In the past year, if one must summarize the competition in the cross-border e-commerce industry with a single keyword, then it is none other than "low price".
Driven by the "Four Little Dragons Going Global" represented by SHEIN, Temu, TikTok Shop, and Alibaba AliExpress, affordable and high-quality Chinese products are sparking a frenzy of competition in the global e-commerce market regarding cost-effectiveness.
Especially Temu, which has been established for just over a year, has quickly captured the hearts of middle and low-income Americans through its crazy low prices. According to a survey conducted by the statistical agency GWS, Temu's daily active users in the United States have been continuously increasing since the beginning of 2023, with nearly 10 million new users added; In October, the total number of users for Temu and SHEIN applications reached 110 million.
Such a growth rate forces Amazon to take action.
Recently, Amazon announced at its annual cross-border e-commerce summit that starting from January this year, the commission rate for clothing products priced below $15 will be reduced to 5%; The commission rate for clothing products priced between $15 and $20 has been reduced to 10%. It should be noted that the commission rate for both types of products was 17% previously.
Industry insiders believe that the Amazon platform dominates the minds of mid to high end consumers, and the rise of low-priced platforms such as Temu is competing for the market of products priced below $20 on Amazon.
So, how much room for imagination is there in the mid to low end market? How is the competitiveness brought about by low-priced products achieved?
01 Low price temptation, a globally accepted competitive law
Everyone likes low-priced products. If someone doesn't like it, why not set the price a little lower.
In China, Pinduoduo is well versed in this field. With its ultra-low price, in just 8 years, its market value has surpassed the two big brothers Alibaba and JD.com.
The love for low-priced goods is not just a patent of the Chinese people. It should be noted that even in economically developed European and American countries, not all are middle-class, and price sensitive middle and low-income groups are still an important part of society.
According to Zippa's research, as of October 2022, the proportion of the lower class population in the United States (with an annual income of less than $42000) was 29%. It is precisely these groups who maintain a cautious attitude towards consumption that have achieved the fast fashion brand SHEIN in the past few years.
As a disciple of SHEIN's low price strategy, Temu was born less than two years ago. But after shining on the Super Bowl in the United States, it has been consistently ranked first on the Apple App Store and Google Play download charts for a long time.
The main reason for such good results is that Temu and SHEIN target different audiences. SHEIN, which focuses on fast fashion, mainly targets young girls who pursue fashion, while Temu mainly provides consumers with low-priced products across all categories, advocating "Team up, Price down". With such a straightforward slogan and a comprehensive range of categories, the target consumer group is naturally more diverse and broad.
On the merchant side, Temu adopts strategies such as "no commission, no transportation and storage fees, no advertising fees" to greatly reduce merchant costs from a platform perspective and ultimately increase their enthusiasm for going abroad.
According to data analysis company YipitData, Temu achieved a GMV of approximately $500 million within the first five months of landing in the United States, increasing from $3 million in September 2022 to $192 million in January 2023, with a GMV of $635 million in May 2023.
Not only did Temu achieve great success in the United States, but TikTok Shop, which entered Southeast Asia at a low price, also achieved good results after entering the European and American markets. Recently, TikTok Shop announced its five major achievements in promoting full custody black in the US and UK markets: from November 14th to 20th, the order volume in the US market increased by 205% compared to October 20th to 26th.
From a category perspective, products such as care, beauty, and women's clothing are very popular on TikTok Shop; From the store perspective, some small and medium-sized DTC brands or collection stores featuring white label products have achieved good results with high cost-effectiveness.
Alibaba AliExpress has chosen to deeply cultivate markets such as Brazil and Spain to build its competitiveness. In the annual evaluation of the veteran Brazilian website "True Black Five", AliExpress was successfully selected as the "Black Five Best Platform" in the consumer electronics category, while the Spanish portal ADSLZone announced AliExpress as the "Best E-commerce Platform in Spain".
Obviously, the internal competition of domestic e-commerce is spreading globally through cross-border e-commerce platforms. On the one hand, this is related to the slowdown in global economic growth leading to consumption stratification, and on the other hand, it must be said that the low price of genuine fragrance has become a universally accepted competition law worldwide.
The question of supply chain cannot be bypassed behind the price of 02
Why can the trend of cost-effectiveness spread from China to the world? This is inseparable from the fact that China has over 1000 mature industrial belts and an extremely complete supply chain system.
In fact, the competitive advantage of industrial belts is achieved through a sound supply chain system.
For example, in a clothing industry belt, production equipment, raw materials, surface materials, and even transportation related to the clothing industry gather together, forming an upstream and downstream collaborative chain. The various parties involved in the chain work closely together to improve supply chain efficiency while reducing production costs, which is an irreplaceable competitive advantage that industrial belt enterprises possess.
Especially for low-priced goods, their profits are limited, and the low costs brought about by the agglomeration effect of industrial belts are unimaginable for other enterprises. For example, Yiwu, Zhejiang, relies on the power of industrial belts and supply chains to make the small commodities produced here famous worldwide.
In fact, the development of China's local e-commerce industry is also closely related to industrial belts and supply chains. On the one hand, demand will strengthen the location advantage of industrial belts, thereby forcing the continuous improvement of supply chain efficiency; On the other hand, as the supply chain matures, the agglomeration effect of industrial belts will become more apparent, ultimately driving the entire e-commerce industry forward.
At present, the domestic e-commerce industry has entered a relatively stable competitive landscape. Turning their focus from domestic to overseas and seeking new business opportunities has naturally become a new choice for many enterprises.
However, the cross-border e-commerce industry has long bid farewell to the blue ocean era. The early primitive market no longer existed, and with the increase of entrants, competition became increasingly fierce. The price war that was once most used in the domestic e-commerce war inevitably extended to overseas markets.
It can be imagined that the competition in the cross-border industry will likely be a supply chain based war. Whether it's production enterprises, cross-border platforms, or small and medium-sized sellers, every participant who gets caught up in the vortex of price wars must demand efficiency from the supply chain.
The supply chain cost of a commodity can be roughly divided into two parts: one part is the production cost involved in the process of transforming raw materials into commodities; The other part is the logistics and warehousing costs involved from the factory to the hands of consumers.
The lower the selling price of a product, the smaller the profit margin left for the entire supply chain. That is to say, given the need for cost control, every link in the supply chain needs to constantly squeeze out water in order to maintain price competitiveness.
Do branded products not require supply chain efficiency? Of course not. In the era of consumer classification, people will inevitably choose the brand with the lowest price for the same quality. So, for such enterprises, the improvement of supply chain efficiency enhances brand influence, and ultimately still brings competitive advantages.
03 Competition for sellers, one-stop solution popular
Batch production and intensification are important ways to reduce costs, especially in logistics transportation and warehousing. Scaling can further dilute various costs.
Last July, Lazada actively launched the Just In Time (JIT) model while promoting comprehensive hosting. This model, which was widely used in the Japanese automotive manufacturing industry, can help retailers implement flexible supply chain management based on real-time sales data and market trends, reduce inventory risks, and achieve higher sales efficiency and customer satisfaction.
However, among various logistics solutions launched by platforms and supply chain enterprises for cross-border sellers, a one-stop full chain solution is the most popular.
For example, the supply chain enterprise "Baishi International" (hereinafter referred to as "Baishi"), which has been deeply involved in the Southeast Asian market for many years, built a "highway" connecting Southeast Asia as early as 2020, providing customers with a full chain service of "one order to the end" from product collection, domestic collection, customs clearance, and even end-to-end distribution.
For household appliances such as televisions and air conditioners, Baishi also offers installation services through training delivery personnel, greatly solving the problem of incomplete teams in the early stages of overseas travel for enterprises, while also saving a lot of costs for enterprises.
A major characteristic of e-commerce platforms is speed, so in addition to cost-effectiveness, the experience brought by fast logistics is also an important competitive advantage for businesses and platforms.
Free shipping and next day delivery, which are already common in China, have also been gradually copied into overseas markets in the competition of cross-border logistics enterprises. It is understood that in some countries with good infrastructure in Southeast Asia, cross-border e-commerce business can now reach the next day or even the same day.
Such efficiency will naturally force changes in cross-border e-commerce platforms.
Last September, Amazon announced a partnership with third-party logistics companies to launch the Amazon Supply Chain by Amazon integrated solution. This is an end-to-end, fully automated supply chain service that not only allows sellers to focus more on creating high-quality products for consumers and expanding their business, but also helps sellers reduce costs, improve delivery speed, and enhance consumer experience.
Not long ago, this solution was opened to Chinese sellers. This means that Chinese sellers on Amazon can hand over the first leg of transportation from China to customs clearance, and then to overseas end of delivery to Amazon for completion.
Compared to Amazon, Chinese cross-border e-commerce platforms are moving faster, directly targeting some small and medium-sized sellers and launching a "fully hosted model". The most important feature of this model is to enable enterprises to focus on producing corresponding products according to platform cost requirements, and all other processes including pricing are entrusted to the platform, which puts higher requirements on the seller's supply chain.
2023 is the tenth anniversary of the "the Belt and Road", which means more opportunities for Chinese enterprises to find the second growth curve overseas.
But the journey to sea is not that simple. Different countries and regions have completely different business environments and cultural differences, and the rapid growth of cross-border e-commerce may also cause concerns in some countries, leading to bans or restrictions.
So next, cross-border enterprises need to think about how to find a balance between speed and security while improving supply chain efficiency.
News
