How does Amazon’s “philanthropist” reject internal circulation?

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"It's too curly. I'm green."

This is the sigh of a cross-border e-commerce seller. When the price war on Amazon was raging, it appeared:

If you dare to offer "up to 10% off", I dare to offer "up to 20% off";

If you dare to offer “the lowest price on the entire internet”, I dare to offer “buy one get three free”.

…

Sellers from all walks of life are fighting fiercely, and Amazon's e-commerce has reached its peak of internal competition.

In addition to the extreme internal competition, sellers also expressed that they are thorough cross-border philanthropists.

Continuously outputting product costs, paying service providers, and investing in Amazon advertising fees, the gross profit is lost like a moral integrity, just like doing charity.

Why does involution occur?

01 Amazon FBA's warehouse restrictions are becoming more stringent

In fact, I am not afraid of this wave of new sellers entering the industry this year, and I think 80% of them will fail. However, after this wave of new sellers enter, they may not be able to grab traffic and orders, but they will definitely compete with old sellers for FBA warehousing and distribution resources. This is why Amazon has recently restricted FBA warehousing. The entire FBA resources are limited, but suddenly a wave of people come to compete with you. With limited resources, you can only adopt a more stringent quota system. This is a perfect embodiment of internal circulation.

02 Profits continue to decline

Last year, everyone's profits were very good, and the overall profit margin was very high, far exceeding the average level of the past few years. But these good days may be gone forever. Starting this year, many top sellers have begun to cut prices first, and some are even selling at a loss. The reason is that these big sellers sold too much last year, resulting in too much stocking. As a result, they encountered weak sales this year and stricter warehouse restrictions. If they don't clear the inventory quickly, they may face huge losses, so they have to clear the inventory at a low price. In addition to the big sellers cutting prices, some wealthy and willful new sellers have also begun to rely on low prices to quickly seize the market, and the extent of price cuts is not even inferior to these top sellers.

As the top sellers have set an example, and new sellers set lower prices to seize the market, other old sellers who have no inventory backlogs have to follow suit, and even sell at a loss, which has led to a significant drop in profits for the entire category. The huge profits of last year may not happen again in the next few years. This situation is also a typical manifestation of involution in the industry.

03 Logistics and supply chain costs have increased dramatically

The resources of logistics and supply chain are also constant, and it is difficult to see a significant increase within a period of time. Therefore, once the number of sellers surges, coupled with a surge in the number of shipments, logistics and supply chains will suddenly become sought-after resources. Air freight has skyrocketed, and it is difficult to find a cabinet for sea freight. AGL bookings have to be made nearly two months in advance. Supply chain factories that have cooperated for many years and have credit terms have been directly intercepted by some new tycoons who pay cash for goods. Such cases are everywhere this year. In the final analysis, the resources have not changed, but the surge in sellers and shipments has caused this. There is no doubt that this is also a manifestation of involution in the industry.

The right way to reject involution

01 Use product differentiation strategy to break through the involutionary ecosystem

We all know that if you follow the trend and make common hot-selling products on Amazon, many fellow sellers will keep a close eye on you, so you should resist the involution of sellers. You can try not to make big hot-selling products, but to focus on small hot-selling products.

In order to increase profits and widen the gap with their peers, sellers can upgrade their products and find selling points for new products.

For example, take the classic toothpaste as an example. The popular toothpaste may be white in color, so can we design a transparent or green toothpaste? Or the popular toothpaste is generally sweet in taste, so can we try to upgrade it to a sour, spicy or salty toothpaste, which will make people feel novel and is actually the charm of differentiation.

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