Who will be the next ＂graffiti＂ in the platform dispute of cross-border e-commerce？

Wen Tian Huang

China’s cross-border e-commerce companies, who have been toyed with by Amazon, have had a particularly hard time in recent months. There are many big sellers who closed down in an instant because of their titles. The extension of circulating debt to upstream manufacturing industries such as factories and component manufacturers has made the whole industry restless, and everyone is in danger. I wonder if it will be their turn to shoot next. Escaping from Amazon has become the consensus of the whole industry.

Driven by the success of the shein model, a large number of cross-border e-commerce sellers are flocking to a decentralized independent station platform like Shopify, trying to take their fate into their own hands. However, the friendly period of each platform is always inversely proportional to its size. Shopify, which has been flocked to China sellers for a short time and has a market value of more than 180 billion US dollars, has also begun to play a "decent" role, and has also offered a killer weapon for large-scale titles for platform accounts suspected of violating the rules.

Cross-border e-commerce is essentially a trade transaction between supply and demand. E-commerce entrepreneurs play the role of "ants moving" between the domestic manufacturing industry chain and the overseas market demand. They wander among various rules of overseas centralized e-commerce platforms and strive for scale effect. The vast majority of cross-border e-commerce companies have made their fortune in the marginal layer of society, trying to make money in a few choices. As a result, the centralized platform has strong capital and forced these mud legs to become decent, not only to be more compliant, but also to be a good brand.

This means that sellers of cross-border e-commerce will pay more wool tax to the platform in the future, and they will also sacrifice more profits to do compliance and build their own brands. Cross-border e-commerce does not necessarily do big if it is done early, but it must be a gray master of regular arbitrage. When the platform found that its painstakingly managed traffic became an arena for smart people to arbitrage, the ruthless strangulation began.

In the first half of this year, the cross-border e-commerce market in China reached 6.05 trillion yuan, of which exports accounted for 77.5%. The trend of contrarian growth has become the current foreign trade highlight. Behind the overall growth, sellers who are parasitic on the Amazon platform are suffering extremely.

According to the statistics of Shenzhen cross-border electronic commerce Association, in the past two months, more than 50,000 China sellers have been closed on Amazon platform, which has caused an estimated industry loss of over 100 billion yuan. Some people may have doubts. China is so big and Hangzhou is the capital of e-commerce. Is the statistics of a Shenzhen Association so important?

Many outsiders don’t know that Shenzhen still has this strength. World e-commerce companies look at China and China e-commerce companies look at Shenzhen. On Amazon, 70% of the sellers are from China; Among the cross-border e-commerce companies in China, Guangdong sellers can account for 70%, and 50% of them are from Shenzhen.

Behind Amazon’s sudden have no martial ethics is China’s cross-border e-commerce, which is going through a brutal knockout. According to the survey data of Marketplace Pulse, the market share of China sellers in the Amazon market has been increasing continuously in the past few years, with a peak of 42% in 2020. In 2021, the style of painting changed suddenly, and the share of middle-head sellers of China sellers in Amazon’s four core markets, namely, the United States, Britain, Germany and Japan, dropped to 38%, lower than the 40% at the beginning of the year.

There are both passive elimination and active adjustment. After witnessing the tragic situation that the big sellers in the head fell into bankruptcy due to account closure and warehouse closure this year, I believe that no domestic cross-border e-commerce practitioner will not be wary and spread the eggs into more baskets.

Last year, Shopify’s GMV reached 40% of Amazon’s $119 billion. In the second quarter of this year, while Amazon was busy sealing the accounts of sellers in China, Shopify’s GMV increased by 40% year-on-year to US$ 42.2 billion in the second quarter.

Whether it is centralized Amazon or decentralized independent station Shopify, there is a long-term dynamic platform balance relationship between sellers who concentrate on making money and platforms that need both traffic and brands. They are like a marriage, with a honeymoon period when they first got married, followed by a five-year itch, a seven-year itch, a ten-year itch, and finally a divorce. When the two sides are too familiar with each other and hurt each other too much, even if there are many nostalgia, once they decide to break up because of important changes, they will never be able to recover.

Many big sellers, who are well versed in platform operation, became platform rules and lost to the sudden collapse of rules loopholes, have the determination to expose the uprising in their hearts. They already have a large volume, and their annual sales and profit margins are good. If they want to further expand their scale, they are faced with the limitations of platform traffic, changes in rules, their own brands and supply chain capabilities, and they are anxious to see their peers in the same segment suddenly fall down one after another.

In Shenzhen, the founders and executives of many big sellers have begun to withdraw from the traditional cross-border e-commerce business. They have set their sights on a new development direction and used their years of accumulation and vertical industry experience to serve the vast cross-border e-commerce army in China.

To put it bluntly, I have earned enough money, and I don’t want to be controlled by others. I want to build myself into a new platform.

Recently, cross-border e-commerce ERP SaaS vendors have frequently received large amounts of financing, among which Lingxing received 200 million yuan in Series B financing, accumulated 180 million yuan in Series A financing, caravan software received 150 million yuan in Series A and A+ financing, and Captain BI received nearly 100 million yuan in Series A financing.

In the cross-border e-commerce SaaS software entrepreneurial army, Jijia’s team is more eye-catching, and its founder is Zhang Huajun, the former IT director from Anker, a cross-border e-commerce head company. The transparency of cross-border e-commerce industry chain and the refinement of platform rules have given birth to the demand for third-party ERP management software. Zhang Huajun’s experience in Anker’s operating system construction has become the capital of his venture. The customers who have accumulated cross-border e-commerce ERP SaaS software are concentrated in 30 million to 3 billion waist customers, and it is said that the renewal rate of customers has reached 96%.

If the above data are true, it shows that the technical team from the big head sellers is more grounded, more practical and has more comprehensive advantages than the entrepreneurial team outside the industry in understanding the pain points of cross-border e-commerce sellers, paying attention to the needs of application scenarios, and continuously verifying the operating data for a long time.

Compared with the entrepreneurship of cross-border e-commerce SaaS software vendors in the direction of operating platforms, some big sellers look further. Recently, I chatted with Lao Fang, the founder of a big seller headquartered in Shenzhen Xili, with annual sales of nearly 4 billion. He told me his new layout in detail.

More than ten years of cross-border e-commerce operation experience has enabled Laos to precipitate relatively strong supply chain management capabilities, supporting management capabilities such as logistics, warehousing and after-sales, deeply customized operating system resources and mature teams. The market capacity of each single product of cross-border e-commerce is relatively limited. After making the market of some products to the extreme, Laos had an epiphany in this Amazon title tide. He distributed the traditional e-commerce business to his brothers who followed his own business for many years, and he invested hundreds of millions of yuan to build an enabling platform to serve cross-border e-commerce.

His empowerment platform model can be said to be nanny-style. Between the growing huge cross-border e-commerce group and overseas e-commerce platforms, Laos’ empowerment platform provides comprehensive services for small and medium-sized cross-border e-commerce sellers from product selection to logistics, supply chain, warehousing and delivery, after-sales and customized operating system empowerment.

At first glance, this platform model of online and offline all-inclusive operation is quite heavy, and the scale is much slower than that of pure online platform. However, once the standard parts empowered by the platform are polished finely enough, it can form a moat that is difficult to imitate and copy, and win a better position in the wave of transformation of Amazon sellers.

Such a heavy gameplay has already landed, that is, graffiti that deeply cultivates smart homes. Graffiti started as a cloud platform and solution, and the rapid growth of its performance also benefited from the rise of cross-border e-commerce industrial chain with smart home as its main sales category in China. The advantages of graffiti intelligence in the development of cloud platform and application system are highly complementary to the cross-border e-commerce industry chain of smart home dominated by Amazon.

Most hardware factories don’t have enough profits to raise dozens of ios and Android system code farmers to promote the intelligence of hardware products. Most small and medium-sized cross-border e-commerce sellers who focus on trade are more willing to invest too much in product research and development. Graffiti’s intelligent system package solution has its place in these fragmented demand scenarios. Through the active cooperation between offline and hardware factories, as well as a certain amount of investment, graffiti has achieved a certain share in the system of smart home products at sea, and the activation and continuous use of a large number of overseas users has also brought about the ability of graffiti big data and cloud services. The growth of this part is the core capability of the platform that the capital market pays the most attention to, and finally it helps graffiti to successfully land on Nasdaq and become the most competitive AI+IOT artificial intelligence IoT solution platform in the industry.

In this wave of transformation of cross-border e-commerce sellers’ platform development, whether they focus on online ERP SaaS platform, or build a more three-dimensional platform to empower the whole industry chain that includes online and offline matrix services, or even seek a new direction of re-aggregation after the breakthrough point in more subdivided fields, they will eventually enter a close-knit homogenization competition in the process of seeking scale effect horizontally after completing the vertical depth exploration.

This track is both vibrant and extremely crowded. No matter where the big sellers cut in, they are all serving the same type of groups in different shades, and there will be no more than three long-distance runners for platform players.

As a senior big seller who started from Taobao to cross-border e-commerce, Laos is pessimistic about the future fate of cross-border e-commerce big sellers. He asserts that this group of big sellers will die out in the future, which is why he firmly turned to the development direction of the platform.

I basically agree with this judgment. From now on, cross-border e-commerce sellers are already a high-risk industry. After completing the original accumulation, platforms such as Amazon began to pursue profit margins and brand effects. Most of the big sellers parasitic on e-commerce platforms are masters of platform wool, wandering in the gray area of platform rules, which is also the main driving force for the continuous improvement and refinement of platform rules.

When the big sellers have achieved the extreme operation of some products and are constantly seeking for greater scale effect, their accumulated operational ability can already affect the trend of platform segmentation traffic, their symbiotic relationship with the platform has undergone subtle changes. Often walking by the river, how can there be shoes that are not wet? Once the scale of some operation links of large sellers is too large to break through the bottom line of platform rules, the decline of users’ word-of-mouth and negative effects will often be greater.

The centralized e-commerce platform itself tends to monopolize, pursuing scale effect and resource concentration. When the big sellers in the platform use their excellent operational capabilities to seek scale effect, they compete with the centralized e-commerce platform for profit. An e-commerce platform like Amazon wants to see the platform seller ecology, which is dominated by small and medium-sized sellers, and is a prosperous scene of competing for beauty, rather than the concentration of traffic to big sellers, which weakens the control and profit margin of the platform and is more likely to produce a large sudden negative word of mouth.

In the past, the relatively complex management process of transnational industrial chain and the asymmetric information market environment at home and abroad provided a fast-growing bonus for early sellers. Nowadays, the global cross-border e-commerce industry chain is becoming more and more mature, and the talents, supporting services and operation processes of the industry are rapidly transparent, and the rules of the game of e-commerce platforms are also deepening and refining. Under this trend, the entry threshold for cross-border e-commerce is getting lower and lower, so low that you can get nanny-style services to get on the road quickly with only the initial investment, but the challenge of being a large and medium-sized seller is getting bigger and bigger, which is almost difficult to achieve. Even if you have become a big seller now, the e-commerce platform is making big sellers bear more responsibilities and costs. If you can’t dance with the platform, your final fate may suddenly be closed down as it is now.

Every highly mature industry is very similar. Cross-border e-commerce is taking off the mysterious veil and becoming more and more transparent, and the starting point for engaging in cross-border e-commerce is also decreasing. Driven by the continuous growth of the cross-border e-commerce market, more entrepreneurs will join in the future, and most of them are doomed to leave the market in a daze, in a wave-by-wave cycle in a mature platform economy.