Newcomer Temu is eyeing the industrial belt, and the old Amazon can't sit still either

Competition in the cross-border e-commerce industry is intensifying, and industrial belts have become a new arena for cross-border giants. This article details the current situation of cross-border e-commerce, the situation of newcomers and established giants in the industry, and cooperation with industrial belts. I hope it will be helpful to you.

Since the beginning of this year, the cross-border e-commerce circle has been extremely lively.

In addition to the domestic cross-border e-commerce SHEIN introducing third-party sellers, sparking speculation that it will transform into a platform, industry newcomers Temu and Tiktok are also not willing to lag behind and are accelerating their competition for overseas markets in various ways.

As these emerging cross-border e-commerce platforms stir up competition, Amazon, the global cross-border e-commerce giant, has inevitably become the focus of everyone's attention.

Not long ago, some media reported that due to the competition for traffic from emerging cross-border e-commerce companies, eBay has lost nearly 2 million daily active users in the UK, and Amazon's daily active users have dropped by 8 million this year.

However, this statement does not seem to have affected Amazon's performance.

During Prime Day in July, Amazon users around the world ordered a total of 375 million items, setting a sales record for the company within 24 hours of the event.

Not long ago, Amazon Global Selling announced the launch of the "Ten Measures to Start the Industrial Belt" support plan. In this regard, Dai Xuefei, Amazon's global vice president and executive president of Amazon Global Selling Asia Pacific, said that the support plan launched this time hopes to help more traditional manufacturing companies in the industrial belt further leverage their supply chain advantages, accelerate the digital transformation and upgrading of enterprises, seize new global business opportunities, and build a "global brand."

It is not the first time for Amazon to cooperate with industrial belts, and industrial belts are no strangers to cross-border e-commerce platforms. So why have industrial belts become so popular in the past two years? What trend will the competition among cross-border e-commerce platforms form?

1. The trend starts from emerging platforms

Recently, a survey on online shopping showed that 35% of American consumers tend to buy clothing through online channels, 31% buy shoes, and 26%, 25% and 19% buy bags and accessories, consumer electronics and beauty and personal care products respectively.

The change in consumption habits has made it almost inevitable that e-commerce platforms featuring online platforms will compete for consumers. Moreover, in the world of traffic, there has never been common development, only the survival of the fittest.

Under this situation, facing the rapid rise of emerging cross-border e-commerce platforms represented by SHEIN and Temu, even though it is the world's largest cross-border e-commerce platform, Amazon dare not say "it doesn't matter".

Especially since this year, Temu's daily active users in the United States have increased rapidly. Adopting the same new user acquisition strategy as in China, Temu topped the list of free shopping apps downloaded by the U.S. Apple App Store within just one month after entering the U.S. market.

Monitoring data from Similarweb shows that as of July 14, 2023, Temu's daily active users in the United States have increased by nearly 10 million since the beginning of this year, reaching 17 million.

In addition, Temu has quickly swept the markets in Australia, New Zealand and other places. In less than a year since its establishment, Temu has opened sites in 27 countries and regions around the world, which is an astonishingly fast speed.

Industry insiders believe that in the short term, whether in terms of profit model, user base or overall size, emerging brands such as Temu are not enough to pose a major challenge to Amazon.

At the same time, as SHEIN, which has been deeply involved in the European and American markets for several years, transforms into a full-category platform and sets out to build its own logistics, warehousing and distribution system, and Tiktok launches the Shop function in the United States and starts a self-operated fully managed model, Amazon will have to face a more complex competitive situation for a considerable period of time in the future.

Not long ago, Amazon released its semi-annual report, which showed that Amazon's net sales in the second quarter were US$134.4 billion, an increase of 11% compared with US$121.2 billion in the same period last year; net profit was US$6.75 billion, compared with a net loss of US$2.028 billion in the same period last year.

However, it is hard to say whether this fairly good result is due to the growth of the main business or to cost reduction and efficiency improvement through layoffs.

2. Industrial belt becomes a new highland

According to preliminary customs statistics, cross-border e-commerce continued to release its advantages and potential in "buying globally and selling globally" in the first half of this year, with import and export volume reaching 1.1 trillion yuan, a year-on-year increase of 16%, of which exports were 821 billion yuan, an increase of 19.9%.

Such growth cannot be achieved without policy support.

In April this year, the General Office of the State Council issued the "Opinions on Promoting Foreign Trade to Stabilize Scale and Optimize Structure" (hereinafter referred to as the "Opinions"), which specifically proposed to support foreign trade enterprises in expanding sales channels and cultivating independent brands through new business forms and models such as cross-border e-commerce.

The Opinions also encourage local governments to combine their industrial and endowment advantages to innovate and build comprehensive cross-border e-commerce pilot zones, actively develop the "cross-border e-commerce + industrial belt" model, and drive cross-border e-commerce business-to-business exports.

If we look further ahead, we will find that since last year, the State Council has agreed to establish comprehensive cross-border e-commerce pilot zones in 33 cities and regions including Langfang, Cangzhou, and Yuncheng. At present, there are 165 comprehensive cross-border e-commerce pilot zones across the country.

Of course, the confidence of the policy ultimately relies on the excellent industrial chain foundation that China has accumulated over the years.

"Industrial belts concentrate China's high-quality supply chains and are the basic foundation of Chinese manufacturing. In terms of scale, classification and infrastructure, many industrial belts have the potential and advantages to develop cross-border e-commerce," said Dai Xufei.

She also believes that "cross-border e-commerce can help enterprises in the industrial belt to develop wider sales channels, expand more diversified business models on the C-end and B-end, and help enterprises gradually transform and upgrade to digitalization through docking with end customers, and truly build international brands. The model of 'cross-border e-commerce + industrial belt' is a powerful combination of new formats and high-quality supply chains, which will create a powerful superposition effect."

in the country, Alibaba is one of the first companies to explore opportunities in industrial belts.

Its cross-border e-commerce platform AliExpress launched the Industrial Belt Ten Thousand Merchants Recovery Plan in 2020, which has been implemented in many provinces and cities including Zhejiang, Sichuan, Fujian, Guangdong, Jiangsu, Hunan, and Henan.

This year, AliExpress launched the "full trusteeship" model and held nearly 100 investment promotion conferences in industrial belts in more than 30 key cities across the country, covering key industrial belts in and around Guangzhou, Shenzhen, Xiamen, Yiwu, Hangzhou, Shanghai and other cities.

The industrial belt has become a new battlefield of competition.

3. Cross-border e-commerce may be divided

Where the crowd is, there is the traffic.

As competition among e-commerce platforms intensifies, the problem of traffic is becoming increasingly serious. How can we improve the platform's own attractiveness to traffic? How can we help sellers better open stores on the platform?

According to Hootsuite, 26.5% of social media users go to social platforms to look for products to buy. According to mid-2022 data, 74.2% of adults in the United States use Facebook, followed by Facebook Messenger, Instagram, TikTok, and Twitter, accounting for 61.1%, 60.7%, 42.4%, and 41.8%, respectively.

Therefore, in addition to e-commerce platforms using social media to attract users, Tiktok, a social platform with inherent traffic advantages, has also joined the "battle" of cross-border e-commerce. By spreading good content on the platform through social media, Tiktok has launched Tiktok Shop.

This year, Tiktok has turned its attention to the industrial belt and launched the "New Sea Plan" in July. In addition, SHEIN recently announced that it will upgrade and expand 100 factories by 2023 and complete the upgrade and expansion of 300 factories within four years.

At present, cross-border e-commerce platforms have all set their sights on the industrial belts, but because different platforms have different resources and characteristics, the platforms are divided into two major factions.

The first category is represented by Temu and SHEIN, which are good at conquering the market with price advantages and have become synonymous with high cost performance. For example, Temu quickly acquires customers by attracting new customers and giving gifts, while SHEIN is highly known among female groups because it has deeply cultivated the fast fashion market.

Since the "full trusteeship" model allows companies to concentrate on production, a series of tedious tasks such as listing, sales, logistics, warehousing and after-sales are handed over to the platform. In this way, the efficiency of the company will be greatly improved and the price of goods will be more cost-effective.

As a result, cross-border e-commerce platforms that emphasize cost-effectiveness, such as Temu, AliExpress, TikTok Shop, Lazada, and Shopee, have begun to launch a full-hosting model.

The other type is represented by Amazon. This type of platform usually gives merchants more operational autonomy, and the platform is committed to building brand companies with quality products , and the products on sale are mainly mid- to high-end.

In Amazon's view, different companies may have different development goals at different stages, but better product strength, brand strength, operational capabilities, cognitive power and a longer-term development vision are very important. Only by doing these well can a company have a long-term and resilient business model.

In addition, compared with other platforms, Amazon's biggest advantage is that in addition to having a huge C-end consumer base, 96 of the Fortune 100 companies in the United States purchase on Amazon. This is also very attractive to larger brands, which means that entering Amazon will have the opportunity to tap into potential B-end customer bases.

"When we integrate with industrial belts, we will pay attention to those companies whose product characteristics are particularly suitable for developing B-side business." Dai Xufei said, for example, in Zhejiang Yongkang Hardware Industrial Belt, the proportion of local traditional foreign trade companies engaged in cross-border e-commerce business is as high as 68%, of which B2B business accounts for a high proportion.

Although Amazon Global Selling emphasizes that it will use a series of data-based tools to help companies in the industry belt understand the preferences of overseas consumers, thereby leveraging the companies' own flexible production capabilities to accelerate product innovation and build global brands.

But recently, there are rumors that Amazon will launch a fully managed model before the end of the year. New Retail Business Review believes that with the deepening of communication and cooperation between the same industry belts and the increase in competitive pressure, it is not impossible for Amazon to launch a fully managed model in addition to the existing model to drive business growth. We might as well wait and see.

Author: Wu Shaoge

Source: WeChat public account "New Retail Business Review (ID: xinlingshou1001)"