The seemingly popular cross-border e-commerce O2O model actually has an unknown cruel reality: loss. The cross-border e-commerce O2O chain business format is a very “heavy” model, which is essentially no different from traditional offline retail. At present, at least 80% (perhaps higher) of the cross-border e-commerce O2O in the industry are not profitable, and some profitable stores are supported by rent subsidies from local governments. Why is this the case? Because there are three problems:
First, the traffic problem. Most cross-border e-commerce O2O stores are very popular at the beginning of their opening, often attracting a large number of consumers to watch, and there was a phenomenon of queuing to buy. However, this situation of crowded stores lasts for a maximum of three months, after which sales return to normal, and even there are few customers. Under normal operation, the offline radiation range of any store is limited; and the popularity at the beginning of the opening is often an abnormal over-range radiation, and many consumers drive from far away just to try it.
Second, the operating cost problem. There are two major operating costs of offline stores that cannot be ignored, namely personnel and rent. Needless to say, the cost of employee salaries is getting higher year by year, and management is also very difficult. In terms of rent, if it is a busy area, the traffic is considerable but the rent is frighteningly expensive; if it is a remote suburb, the rent is cheap but there is almost no traffic. Most stores will choose urban areas to ensure basic traffic, but high rents are inevitable. Therefore, overall, the operating costs of cross-border e-commerce O2O formats are very high, which is an important factor hindering its profitability.
Third, procurement issues. Many cross-border e-commerce O2O companies are start-ups, and their sources of goods are mostly provided by traders, which is a typical “multi-frequency and small quantity” procurement model. Therefore, these companies not only do not have the ability to directly connect with foreign brands or manufacturers, but also do not even have the basic advantages of centralized procurement. In this case, the procurement costs of such O2O cross-border e-commerce companies are high, the procurement channels are single, and the goods sold in the end are basically the same.
In addition, after the tax reform of cross-border e-commerce, the travel tax is no longer applicable to cross-border e-commerce. This is undoubtedly a big negative for cross-border e-commerce O2O companies that mainly sell maternal and child products, food and health products.
So, import cross-border e-commerce O2O is half fire and half ice. On September 29, 2015, the General Office of the State Council issued the “Opinions on Promoting Online and Offline Interaction and Accelerating the Transformation and Upgrading of Commercial Circulation Innovation and Development”, encouraging the development of the O2O model. In this document, the State Council mentioned the application of O20 in cross-border e-commerce. However, this is only a little bit of good news at the policy level. At the operational level, companies still face the three problems mentioned above.