Cross-border sellers and suppliers are inseparable!

On July 18, Dongguan Cooper Electronics Co., Ltd. (hereinafter referred to as Cooper) announced the suspension of production and closure, causing the industry to sigh.

Cooper specializes in electronic products and OEMs Bluetooth headsets for cross-border brands. It is an important supplier behind the top-selling Zebao in the industry. One of the reasons why it cannot survive is that cross-border sellers such as Zebao default on payment.

As the industry environment turns cold, sales and profits of many cross-border big sellers have declined, and asset-heavy suppliers in the industry have also begun to decline. According to people familiar with the matter, many suppliers have gone bankrupt in the past two years. In order to reduce risks, many manufacturers have shortened the billing period or asked sellers to pay part of the payment in advance. Many manufacturers are in danger of stocking up on goods and have begun to proactively ask sellers whether to place orders.

Obviously, the cross-border e-commerce industry has a certain degree of radiation on surrounding companies. In addition to suppliers, logistics companies have also been greatly affected. News of this kind came one after another, causing more worries.

Due to Zebao’s default in payment, Dongguan Cooper suspended production and closed operations

On the 18th, Cooper issued a notice of suspension of production and closure with an official seal. This notice was widely used in cross-border e-commerce. It went viral and caused heated discussions among many suppliers and sellers.

According to the notice issued by Cooper, the background of its suspension of production is that the outbreak of the new crown epidemic has caused an unparalleled impact on the global economy and trade. The specific reasons are mainly as follows:

1. Many cross-border e-commerce companies defaulted on payment, and a large number of finished products were backlogged in the warehouse, creating a vicious cycle;

2. Domestic External orders have been severely out of touch and have fallen off a cliff;

3. In recent years, production and operation have suffered losses every year and are unsustainable;

4. The sudden outbreak of war and the impact of the general environment have directly led to The company was greatly affected and the market was extremely severe.

Several cross-border e-commerce sellers are in arrears with Cooper, among which Zebao is the most famous. On the 19th, Cooper's major shareholder and actual controller Wei Yongning told the media: "Zebao, a major cross-border e-commerce seller, has defaulted on the company's payment." An insider said that according to the news he heard, Zebao defaulted on the company's payment. Po's payment data is not small.

Zebao is a well-known leading cross-border e-commerce seller in Shenzhen, mainly selling consumer electronics products on the Amazon platform. According to public information released by Zebao, Cooper is its main supplier and has been its second largest supplier for many consecutive years. The company's main products purchased from Cooper are Bluetooth headsets. In 2017, the amount of products purchased by Zebao from the top five suppliers was 371 million yuan, accounting for 40.35% of the total purchases. The amount of products purchased by Zebao from Cooper Electronics reached 82.443 million yuan, accounting for 8.96% of the total purchases.

It can be seen that Zebao’s purchase of products from Cooper involves a large amount of money and there is a close relationship between the two parties. A former Zebao employee also confirmed that Cooper is indeed one of Zebao's large suppliers.

Last year, Amazon launched a compliance rectification and suspended the accounts of some sellers with violations. Zebao also encountered a crisis of account suspensions, and several main accounts and brands were affected one after another.

In 2020, Zebao’s sales revenue on the Amazon platform accounted for 93.40% of its total revenue, which shows that it is highly dependent on Amazon. Affected by the account ban incident, starting from the third quarter of 2021, the purchase volume of Zebao's major products has been significantly reduced. When big-box purchases drop sharply, suppliers will definitely have a hard time!

"The headphone business of a once-famous large manufacturer was booming. It survived for more than ten years, but now it suddenly went bankrupt!" a fellow manufacturer lamented!

According to the notice issued by Cooper, production and operations have been officially suspended on July 18, 2022, and all employees have been dismissed in advance. After all employees terminate their labor contracts with the company, they can appeal in accordance with the national labor law and other relevant laws and regulations. solve.

Founded in 2010, Cooper is a professional IT peripheral manufacturer dedicated to the development, production and sales of audio products.

The company's current main core products: portable card-enabled headsets, Bluetooth wireless headsets, 2.4G digital wireless headsets, USB functional headsets, 5.1 game console audio-visual headsets, anti-noise headsets, etc. The company's main customers also include many well-known domestic and foreign brands. .

According to people familiar with the matter, this factory was once a relatively well-known headphone giant manufacturer in Dongguan, with thousands of employees, most of whom were female. A netizen who claimed to be near the factory said that currently workers cannot be paid their wages.

Is the billing period the culprit that drags down the factory?

In fact, due to the impact of the market environment and the cross-border e-commerce industry, factories like Cooper's that are currently unsustainable are not an exception.

A netizen revealed that he, like Cooper, was dragged away by Zebao for millions, and this year has been very difficult. Many factories are now carrying heavy loads.

“I received a call from a junior high school classmate and was told that the entire production line of the factory had been laid off because there were no orders, and the boss could no longer survive,” said a seller in the industry.

A factory source said that a nearby factory went from producing 2 million pieces of products a month to 200,000, and the output was cut directly to the heel. Business in the factory is not good now, and sometimes the landlady needs to collect rent to maintain the wages of factory employees.

There may be many more such factories. Many manufacturers believe that one of the factors that makes it difficult for factories to support is the issue of billing periods, and almost everyone is held back by the billing period. We dare not give cross-border e-commerce accounts due date now, the risk is too great!

Since this year, many manufacturers have begun to shorten the billing period in order to reduce risks. Many factories have shortened the billing period from the original 3 months to 1 month. Some even do not give a billing period, and pay with one hand. goods.

Some factories will ask sellers to pay in advance. One seller said that he received a call from the supplier and asked if he could pay part of the payment to ensure that it is earmarked for use. This payment will be used for our orders. Recently, there are not a few cases where factories require payment in advance. The general situation reported by multiple sellers is that the factory wants to be more stable under the bad environment, and has recently been asked by many manufacturers to pay in advance.

Industry insiders said bluntly that suppliers and cross-border sales are deeply bound. Factories are asset-heavy enterprises. Developing and manufacturing a product requires a lot of manpower, R&D, time and other costs. In addition, in the past few years, when factories were involved in each other, multiple factories would give cross-border sellers a certain account period. , if it is a large customer with long-term cooperation, some factories will give an account period of 1-3 months, and some will even give it half a year.

If there is a problem with the cross-border seller that the factory cooperates with, product sales are blocked, there is a problem with the account, the seller's cash flow is no longer sufficient, the inventory of the foundry is overstocked, and the payment is slow, a crisis will come. The funds invested by the manufacturer in the early stage are likely to be owed all the time, and being owed a large amount of money is undoubtedly a fatal blow to the asset-heavy factory.

Regarding Cooper's suspension of production, some netizens made sharp remarks: "It was dragged to death by the combined efforts of multiple cross-border e-commerce sellers. Many orders were placed and could not be sold, resulting in a large amount of inventory and a broken capital chain. "

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In fact, in addition to supplying cross-border sellers such as Zebao, Cooper also does online business himself.

In August 2020, Cooper publicly recruited Amazon operators, requiring marketing and English-related majors, and more than 1 year of experience in Amazon platform operations; independently operating the Amazon platform, and being familiar with Amazon’s operating environment, transaction rules, Operation and promotion ROI, paid advertising placement, familiar with European and American overseas markets, etc.

In September 2020, Cooper also recruited Alibaba operations, responsible for operating the Alibaba e-commerce platform, editing, uploading and updating products in the backend, and optimizing rankings.

In addition, Cooper has also recruited e-commerce artists, data analysts, new media operations specialists, etc. It can be seen that this factory is not only engaged in processing, but also has another identity - a cross-border e-commerce seller.

One of the reasons for Cooper's collapse was the serious disconnect between domestic and foreign orders, which showed a cliff-like decline.

The orders here should not only be orders placed by cross-border sellers such as Zebao, but also orders from their overseas customers.

As the epidemic in Europe and the United States becomes normalized, many consumers prefer to buy rationally. They spend their money wisely and buy some daily necessities or some low-price products. The information index of consumer purchases The continuous decline has greatly affected the orders of cross-border e-commerce sellers.

After the wave of Amazon account bans broke out, 3C sellers were the first to bear the brunt, and Zebao’s orders and sales were also seriously affected. As a supplier of Zebao, the products sold by Cooper’s online store must be related to 3C. Overseas customers and online orders may also be greatly affected.

So, there must be more than one straw that breaks the camel’s back!

As a supplier standing behind cross-border sellers, factories and sellers are closely related. When cross-border demand is strong, orders are flying in, and when products are unsalable, they face backlogs and payment collection problems. Now, they are beginning to experience more pressure from across borders.

Binding sellers and suppliers

After the Amazon account ban incident, many leading sellers fell from the altar and have not been able to turn around. At the same time, the operating costs and fierce price wars that have continued to rise this year have repeatedly compressed the profit margins of sellers, and sellers whose accounts have been banned are suffering from all sides.

Recently, Huading Co., Ltd., the parent company of Tongtuo, released its performance forecast for the first half of 2022. It is expected that the net profit attributable to shareholders of listed companies in the first half of the year will be 360 ??million to 510 million, which will increase by 188 million compared with the same period last year. billion to 338 million, a year-on-year increase of 109.29-196.49. This result looks quite impressive.

However, it is expected that the non-net profit attributable to shareholders of listed companies in the first half of this year will be -240 million to -140 million, which will be a decrease of 273 million to 373 million compared with the same period last year, a year-on-year decrease of two times. many.

The sluggishness of the main business is an important reason affecting the current performance. In the first half of the year, Huading's cross-border e-commerce segment was still in a state of loss, mainly due to a significant year-on-year decrease in cross-border e-commerce revenue, and a large amount of asset impairment provisions due to the PayPal incident.

Obviously, the sequelae caused by account ban cannot be avoided, especially since Tongtuo has stepped into two deep pits of account ban from third-party platforms and independent stations.

From mid-to-late July to early August last year, 54 Amazon stores involved in multiple brands of Tongtuo were closed, and 41.43 million yuan of funds were allegedly frozen, accounting for 4.27% of the company's monetary funds at the end of 2020. Although this caused a big blow to Tongtuo, Tongtuo's operations on other platforms and self-operated websites were not affected at that time, and these business sectors were still operating normally.

In order to avoid the impact of Amazon's account suspension, Tongtuo increased its sales proportion on third-party platforms such as eBay on the one hand, and on the other hand increased its investment in self-operated websites.

According to the main operating data for the fourth quarter of 2021 disclosed by Huading Co., Ltd., its export revenue of cross-border e-commerce digital, apparel, and household products in 2021 was 5.35 billion. This year, the total revenue of the three categories of Tongtuo Export's self-operated websites (including mobile terminals) was 110 million. From January to September, the net sales revenue of independent websites accounted for 3.48% of the total sales revenue in the same period. The annual revenue of the self-operated platform The number of visits also reached 71.5 million.

After the account ban incident, sellers all regarded independent websites as a safe haven and had high hopes for them and spent a lot of money to build them. The same is true for Tongtuo. However, at the end of March this year, Huading Co., Ltd. issued an announcement: 29 of the PayPal accounts bundled by Tongtuo Technology on the independent website had funds deducted by PayPal. As of March 28, 2022, the total amount deducted was RMB 54.245 million yuan; 6 accounts were sued for trademark infringement due to products sold by bound independent stations, with frozen funds of 24.246 million yuan, totaling 78.491 million yuan, accounting for 8.09 of the company's audited monetary funds at the end of 2020.

The successive account closures and fund freezes have had an indelible impact on Tongtuo's operations and profits. The company's capital turnover will inevitably be restricted. At this time, can the service providers who cooperate with it deal with it calmly?

When cross-border sellers are hit by thunderstorms, no cooperative company can completely stay out of the matter. As soon as the news of the industry's account ban came out last year, the suppliers that cooperated with them were on pins and needles. Many companies inquired about the seller's company situation or directly Go and ask for payment. The one that caused the greatest psychological shadow to the cooperative factories was undoubtedly the former Global Tesco.

According to previous employees of Global.com, the company owes money to more than 3,000 suppliers. It owes about 450 million yuan to suppliers and about 300 million yuan to logistics, totaling More than 700 million yuan.

Due to long-term arrears in payment, Global.com has been blocked by suppliers many times. The most serious incident was in June last year. Yien.com once collected information about some debt collection suppliers at that time. They were located in more than a dozen cities such as Shenzhen, Guangzhou, and Foshan. The amount of debt owed ranged from tens of thousands to several million. In order to get back the payment, most suppliers went to The number of on-site debt collections was no less than 5 times, and some merchants even went there more than 30 times and still did not get the payment.

Supplier form

After this incident, many suppliers have drawn a safety line, saying that they will carefully select cross-border e-commerce customers in the future and will no longer give account terms easily. . This is a downgrade of external trust in the entire cross-border e-commerce industry.

Nowadays, Cooper's failure to pay for goods sold by cross-border e-commerce eventually led to the suspension of production and dissolution of the factory. This incident has once again put the risk of cross-border supply on the table. In the past year or two, as cross-border business has become more difficult, disadvantages such as rising costs for sellers, low-price sales, and declining profits have intensified. Uneasiness has also begun to spread from sellers to partners, and service providers are on pins and needles: Will my client make a mistake? Do I have to pay for it?

The difficulty of cross-border business has escalated, making it difficult for service providers

Since this year, Amazon sellers have generally reported high advertising costs, slow inventory turnover, and falling product prices. In order to maintain rankings or promote For new products, sellers are desperately pushing up CPC under the platform’s high recommended bidding, and ACoS remains high. When reviewing performance, many sellers found that they sold more goods but made less money. This is to a certain extent It affects the confidence of sellers, but more seriously, it has a positive impact on profits.

A seller who has been in the industry for three years has caught up with the development of cross-border e-commerce. It has always been smooth sailing, with positive profits every month. However, when he took stock of his performance in June, he found that he had suffered a loss for the first time. He felt anxious, and judging from the current situation in July, the performance had not improved significantly, so the seller set the next development goal of ensuring balance of payments.

On the other hand, involution has become more serious this year. When sellers engage in price wars regardless of profits, the suppliers behind them cannot sit still.

Last week, a seller discovered that a factory he saw when selecting products on 1688 marked "the cross-border price of this product must not be lower than **" on the details page. This was because he himself Do you also do cross-border retail? However, customer service informed us that the company only operates in the domestic market and limits cross-border sales prices in order to allow every customer to make a profit. At the same time, it will complain about products on the cross-border platform that are sold below this price limit. A few sellers are willing to sacrifice profits and offer low prices, forcing suppliers to rectify the Amazon market.

In fact, if the seller cannot balance the income and expenditure, both internally, including company operations, and externally, business cooperation, will be dragged into the quagmire. Cooper is a clear example. But if there is a problem with the seller's operation, it is not just the supplier who will be affected.

A logistics person lamented: As a freight forwarder, we are also wary of cooperating with these large manufacturers and sellers. Although the shipment volume is large, the billing period is usually several months or half a year.

If Amazon is not selling well, it will keep clearing inventory, and the billing period will be delayed again and again! "You want money? I won't have the money to pay you until I sell out! Deduct the goods? You can deduct it. Anyway, warehousing requires rent!"

When news about logistics company thunderstorms comes out frequently, sellers in the industry are deeply worried. Fear of stepping on thunder. Similarly, when cross-border platforms or payees rectify illegal sellers, logistics companies are also worried that their sellers and customers will be hit. If the latter's operations are blocked or their capital chain is interrupted, their service fees will be difficult to recover. .

This involvement comes from the composition of the current cross-border e-commerce model.

Some netizens said that many of today’s foreign trade companies are empty-handed. They have made a little effort to increase the supplier’s payment and lower the logistics provider’s freight. They only need to pay the company’s basic expenses. This kind of operation has caused chaos in the industry.

For smaller seller customers, suppliers and logistics companies can refuse the payment period. However, the current shipment volume has been reduced and logistics prices have been falling repeatedly. Many sellers go straight to the point and ask if there is a billing period. If not, there will be no further explanation. In order to attract goods, logistics companies can only make concessions and allow the billing period, which also brings certain difficulties to their own operations. of uncertainty.

The same goes for the supply side. If product sales are hindered, cross-border sellers' cash flow is no longer sufficient, OEM inventory is overstocked, and the payment cycle is extended, a crisis will arise.

Industry insiders believe that risks from the market are beginning to shift to the supply chain, which is a very dangerous signal. "If Dazhai goes bankrupt, it just freezes and loses a large amount of funds and goods, but these funds and goods are either investors' principal or suppliers' payments. Cross-border e-commerce is almost always asset-light, except for rented venues and computers. There are almost no fixed assets, and these smart people who hold the traffic password can change their vests and start over at almost zero cost.”

The manufacturing industry that passively accepts risk transmission will need to face the crisis of further amplification of risks. , related upstream and downstream companies will inevitably be affected, thus forming a domino effect. Judging from industry feedback on the Cooper incident, something like this is happening.