Home / Lights & Construction

"Affected by Amazon's banning wave, the same sellers in the building have gradually withdrawn their rents. The companies that originally wanted to rent one floor now only have one room to prepare for the peak season." In the exchanges of several home furnishings, home furnishings continued to sell. The news that Lin shares was also involved in the banning tide shocked the industry. Henglin said that because the smugdesk brand was affected by Amazon's banning event, the Amazon store is currently in a blocked state. From the closure of 3C big sellers, to household appliances, health care and other categories that suffered successively, and then to the home and apparel big sellers, which were also "named on the list", Amazon sellers fell to the bottom of the once "rich overnight". This feature seems to be more prominent among home furnishing sellers.

Last year, the export of home appliances was very popular, and the factory called out so many orders that they "dare not take it." However, in the bloodbath of Amazon's title, these sellers had to embark on the tearful low-price inventory sale to survive with broken arms. road. What happened in this?

The truth behind the overall coldness of home furniture export trade

"Last year it really made a lot of money. Some of my peers around Amazon can earn 100 million in sales per month, and some entrepreneurial companies have entered the B round of financing, and scenes of "rich-making myths" have been staged in the industry. (click here) See more big-selling blessing myths) The plot began to reverse in the first half of this year. After being involved in the banning tide, they could only speed up shipments and actively save themselves. Some sellers have completely given up struggling." Li Yuan, a home furnishing seller, sighed.

At the beginning of this year, seller Wang Meng suddenly discovered that orders had begun to decrease, especially in the US market. "Last year the repeated epidemics and the formation of consumer habits drove the'home economy' to boost demand, so a large number of goods were stocked, and the supply of goods exceeded demand. There have been sellers selling a piece of furniture costing 60 US dollars at a low price of 9.9 US dollars. ."

The home furnishing sellers who were about to run fast were slammed on the brakes by Amazon's massive ban. Sunshine, a seller who has just started Amazon recently, posted that he was deducted $230,000 by Amazon, which is a disaster for small and medium sellers like him. "If the product continues to be sold, the amount of sales proceeds will be directly used as a deduction. At this stage, the store can only be in a stagnant state. If the costs of the inventory products in the transfer account add up to a loss of more than 600,000 yuan; if the inventory cannot be removed, the account will be discarded. The loss will reach more than 1 million yuan." Whether it is to remove inventory or close the store, it will be less than the amount of deduction that needs to be repaid. As a result, many sellers have the idea of abandoning the store.

It is understood that as early as mid-March of this year, home furnishing export companies began to encounter customers canceling orders one after another, and some customers with a large number of orders for goods made the decision to postpone shipment. The impact of the epidemic, the rising cost of cross-border logistics, and the reduction in consumer demand have all caused the overall export trade of the industry to be cold.

"The beauty of Shenzhen's cross-border e-commerce last year will be how miserable this year." This is the self-deprecating situation of practitioners in the industry, but it also expresses the helplessness. He Wei, the head of sales of the Easy Chain business of the Yicang Group, analyzed the root cause. On the one hand, the epidemic broke out last year. There was a large-scale outbreak of consumers working at home and successively updated home furniture, such as office desks and chairs, which once detonated orders. Continued to climb, and with the normalization of the epidemic, the sharp decline in people’s incomes and the “cooling” of US subsidies, overseas consumers’ willingness and ability to redeem home furniture have declined, and the market has shown a situation of oversupply; on the other hand, it needs to be traced. By July this year, Amazon opened the most severe "store closure tide" in history, and the "list" of sellers of blocked brands has gradually increased, and home furnishings have also been involved, directly bringing sales to the "freezing point".

It is reported that PATEO Furniture, as a number of big-name Amazon furniture suppliers, has also been exposed a few days ago to terminate the IPO. As early as June 2020, it had planned to raise 610 million yuan to submit a prospectus to the Securities Regulatory Commission, but the specific reasons for the termination of the listing are currently unknown. There are also rumors that the furniture sales, which completed 1 billion sales last year, have also been exposed this year and filed for bankruptcy.

It is worth mentioning that in early July this year, Amazon founder Jeff Bezos retired and Andy Jassy took over. Perhaps because of the "three fires of new officials", Amazon's current moves may also reflect the iron-fisted style of the new CEO. Behind this is not only the consideration of ecological purification, but also the need to increase platform advertising revenue. In short, the timing is intriguing.

However, the industry is still optimistic about the cross-border e-commerce market. China is the world's largest manufacturing country, and Chinese sellers still have considerable advantages in many consumer products such as household furniture, electronic products, clothing, mothers and babies. At present, what Chinese sellers need to do most is to work on multiple cross-border e-commerce platforms such as independent stations, eBay, and AliExpress at the same time; on the other hand, to concentrate on making products, increase product premiums, and realize Chinese brands going overseas. longterm development.

Where is the pain of big home furniture going to sea

In 2020, the outbreak of the epidemic has caused the sales of large products to rise steadily. As long as the sellers in the industry who are large and heavy goods and have inventory in overseas warehouses, their performance is showing a trend of skyrocketing. In the hot search list of Weibo that dates back to last year, examples of bicycles, furniture, and freezers being snapped up overseas also confirm the popularity of overseas markets. On the other hand, in 2021, big sellers were closed stores, listed companies declared bankrupt, big-name suppliers IPO terminated, and the phenomenon of big home furnishings going out to sea has doubled down. What is more worth pondering is how cross-border companies should continue in this field. Deep plowing? Compared with small and light products, the number of sellers exporting large and heavy goods is much smaller. What is it that prevents 80% of sellers from entering the circle?

Hugo Cross-border tries to analyze the difference between large and small products going overseas from several dimensions such as investment, logistics, capital, and inventory:

Go deeper into the many bottlenecks behind the export of large commodities:

·The pain of capital—large capital investment and complicated cost estimation. The purchase cost of large home furnishings is much higher than that of small and light products, which requires the seller's funds, product selection, and logistics capabilities to be quite high. According to Shenzhen seller Kevin, it takes roughly 1 million to replenish the goods. From the perspective of the normal flow of cross-border e-commerce, in an ideal state, there is usually one container of goods in overseas warehouses, and one container of goods floating on the sea, which is produced by the factory. A container of goods, cyclically, which means that the seller needs at least 3 times the capital to leverage the normal flow of the entire business. "For us, there is still a problem of replenishment. The knowledge in it is also very deep. Because the replenishment time is very long, the seller must press the goods to deliver the goods, and the result is that the replenishment is direct. The stock is out of stock, and the backlog of funds has been made up, and the risk is extremely high." He said.

Wang Jia, the person in charge of the furniture export company, also revealed that he had previously encountered a customer who purchased a complete set of furniture with one order, but due to the large amount of money, the payment was finally completed after 5 splits. There are too many similar cases. The local bank suspected that the credit card was stolen because the amount exceeded the limit, and the transaction was forcibly frozen during the payment, which brought huge challenges to the entire transaction chain.

·Logistics pain-need to be equipped with overseas warehouses, logistics costs account for more than 30% of turnover. Due to weight, volume and other reasons, most of the bulky products are sent to overseas warehouses by sea, and after the order is generated, they will be delivered directly from the overseas warehouses to consumers. Under normal circumstances, the logistics cost of bulky products accounted for more than 30% of turnover. Specifically, for example, if the length of the goods exceeds the standard, there is an over-length surcharge, overweight products have overweight fees, product packaging is too large, and the size does not meet the standards, which may cause out of control of logistics costs.

And some new entrants sellers also regard the deployment of overseas warehouses as their top priority. According to them, if the track of bulky products is not overseas warehouses, core competitiveness cannot be established. At the same time, it also puts forward higher requirements on the ability of bulk sellers to perform overall control in the chain of production, transportation, target market customs and taxation, product certification, after-sales service, target market finance, etc., which will test sellers’ stocking and inventory rationalization. Supply chain capabilities such as operations are often more difficult and complex.

·After-sales pain-the quality of the goods is controlled, and it is difficult to achieve a touch experience. In the home furnishing industry, there is a clear differentiation-the development of export e-commerce such as home decorations, small home appliances, and daily groceries is relatively prosperous, while the development of some large-scale furniture and mattress export e-commerce is relatively slow. It is very common for overseas consumers to buy curtains and small home appliances online, but once large furniture is involved, most consumers are discouraged from shopping online. A large part of the reason is that consumers are unwilling to accept online purchases of heavy home furnishings, especially heavy products such as large furniture and mattresses.

Industry insiders explained: “Big home furniture is more expensive than light and small pieces, and the consumption frequency is low. In addition, the return and exchange is cumbersome and even prone to high shipping costs. At the same time, consumers tend to pay more attention to product experience, such as sofas. You need to experience on-the-spot to know whether the product’s softness and hardness are appropriate, and whether to coordinate the overall style of the room. Although there are currently some AR and VR technology providers in the home furnishing industry, such as Amazon, Wayfair, etc., they are relatively speaking. There is still a long way to go to realize the demand for a real touch experience. Therefore, most consumers use online as a channel of understanding, and they may have many concerns when they actually buy."

If the experience pain point is for consumers, then the logistics pain point is more "pain" to the enterprise. Kevin has a deep understanding: "Once a large product has a quality problem, it is very difficult to deal with. In addition to the high return shipping fee, it is even difficult to return the goods for a second sale. For example, due to the characteristics of furniture products, the logistics damage rate is particularly high." It was revealed that the current practice in the industry is mostly direct refunds. If sellers can persuade consumers to accept partial refunds, they can lose less. The difficulty of after-sales forces sellers to find high-quality and stable supply chains and products, because once there is a problem with quality control, the entire business plate will burst.

·The pain of the channel-the large-scale commodity channel is relatively scattered, the key is to work together online and offline. Affected by the global epidemic, the suspension of offline transactions has forced the acceleration of international trade to migrate online, and the trend of online sales channels is inevitable. However, due to the low standardization of the furniture industry and the logistics and transportation of large items, the industrial chain of the furniture export market has been very fragmented.

(Industrial chain structure of furniture export industry)

"Human goods yard" is often mentioned in business, but now "human goods yard + technology" is talked about by the public. He Wei mentioned that nowadays, under the constraints of heavy offline experience, opaque prices, non-standardized delivery, and complex service processes, the road to digital transformation for home furniture export companies is imminent.

How will home furnishings go overseas to find new growth in the second half of the year?

The above mentioned funds, logistics, after-sales, experience, channels, etc. Although home furnishings are painful, they are also happy. Take furniture as an example. According to statistics from Mangento, the current global online sales of furniture and electrical appliances is 362.9 billion U.S. dollars. In the next five years, it is expected to reach 455.4 billion US dollars, an increase of 25%. Among them, the market share of North American home furnishing e-commerce in 2020 has increased by 20%. Due to the impact of increasing housing market demand and gradually improving shipping infrastructure, the US market is expected to jump to 23% by 2023.

Behind the large-scale home furnishings going overseas, sellers are more worthy of thinking about what they can rely on to eat this market, how many opportunities are left for small and medium-sized sellers, and how can they strive to gain more market share in the second half of the peak season?

"The arrival of any crisis is the end of an era, but also the beginning of another era." According to Longhui Cao, a practical expert in cross-border e-commerce supply chain management, sellers should put their focus behind the bottleneck of large home furnishings going overseas. Continue to optimize on the way of supply chain upgrade and lean management.

The so-called cross-border e-commerce supply chain refers to all the links involved in the process of meeting the needs of overseas customers, including product designers, manufacturers, suppliers, logistics providers, warehousing companies, distributors and C-end customers themselves. These enterprises and consumers form a "chain", an integrated organization, and the management carrier is the information flow, commodity flow, capital flow, and goods flow throughout the "chain", with the goal of reducing procurement, inventory and transportation links. The overall cost of the supply chain improves the competitiveness of the supply chain.

(Picture/Shared by Longhui Cao, a practical expert on cross-border e-commerce supply chain management)

So, what iterations and optimizations should be done in the large-scale home furnishing category in 2021?

One is to avoid homogenous competition and how differentiated category planning is. Preliminary market analysis needs to be comprehensive and in-depth, avoid red sea products as much as possible, and plan for differentiated products in advance to avoid internal rolls.

The second is to sink the industrial side and integrate high-quality resources strategically. The development of products is not limited to 1688 channels. The Internet is open, fair and transparent, and it needs to be excavated on the spot. In particular, operating large-scale or OEM products should go out more to familiarize themselves with the latest developments in the entire market, industry trends, understand the side information of competitors, and actively feed back to the sales department.

The third is to improve the forecasting ability of sales plans and reduce inventory risks. Undoubtedly, at this stage, most of the export sellers of operating large-sized commodities are clearing inventory and quickly withdrawing funds, but the overseas market is still in demand, so will the entire industry be out of stock frequently in the Q4 peak season, and who will it be? Goods are the king? "This question has no absolute value! With the current high head-up costs and the status quo of procurement costs, no seller dares to ship goods easily. The key depends on the mature operating model of each company and the reasonable judgment of the company's owner to stock up." Cao Long Hui said.

The fourth is to improve the level of quality management and put quality inspection management ahead. When operating large commodities, even if it is an OEM, cross-border sellers should put the quality inspection management to the upstream, and even the upstream end. For example, Longhui Cao said, for example, if a product needs to be sprayed to an overseas factory, then the quality management needs to be forwarded to the most upstream process, instead of just staying in the product dimension, to further improve the quality management level.

Cao Longhui further emphasized: “When operating large-scale commodity exports, sellers should optimize the product structure and packaging as much as possible. The more options there are, at the same time, it is relatively more advantageous to use the product structure and multi-scene layout."