November 27, 2020, Black Friday.
The US Eastern time just reached zero, and overseas orders from New York, Washington and other regions began to flock to the back-end system of the team of cross-border seller Zhang Hua (pseudonym) in Shenzhen. This is the first time that Zhang Hua has participated in the big promotion activities of Amazon and other platforms as a brand owner. Last year, in his fifth year as a cross-border e-commerce seller, he officially launched his own brand.
At first, Zhang Hua, who was staring at the background data, was a little nervous, but the result was unexpected. Just a few hours after the event, the backstage “orders broke”, and the sales volume of one of the smart lamps reached nearly 10,000, and Zhang Hua had to urgently contact the factory to make additional orders. On this day, store sales increased by more than 30% compared to 2019.
This achievement made Zhang Hua a firm determination to transform the brand.
In recent years, some cross-border sellers who are unwilling to sell only low-priced products and are eager to seek higher premiums have begun to try to operate their own brands. In 2020, the great development of global online shopping, the emergence of benchmark cases such as Anker Innovation with a market value of 74 billion yuan, and SheIn with a valuation of more than 15 billion US dollars, will add to the craze for cross-border seller branding. Put the fire.
Importantly, the success of these benchmarking cases not only provides a feasible route for transformation and upgrading for many cross-border sellers, but also allows the capital market to see a huge room for growth in the branding of cross-border e-commerce sellers, and then use real money as the field. Provide blessings.
However, can this wave of branding of cross-border e-commerce sellers continue? Where is the next opportunity for the birth of a cross-border e-commerce company with a market value of 10 billion? What challenges will new entrants face? After interviewing first-line sellers, platforms and investors, “Xiaguangshe” tried to answer these questions.
1. From “distribution” to brand
The branding of Chinese cross-border e-commerce sellers started years ago.
In 2016, Zhang Hua tried to sell goods on Amazon. Initially, he chose women’s clothing, and later extended to categories such as home furnishings and outdoor products. The markets for these products are the European and American markets represented by the United States and the United Kingdom. Subsequently, Zhang Hua entered dozens of e-commerce platforms such as eBay and Shopee, and sold the goods to more than 100 countries around the world.
As a trader in the export link of cross-border e-commerce, Zhang Hua single-handedly connects with upstream supply chain resources and cooperates with dozens of factories with corresponding production capacity. After selecting products and placing orders, they will OEM and move them to overseas e-commerce platforms; On the one hand, when selling OEM products to overseas users on cross-border e-commerce platforms, the method adopted is to distribute goods-upload products in large quantities on the platform, and use as many SKUs as possible to attract users to buy.
The advantage of distributing goods is that, regardless of product quality or price, as long as search optimization is done well, users can always find me to place orders.
The downside is that the back-end SKU management is very cumbersome. At the most exaggerated time, the number of SKUs in Zhang Hua’s store has reached hundreds of thousands. The occasional products that are ordered also require team follow-up and purchase, which is “too laborious”.
This almost “morbid” state will drag the team to death sooner or later. More importantly, with the increase in the number of Chinese sellers on overseas e-commerce platforms, the homogeneity of supply has intensified, and sellers have begun to fight a “price war.” At this time, if you want to continue to survive in the constant “involution”, you need boutique operations.
Since 2017, Zhang Hua’s team has first tried more detailed operations on household products that are not seasonal. At that time, the sales volume of a lamp that had not been sold much before reached 100,000+, and it continued to sell well a year after it went online. “A lot of similar products may be sold out after half a month.”
This gave Zhang Hua an inspiration. If forecasts and reasonable operations are based on back-end data, the emergence of explosions will be more controllable. In this way, stable large orders not only mean low prices for centralized procurement, but also mean that sellers will have greater control over the upstream supply chain. From a consumer’s point of view, in the process of continuously polishing products, sellers can continue to dig deep into user needs and iterate products, “have a deeper understanding of user psychology, and continuously optimize their shopping experience.”
This process is equivalent to the transition from a simple and rude distribution model to the era of refined operation, and the branding idea is slowly taking shape.
And Zhang Hua’s transformation is only a microcosm of the branding attempts of Chinese cross-border sellers at that time. Around 2015, the first batch of sellers engaged in cross-border exports have started the road to brand building: In 2014, Anker Innovation, which started from selling charging products on the Amazon platform, began to incubate its own brand Anker; still in 14 years, cross-border fast Fashion e-commerce company SheIn acquired cross-border women’s clothing brand ROMWE to accelerate branding…
Zhong Bo, the founder of sweeping robot brand Yuli, who has many years of experience in cross-border e-commerce operations, told “Xiaguangshe” that the branding process of cross-border e-commerce sellers is very similar to that of domestic e-commerce, which is divided into three stages:
The first stage is the bonus period of the platform, as long as the goods are available, they can generally be sold; in the second stage, there are more and more merchants, and the products are gradually enriched. Consumers desire more branded and trusted products. Appeared; in the third stage, the increase in brands has intensified competition, prompting the birth of more professional and stronger brands in the vertical field.
In contrast, the branding attempts of cross-border e-commerce companies are now in the second stage. Crossing the barrier of branding means that sellers will get a higher margin.
Zhong Bo said that, represented by the 3C category, the profits of cross-border e-commerce sellers generally range from 10% to 20%. The financial report of Anker Innovation, which has an independent brand, shows that its gross profit margin is close to 50%. According to data, this small cross-border e-commerce seller originally started from Amazon, and has now become the number one brand in the sales of power bank category on Amazon in the United States. In 2019, the company’s revenue reached 6.655 billion yuan, of which overseas revenue accounted for 98.47%.
It can be said that with the upgrading of operating models, these cross-border sellers who started from overseas e-commerce platforms hope to continue to enhance their own value through branding, and obtain greater development space.
But before 2020, the branding of Chinese sellers is more limited to stories within the cross-border industry, and more circulated for private sharing among sellers and a small number of investors. Until last year, the special time node and the maturity of a series of elements behind it brought this niche story to the public.
2.2020, the explosive node
In 2020, cross-border e-commerce, especially brand sellers, will become popular.
Under the black swan of the epidemic, the purchase behavior of overseas users was forced to go online. According to the “2021 Mobile Market Report” released by App Annie, with the exception of China, the usage time of global shopping apps in 2020 has increased by 45% year-on-year.
This makes the e-commerce track one of the few areas that achieved growth last year. Research data shows that global retail e-commerce continues to grow rapidly under the epidemic, and the market size is expected to reach US$4.03 trillion in 2020, a year-on-year increase of 16.5%.
In 2020, when the demand for online purchases has increased greatly, and limited by the outbreak of overseas epidemics and the difficulty of resuming production, China, which was the first to control the situation, can release the power of the “world factory” to the greatest extent and export goods to the world on a large scale.
At this time, with the traditional foreign trade model relying on offline channels being affected, cross-border e-commerce has become an important transaction carrier and an important force for stabilizing foreign trade. With the support of multiple policies, cross-border e-commerce has developed rapidly.
More sellers have poured into the cross-border e-commerce field. According to the data from Tianyancha, 87,000 new cross-border e-commerce-related companies were added last year. In addition, according to preliminary customs statistics, the total value of my country’s cross-border e-commerce imports and exports in 2020 is 1.69 trillion yuan, an increase of 31.1%, of which exports are 1.12 trillion yuan, an increase of 40.1%.
The vent of capital has blown into the field of cross-border e-commerce . According to the “Dianshubao” e-commerce database of the Net Economics, a total of 33 platforms in the cross-border e-commerce sector in China will receive financing in 2020, with a total financing of over 7.09 billion yuan.
Among them, the attention of large institutions mostly falls on brand sellers.
In September 2020, Starlink, an export cross-border e-commerce company, announced the completion of a 300 million yuan A round of financing, led by Sequoia Capital China Fund, followed by Tiantu Investment, Xiangfeng Investment, and Lingxi Capital; in October, “Wantuo Technology”, a new consumer brand of export cross-border e-commerce, announced the completion of a 300 million yuan A round of financing, with the exclusive investment of Sequoia Capital China Fund.
“In the past, when domestic investors went to see cross-border e-commerce sellers, they often felt that the space was not very large. But to a certain extent, several important (branding) cases in this field will appear in 2020, let us renew I found that there are still great opportunities here.” Tao Yangfeng, assistant vice president of Zero One Ventures, who pays attention to overseas markets, said to Xiaguang Club.
Zero One Ventures has previously invested in cross-border related projects such as “Xiaoman Technology”, a SaaS platform for CRM and email marketing management for foreign trade companies, xtransfer, a cross-border foreign trade collection service provider, and hibobi, a middle east maternal and child e-commerce company. Tao Yangfeng revealed that last year, the agency focused on high-quality sellers on platforms such as Amazon, especially sellers who “go in the direction of the brand”, and launched several related projects.
The important cases mentioned by Tao Yangfeng mainly point to Anker Innovation and SheIn. The amazing power displayed by these benchmarks has allowed the outside world to re-understand the value of cross-border e-commerce brands.
In June 2020, at an internal meeting, SheIn announced that its sales have exceeded 40 billion yuan, and it is expected to hit 100 billion in 2020; in August, according to media reports, SheIn has completed an E round of financing with a valuation of more than 15 billion US dollars .
The excitement of the primary market has also infected the secondary market. Cross-border brands represented by Anker Innovation are also recognized in the secondary market. In August 2020, Anker Innovation, which was established in 2011, landed on the ChiNext. On the first day of listing, Anker surged 121%, and its market value has exceeded 70 billion.
In the past, cross-border companies such as Anker Innovation were more “hidden under the water”. The move to go public and the enthusiasm of the capital market made them stand under the spotlight.
Capital’s attention may continue. “For investors, there are many opportunities for cross-border e-commerce sellers. The market is very large and fragmented. There are currently only a handful of companies with revenues of tens of billions, but in the future, there is a good chance that hundreds of companies will appear in various vertical fields. A brand-based, multi-channel boutique seller with a revenue of 100 million yuan.” Tao Yangfeng said, “In fact, many funds started to look at this area last year, and the number of agencies that sold them has obviously increased.”
It is foreseeable that there will be more and more boutique cross-border sellers “going towards branding”. From the overall perspective, with the disappearance of domestic labor dividends, brand transformation is in line with the trend of China’s industrial upgrading, that is, to create products with higher added value through branding and service upgrading.
For tens of millions of Chinese cross-border e-commerce sellers, brand transformation is not only a requirement of the times, but also a new opportunity.
3. New opportunities
The excitement belongs to the old players, do new players still have a chance?
Soochow Securities analysis report shows that the current three models of cross-border e-commerce are pan-product sellers, boutique brand merchants, and independent platform platforms. Among them, boutique brands balance the three elements of value, accumulation and risk, and are optimistic about the general trend of cross-border e-commerce branding.
For cross-border e-commerce sellers, there are still new opportunities for entry.
On the one hand, in the state of epidemic prevention and control, new scenarios have given birth to the rapid development of new categories. According to Shopee, the leading e-commerce platform in Southeast Asia, data from the platform in April and May last year showed that household items and fashion categories have become the hot spots, and the sales of sub-categories such as gardening, kitchen, furniture, pajamas, and home wear have increased significantly.
Zhang Hua can also clearly feel the increase in the sales of household products. According to the team’s statistics, the turnover of this category increased by 20% last year, and the team also launched its own household brand at that time. “On many platforms such as Amazon and AliExpress, the household goods category is growing. The initial stage of the new category is very suitable for us to launch a new brand.” He said.
On the other hand, the maturity of the overall service ecology of the overseas industry makes it easier for cross-border e-commerce to incubate brands. This ecosystem includes payment solution providers, automated marketing service providers, third-party warehouse logistics service providers, and so on.
For cross-border e-commerce, the service chain is longer and more complicated because it involves cross-border transactions and logistics. The immaturity of supporting industries in the past sometimes directly affected the service level of sellers.
Zhong Bo, for example, said, “In the past, cross-border after-sales was a big problem. Overseas users bought products that had problems. Domestic maintenance personnel could not rush over without a visa. The cost of cross-border mailing was particularly expensive. At that time, we had to take a lot of detours. For example, we send the goods to Hong Kong and we send a team there for centralized processing. Now, many third-party partners can provide us with corresponding solutions, and even handle them locally.”
What needs to be mentioned here is that the improvement of the ecology of overseas e-commerce platforms has made it more likely for cross-border sellers to export Chinese styles and use mature domestic e-commerce operation logic to achieve “dimension reduction strikes.” The most representative one is that the live streaming mode has gradually become popular overseas, driven by the platform.
Shopee launched Shopee Live in 2019 and is actively deploying a live delivery model in Southeast Asia. Last year, under the influence of the epidemic, the live streaming mode of the platform was welcomed by more and more consumers.
During the 12.12 promotion period, a total of 450 million people watched the Shopee live broadcast, which is equivalent to the data of the platform in 19 years. In addition, on the day of Double Twelve Promotion, the number of cross-border sellers participating in Shopee live broadcast doubled from last year. Among them, including well-known domestic brands such as Huawei, Orange, and Three Squirrels, the number of brand sellers participating in the live broadcast increased 7 times compared with the same period last year.
When the live broadcast takes the goods out of the country, the Chinese sellers who are most familiar with this game are naturally. Shopee said, “During the epidemic, we discovered a preference for live broadcast of Yiwu industrial belt products, and quickly established a Yiwu operation center, especially a live broadcast room, and trained a group of Yiwu sellers who live live to bring goods to Southeast Asia.”
The emergence of new channels and delivery models may help shape the branding of cross-border sellers.
4. Challenges cannot be ignored
It seems that now is the perfect time to enter brand e-commerce.
But in fact, there are still some practitioners who view this trend in a more calm manner. “Cross-border sellers’ brand transformation is a good thing, but at present, I feel that the industry has been over-specified, and there are many challenges in actual operations.” said Li Ziran, an overseas serial entrepreneur.
Currently, Li Nature also operates cross-border e-commerce businesses in Southeast Asia and the Philippines. In his view, the challenges of incubating independent brands mainly focus on the following aspects:
First, a good product . “Products are the foundation. To build a brand, we must make very good products. This is a very high threshold.” Li Ziran said, “The domestic mature supply chain can provide us with some assistance, but this is not the decision condition for the brand. Because the supply chain allows us to produce cost-effective products more quickly, what the brand requires may be more differentiated and more satisfying products.”
How to build a good product actually tests the team’s ability to perceive overseas markets and users and design capabilities.
A very typical example is the American outdoor home furnishing e-commerce brand Outer, which was established in 2018. Its main product is an outdoor sofa. The product was launched in May 19, and one year later, Outer’s monthly sales have exceeded 2 million US dollars.
The reason for its popularity is that when it rains or winds, users can use an embedded handle to directly cover the cushions and cushions. This design and special product fabric make this sofa soft and comfortable, but not easy Dust or discoloration outdoors.
The original intention of the product design came from the founder Liu Jiake’s previous complaints and feedback from overseas consumers when he helped his relatives to open a furniture shop on Amazon. They were dissatisfied with the comfort and environmental protection of the current outdoor household products. With this insight, it will also take time to polish out products that can meet the needs, which is why Outer only launched this product in the second year of its establishment.
Second, the ability to tell stories. The reason why a brand becomes a brand is to have corresponding values and brand stories. These space that carries its added value is the key to establishing deep links with users.
For many cross-border e-commerce teams who are accustomed to the mode of distributing goods, the shaping of brand connotation is completely different from the previous sales. It requires time accumulation and continuous experimentation. For teams that need to face overseas markets, the challenge is how to use a more localized way to convey this story to consumers.
Again, find the difference. Li Ziran believes that although Anker Innovation and SheIn have provided certain branding ideas, later entrants have not been able to fully replicate their successful model. “Their rise, to a certain extent, has some factors of the right time and place at the time. For example, Anker’s innovation has benefited from the rapid start of Amazon’s charging products.”
Therefore, from channels, traffic gameplay to emerging markets, new players need to find differentiated gameplay. For example, Li Ziran is trying to deploy TikTok, hoping to use its rapid rise overseas to find new channels for bringing goods. “At present, limited by the degree of commercialization of the platform itself, the effect remains to be seen.”
Finally, the funding threshold. By analogy with the cost of creating a brand in China, Li Ziran said that the investment in incubating a brand needs at least one million. “Only calculating the cost of opening a store on an online platform, labor, etc., is not a small expenditure. If you start in Southeast Asia, the investment will be relatively low, and the cost will be greater in mature markets such as the United States.”
In fact, Zhang Hua is facing the above-mentioned problems in the operation process. He also knows very well that when the competition in the cross-border e-commerce industry goes from low price to brand, crossing these thresholds is just the beginning. But he still hopes to continue to try to promote branding, and even plans to incubate multiple brands in women’s clothing, beauty, outdoor products and other categories.
After all, the story of becoming the next Anke and SheIn is attractive enough. In the “BrandZ Top 50 Global Brands in China in 2020”, Anker Innovation and SheIn ranked 11th and 13th respectively. Together with them are star companies such as Huawei and ByteDance.
“Going to the sea of stars overseas is no longer just the story of giants. It is also possible for us cross-border e-commerce sellers.” Zhang Hua said.
