Shenzhen is not the only one suffering from Amazon’s ban

Recently, the news that Amazon has banned China’s cross-border e-commerce on a large scale has caused an uproar. Statistics show that as of the end of July, Amazon had shut down the accounts of 50,000 Chinese cross-border e-commerce merchants in one day, most of which were concentrated in the waistline. CLP Hengye, Shenzhen Ruitai, Shenzhen Hesi, and Guangzhou Tai Yang and other companies have been affected.

Currently, among the external cross-border e-commerce platforms, platforms such as Google, Amazon, and Facebook account for the mainstream. Due to their resource monopoly, it is difficult for merchants to open overseas markets without the help of these platforms.

This round of Amazon account suspension controversy has been brewing since the end of April. By May, more and more domestic cross-border e-commerce companies had platform login problems. At that time, many merchants chose to appeal via email. Ways to seek recovery. On May 20 and June 16, Amazon issued open letters on its public account, emphasizing that platform sellers cannot fake reviews. Amazon stated that the platform resolutely suspended the sales permissions of some sellers after discovering that a considerable number of merchants were making false reviews through social media or hiring third-party service providers.

Statistics from the Shenzhen Cross-Border E-Commerce Association show that in the past two months, more than 50,000 Chinese sellers have been blocked on the Amazon platform, causing industry losses estimated to exceed 1,000 billion.

Of course, the most affected ones are leading companies, such as Youkeshu, a super seller in Shenzhen. Recently, Tianze Information, the parent company of Youkeshu, released its 2021 semi-annual report. Financial report data shows that Tianze Information’s half-year revenue was 1.177 billion yuan, a year-on-year decrease of 50.27%; the net loss was 949 million yuan, a year-on-year decrease of 1285.48%. From the perspective of subsidiary business, affected by Amazon's store closure, Youkeshu alone suffered a net loss of 742 million yuan in the first half of the year.

Picture source: Tianze Information 2021 Semi-annual Report

After the Amazon store closure incident broke out, the public’s attention focused more on Shenzhen. There are also related slogans on the Internet: The world's e-commerce companies look to China, and Chinese e-commerce companies look to Shenzhen.

According to the statistics of cross-border e-commerce companies from Qichacha, the largest number of cross-border e-commerce companies in China is actually not Guangdong Province with Shenzhen, but Beijing. The top three are Beijing with 9,445, Guangdong with 9,098 and Zhejiang with 3,552.

Source: Qichacha

However, this time the ban occurred on Amazon, so Shenzhen became the hardest hit area. According to data released by Marketplace Pulse, Shenzhen accounts for nearly 32% of the Chinese sellers on Amazon. Therefore, this is also in line with the Shenzhen Cross-Border E-Commerce Association’s statement that Shenzhen is the city most severely damaged by the store closures.

In fact, there are six major links in cross-border e-commerce, namely producers/manufacturers, cross-border e-commerce companies, payment platforms, logistics providers, customs clearance and commodity inspection, and consumers. When the store closure crisis occurs, the link we are most concerned about must be cross-border e-commerce companies, because they are the ones being executed and are directly affected.

Now we look through this layer and look at the manufacturer/manufacturer behind it. A foreign analysis agency conducted a questionnaire survey on Amazon buyers during the epidemic. The final results showed that due to the impact of the epidemic, home appliances, especially small household appliances and household toys, have become the second most popular demand point after small commodities. Small commodities will undoubtedly be greatly affected by Wenzhou, Zhejiang. We will not discuss it here, but mainly focus on home appliances, which ranks second.

In fact, from the perspective of product attributes, one of the main commodities sold by Shenzhen’s foreign trade merchants is electronic products. In the stable first quarter, business was booming. Statistics show that in the first quarter of 2021, my country’s exports of household electrical appliances were US$27.49 billion, an increase of 67.6% compared with the same period last year.

Data from the China Household Electrical Appliances Association shows that China’s home appliance exports account for 38% of global trade. Domestic brands include air conditioners, televisions, microwave ovens, refrigerators, freezers, washing machines, and other household appliances around us. The proportion is more than 50. Among them, online sales have a huge market space. In the North American market alone, online home appliance sales are expected to exceed US$85.3 billion in 2021.

In fact, the fact that domestic household appliances can achieve a good market share in the world is closely related to the development strategy of domestic household appliance companies. As competition in the domestic market becomes increasingly fierce, Chinese home appliance companies are all focusing on globalization. Major companies including TCL and Hisense are building brand images in overseas markets by sponsoring large-scale sports events. Above, in addition to establishing official sales outlets, cross-border e-commerce carries a large channel distribution task. As for cross-border e-commerce channels, small brands value more than big brands.

In terms of home appliances, behind Shenzhen, Shunde, Lianjiang, and Hefei will also be affected by Amazon's store closures.

Let’s take a look at the situation in Shunde first. In 2006, Shunde was awarded the title of "City of Home Appliances in China" by the China Light Industry Federation and the China Household Electrical Appliances Association. The home appliance industry is a pillar industry in Shunde. More than 3,000 home appliance companies have settled in Shunde, cultivating many industry giants such as Midea, Kelon, Galanz, and Vanhe. The output value accounts for about 15% of the national home appliance industry. Foreign trade, including cross-border e-commerce, is the invisible code for the development of Shunde's home appliance industry. Now that the main platform Amazon has made big moves, some Shunde home appliance companies need to rebuild their overseas e-commerce channels.

At the same time, in addition to home appliances, Shunde also has a bulk export commodity—mechanical and electrical products. The General Administration of Customs' "Value Table of Main Trade Modes of Some Export Commodities from January to July 2021" shows that mechanical and electrical products are the commodity type with the largest export value in general trade. From January to April this year, Shunde's mechanical and electrical product exports were 49.74 billion yuan, accounting for 68.9% of Shunde's foreign trade exports. Some Shunde mechanical and electrical companies that choose Amazon as their sales platform will be affected.

The second one is Lianjiang. The city was awarded the title of "China's Small Home Appliances Base" by the China Light Industry Federation and the China Household Electrical Appliances Association in 2017. Lianjiang is also the famous "Hometown of China's Rice Cookers" ". In the Amazon questionnaire mentioned above, small household appliances were highlighted. In addition to rice cookers, hot water kettles, and air fryers, cleaning appliances such as vacuum cleaners, steam mops, mite removers, and sweeping robots are also popular among foreign netizens. Widely welcomed. Relevant report data shows that the average number of small household appliances in a family in the United States has reached 30, and the number in developed European countries has also reached 20. There are many domestic merchants operating small home appliances on Amazon, so competition is fierce. It is the "hardest hit area" for review review and the "hardest hit area" for being affected.

Hefei was awarded the title of "China Home Appliances Industry Base" by the China Light Industry Federation and the China Household Electrical Appliances Association in 2009. It is the first industry in Hefei to break through the 100 billion output value mark. Similar to Shunde, Hefei not only has a number of home appliance brands, but Hefei also has relatively complete supporting facilities for the home appliance industry. Therefore, as for the impact of Amazon's store closures, the two cities are basically the same.

Of course, cross-border e-commerce is only one form of foreign trade, not all. Amazon is only one of the cross-border e-commerce platforms, but it accounts for a relatively high proportion. At the same time, partial blockade does not mean complete destruction. Cross-border e-commerce will still be one of the main directions of major enterprises.

Under the influence of the epidemic, the manufacturing capacity in overseas markets is seriously insufficient. Even with this store closure, domestic manufacturing companies including home appliances will still flock to Amazon. It’s just that Amazon has defined a new way of playing. Legal and compliant operations are the long-term solution, and opportunism will eventually lead to its own consequences.