① Amazon, the leading online retail company in the US, adjusted a series of rates, such as sales commissions for low-priced clothing, to deal with the impact of low prices from rivals such as Temu and SHEIN; ② Temu went overseas to help parent company Pinduoduo's performance increase in the third quarter, driving the US stock Pinduoduo's market value to a new level; ③ Changes in logistics costs, exchange rates, international relations, and overseas consumption habits have opened up new growth space for cross-border e-commerce.
Financial News Agency, December 7 (Editor Tang Yetian) Shortly after the overseas “Black Five Net One” shopping festival ended, Amazon, the “king” of the US online retail industry, announced a series of updated policies on December 6, including the adjustment of sales commissions on the US website. Not long ago, its newest competitor, Temu from the “Four Little Dragons Going Overseas” of China's cross-border e-commerce, has been making great strides to push its parent company, Pinduoduo, to take over from Ali as the “first brother” in stock market value.
Similar to Temu's rise in 2023, there are also SHEIN, TikTok, and AliExpress, which continue to divert and impact established North American online retail giants. How did the cross-border e-commerce market “roll up” behind Amazon, a new rival of “counterattack” and serious recruitment?
Amazon cuts commissions on low-priced clothing products in the US
On December 6, Amazon officially announced a series of referral fee and logistics fee update policies for the US website as follows:
For clothing products priced below $15, the sales commission will be reduced from 17% to 5%;
For apparel products priced between $15 and $20, the referral fee will be reduced from 17% to 10%.
Other adjustments include lowering Amazon logistics delivery fees, monthly storage fees during off-peak periods, etc.; and providing delivery fee discounts ranging from $0.04 to $1.32 for products that meet the package delivery plan. The new changes will take effect one after another starting January 15, 2024.
Previously, the competitive pattern of the retail industry in the US market was concentrated, showing the characteristics of being very strong, and Amazon maintained an absolute lead. This time, Amazon's US website reduced commissions for low-priced clothing products. The Guoxin retail trade team believes it reflects three directions: one is to increase the preferential strength of low-priced products under the cost-performance consumer trend to increase platform traffic and sales and cope with the potential competitive pressure of low-cost online platforms, including TEMU and SHEIN; second, to continue encouraging merchants to improve overall inventory management and other supply chain efficiency; and third, to further encourage environmentally friendly packaging.
The established e-commerce platform in North America is “under a lot of pressure”
Amazon's “counterattack” came from the pressure it felt from new rivals before Black Friday and earlier.
In addition to established e-commerce businesses such as Amazon and Walmart, participating platforms in the “Black 5 Net 1” promotion in 2023, emerging platforms such as TikTok Shop and Temu have also entered the battlefield. Among them, TikTok Shop's Black Friday (11/14-11/20), which participated in the US Black Five promotion for the first time, increased 205% month-on-month (10/20-10/26); orders and spending on the entire site increased significantly after the official launch of Shein's “Black Friday”.
According to data.ai data, previously, the number of global monthly active users (MAU) of Temu, Lazada, AliExpress, and Shein in October 2023 all exceeded 170 million people. Among them, Temu's monthly activity growth rate was the most significant. At the same time that the number of monthly active people on Amazon has fluctuated and declined, TEMU's MAU level in the US has surpassed Shein and eBay.
Cross-border e-commerce company Temu adopted an absolute low price strategy, targeting the rapid expansion of overseas “price difference” markets after going overseas. Its parent company Pinduoduo's revenue for the third quarter of 2023 surged 93.9% year on year, achieving adjusted net profit of 17.03 billion yuan, an increase of 36.8% year on year. The growth space was opened up by cross-border e-commerce. CICC estimates that Temu achieved revenue of about 16.1 billion yuan in the third quarter of 2023.
CICC believes that Temu's rapid growth is mainly due to the increase in actual customer unit prices brought about by declining subsidies, and the decline in the ratio of procurement costs to commodity transaction value (GMV). The former reflects the pricing ability of Temu products when prices are far lower than similar products overseas, while the latter reflects Temu's continuous optimization of supply chain efficiency and bargaining ability with merchants in the process of rapid growth in traffic and GMV.
The Open Source Securities Trading Team said that in the post-pandemic era, the growth rate of online retail channels in the US continued to be faster than the overall retail industry, reflecting to a certain extent that under the trend of declining consumption, consumers' consumption choices are gradually shifting to more cost-effective online channels.
Cross-border e-commerce development policy window and market potential
Recently, the state has continued to introduce support policies involving the expansion of the scope of cross-border comprehensive pilot zones, tax cuts, and cross-border payments. Combined with AI applications to enable cost reduction and efficiency, the cross-border e-commerce industry has ushered in a development window period.
On December 1, Premier Li Qiang of the State Council presided over an executive meeting of the State Council to listen to reports on comprehensive inspections to promote high-quality development, and to study and clarify a number of measures to accelerate the integrated development of domestic and foreign trade. The conference pointed out that it is necessary to optimize the environment for the integrated development of domestic and foreign trade, implement relevant fiscal and financial support policies, and jointly promote the high-quality development of domestic and foreign trade.
What new development opportunities will cross-border e-commerce face in 2023?
The rise of “affordable consumption” overseas in 2023 is one reason. In the first three quarters of 2023, compared to the high inflation in the US consumer market as a whole, the e-commerce price index (DPI) maintained negative growth and widened decline, reflecting that sales of cost-effective products dominated the mainstream of online sales channels. In the context of high inflation, various consumer living costs continue to rise, and cost-effective products in e-commerce channels are highly attractive.
Another factor is that relatively low international shipping costs have increased the overall profitability of the industry. After a record high in 2022, China's export container freight index base (CCFI) for the first three quarters of 2023 is already close to the same period in 2019.
Against the backdrop of slowing domestic e-commerce market growth and marginal improvements in overseas factors such as logistics costs, exchange rates, international relations, and penetration of overseas consumption habits, overseas travel has gradually become an important increase in e-commerce.
In terms of performance, the A-share cross-border e-commerce sector achieved overall revenue of 14.932 billion yuan in the third quarter of 2023, an increase of 30.6% over the previous year, and achieved net profit of 1,212 billion yuan after deducting non-return to the mother, an increase of 25.6% over the previous year. Looking ahead, iResearch expects the growth rate of the cross-border e-commerce export industry to slow in 2024 and 2025, but still maintain an average annual growth rate of more than 10%. By 2025, the scale of cross-border e-commerce exports will exceed 10 trillion dollars.
Cross-border e-commerce layout in four directions
CaiTong Securities said that in the context of the platform game, brand companies and sellers with strong supply chain capabilities are expected to benefit from traffic dividends brought about by multi-platform competition, while also catalyzing further improvements in overseas logistics infrastructure construction. We continue to be optimistic about the long-term beta of the increase in overseas online penetration. Investors can position themselves in the following four directions:
1) Amazon chain cross-border e-commerce: Anke Innovation (300866.SZ), Huakai Yibai (300592.SZ), Jihong Co., Ltd. (002803.SZ), Zhiou Technology (301376.SZ); 2) Lego Co., Ltd. (300729.SZ), an optional product with high performance flexibility; 3) Overseas Brand No. 9 (689009.SH), Shitou Technology (688169.SH), Superstar Technology (002444.SZ), Taotao Auto (301345.Z); 4) Clothing Export chain, Weixing Co., Ltd. (002003.SZ), Huali Group (300979.SZ), True Beauty (003041.SZ), Nanshan Zhishang (300918.SZ).
At the same time, judging from the results of the third quarter report and the net purchases of main capital in the fourth quarter, the following individual stocks had the highest net profit growth in the third quarter and received net purchases from main capital in the fourth quarter.
