PVC and polyester by 20%-30%. This has combined with soaring freight costs to form a two-way cost squeeze in production and contract fulfillment, a typical cost-push inflation.
What is even more troublesome is the surge in hidden costs, with cross-border travel expenses doubling and soaring.
Last year, a single air ticket to Germany cost about 9,000 yuan. This year, it has soared to more than 20,000 yuan. Companies can only significantly reduce the number of business travelers.
From raw materials to business travel, costs are everywhere.
Sellers who stick to the low-price strategy will eventually fall into a desperate situation where the more they sell, the more they lose.
Tightening of platform rules and capital chain test: the last straw for sellers.
Since costs are rising across the board, can’t sellers directly increase prices and pass on the costs to overseas consumers?
Reality is far crueler than theory.
In the current cross-border e-commerce ecosystem, the threshold for sellers to increase prices at will is extremely high.
挑战一方面来自各大电商平台密集收紧的运营规则。
For example, Amazon has implemented a series of strict new price rules. If a seller suddenly raises the price significantly, he is likely to lose his original shopping cart (Buy Box), or even be punished by the system’s traffic limit.
Under this mechanism, sellers are trapped in a “prisoner’s dilemma” between a rock and a hard place: if they increase the price, they may lose orders instantly; if they don’t increase the price, they are “losing money and making a profit.”
Many sellers can only choose to wait and see, struggling on the edge of the break-even line.
On the other hand, frequent changes in platform policies and lengthening of logistics cycles have greatly intensified the pressure on capital turnover.
If the goods float at sea for one more day, the capital occupation cost will increase by one point.
For those small and medium-sized sellers who originally rely on high turnover and low profits to operate, once there is any slight lag in the capital chain, the entire capital chain will face the risk of rupture.
A turning point in the crisis: The “stability premium” of China’s supply chain.
Winter has arrived, but Chinese cross-border sellers have not sunk in yet.
The wonderful thing about economic cycles is that crises are often accompanied by deep restructuring of industrial structures.
The violent fluctuations in the international market have had a profound impact on the crude oil supply chain, and this impact cannot be eliminated in a short time.
But as industry insiders say, this wave of impact is aimed at all sellers around the world and is not targeted at a single group.
At the critical stage of the competition for endurance, the systemic resilience of Chinese sellers began to play a decisive role.
China has the world’s most complete industrial manufacturing system and leading energy planning and construction.
Previously, some businesses tried to shift their production chains outward in pursuit of lower labor costs.
However, in this global supply chain crisis, the outside world suddenly discovered that other regions are far less able to withstand pressure than China.
A strong signal has emerged: more and more European customers have taken the initiative to seek cooperation recently.
In their eyes, under the current chaotic situation, Chinese sellers have the most stable and reliable delivery.
This “stability premium” is the greatest confidence for Chinese manufacturing to stabilize its position in the storm.
In the face of changes, keen sellers have quickly adjusted their course.
Companies that were originally deeply involved in the Middle East market have turned to exploring European markets with higher unit prices and lower price sensitivity based on customer feedback, and are more actively exploring new blue oceans such as Australia.
Farewell to the era of low prices: branding and refined operations are the only way out.
When the dividends of the low-price model are completely drained by high surcharges, China’s cross-border e-commerce companies must find new rules for survival.
When logistics surcharges and raw material costs continue to rise, the traditional low-price and volume model of cross-border e-commerce has completely failed.
The continuous impact on the cost side is forcing the industry to bid farewell to extensive growth and turn to new survival rules centered on technology cost reduction, logistics hedging, and brand premium.
From an economic logic perspective, this round of cost shocks stems from fluctuations in the crude oil supply chain, global inflation transmission and tightening of platform rules, and is a permanent cost increase.
The arbitrage model that relied on low labor, low logistics, and low compliance costs in the past has no room for survival in the context of global supply chain restructuring.
The core path to solving the dilemma is clear and can be followed.
First, use technology to reconstruct the cost structure.
Intelligent accounting of full-link costs, automatic price adjustment without touching red lines, and stable profits.
Second, hedging risks with logistics diversification.
Overseas warehouse + shipping in bulk, the cost is cut in half and the risk is zero.
Third, build the ultimate moat through branding.
Break out of price wars and rely on brand premiums to make steady profits.
From an industrial perspective, oil prices and logistics surcharges continue to rise, which is essentially a clearing of industry costs.
The clearance of low-end production capacity is accelerating, and the industry has completely shifted from price involution to value competition.
Chinese sellers rely on the country’s complete industrial manufacturing system and innovation capabilities to create high value-added products and absorb logistics costs with brand premiums, which has become the core path through the cycle.
The era of low prices has ended, and cross-border e-commerce has ushered in a new cycle of high-quality overseas sales.
Long-termists who deploy emerging markets, deepen refined operations, and adhere to the branding route will eventually seize the opportunity and achieve a leap in the restructuring of the global supply chain.
