Amazon freezes hundreds of millions of dollars in funds for its best sellers! The old era is accelerating its exit

I have been bombarded with various news about the closure of big sellers these past two days, and I have become a little numb, but today's news still shocked me. Shenzhen's well-known big seller Youkeshu released an announcement yesterday, revealing that 340 stores were closed! More than 130 million funds were frozen by Amazon!

This is a major event announcement issued by Tianze, the parent company of Youkeshu. Sellers who are familiar with this area will know that major event announcements of listed companies are not issued casually. They will only be released when things are really serious and related to the future and survival of the company. Generally, it will only be used when the company encounters major losses, major changes in the external environment, major or all businesses are suspended, major assets are seized, detained, frozen, or mortgaged, pledged, etc.

This fully demonstrates that Youkeshu is in a very dangerous situation now. Youkeshu also mentioned that the number of employees has dropped from about 2,800 in January this year to 1,400, a sharp drop of 50%! Among them, the number of supervisors and deputy supervisors who resigned exceeded 280!

Youkeshu is one of the famous "Four Young Masters of South China City" in the cross-border circle, with businesses spread across Amazon, AliExpress, independent stations, etc., with annual sales reaching more than 2.486 billion (in 2016) . It is really sad to see it end up like this, but I have to say here that this large-scale store closure is just the last straw that broke the camel's back for Youkeshu. In fact, the ending of Youkeshu has been written since the end of last year, a standard ending where a store that sells well is dragged down by inventory.

You should know that before 2020, Youkeshu once made a bold promise to achieve a performance commitment of 410 million in profit in 2020. However, due to the epidemic in 2020, overseas e-commerce traffic and orders increased significantly, and all big sellers made a lot of money. Although Youkeshu's growth rate was also high, it was still 10.5033 million away from the performance commitment target it set.

And the more serious problem is that the epidemic dividend in the first half of 2020 caused Youkeshu's performance to surge, but also affected Youkeshu's expectations for future performance.

In the second half of 2020, Youkeshu launched a strategic stocking plan , bringing the inventory on the Amazon platform to an astonishing level. I guess the reason must be the bonus from the pandemic in the first half of the year, which led to Youkeshu’s management having too high expectations for sales. The year-end promotion performance was far worse than during the pandemic lockdown in the first half of the year, and the beginning of the year was traditionally an off-season for Amazon. These two situations combined to deal a heavy blow to Youkeshu.

Due to insufficient revenue and increased inventory costs, Youkeshu's monthly profit shrank beyond expectations , from 45 million yuan in January to 1 million yuan in May, a drop of more than 97%! The capital chain has been on the verge of breaking, and as early as the beginning of the year, there have been problems with wage arrears and overdue payments.

The inventory pressure and low risk resistance of the distribution strategy are innate. It was just that the traffic carnival in the first half of 2020 caused Youkeshu to make wrong judgments and operations. Even if Youkeshu reacted in the first half of this year and began to gradually transform into a boutique route and modify its organizational structure, it is difficult to turn a big ship around. Even if Youkeshu succeeds in its transformation, it will still suffer losses.

Moreover, Youkeshu is the second top-selling brand this year that was dragged down by the over-marketing.

In June of this year, another cross-border giant, Global Easy Shopping (CROSS), once known as the "first cross-border stock", filed for bankruptcy.

As for the reason for the loss, Cross-Border Link stated that it was mainly due to the company's provision for bad debts of inventory. In other words, there is actually a large amount of inventory that cannot be sold and can only be treated as bad debts to prevent accumulation and greater impact.

When Cross-Border Communication announced its 2020 financial report at the beginning of this year, everyone was shocked. Cross-Border Communication's net assets dropped directly to negative numbers! A large amount of debt and a rapid decline in revenue caused Cross-Border Communication to be insolvent, and its stock was also labeled as *ST, indicating that Cross-Border Communication had "delisting risks" and "other major risks."

These two companies are both representative of Amazon’s first-mover advantage. They uploaded products in large quantities and released them when they had data, but gave up when they didn’t. In short, they took advantage of the first mover advantage. After going public and raising funds, they became even more aggressive. They not only expanded the scale of the company and increased the intensity of distribution, but also started price wars in various categories. After all, they didn’t feel bad about making money after raising funds, and they just wanted to use money to squeeze out their competitors.

The era that Amazon has entered, which we have always called the post-Amazon era, is a liquidation of the old-era distribution methods and sellers who stick to the old methods. It is an era of full compliance and preparation to embrace regulation.

I can say that the coming period will be the best period for white hat branded small and medium-sized sellers. In the alternation between the old and new eras, the giants and small and medium-sized sellers who insist on the old way of distributing goods will be eliminated or undergo a transformation (Kuo-Kuai-Tong and Youkeshu are examples). There will be a market vacuum in the middle. Before the giants of the new era take up their positions, these markets will belong to small and medium-sized white hat boutique sellers. As long as you choose the right route and direction, the market and policies of the new era will be beneficial to you.

Remember, the transition between the old and new eras is when chaos is most likely to occur, and heroes are also most likely to emerge. The new hero will eliminate the evil dragon of the old era, and then sit on the evil dragon's throne himself.

Ahem, of course, if I were a big seller, I would definitely forget about heroes and dragons. In short, the general direction of Amazon's new era is definitely branding and compliance. Whether you can seize the opportunity to occupy a good position in the new era depends on your grasp!