In 2018, the cross-border e-commerce industry showed explosive growth. However, with the influx of capital and a large number of sellers, the main battlefield of cross-border e-commerce, the European and American markets, has changed from “deep diving in the blue ocean” to “bloody battles in the red ocean”, and sellers have made less and less profit from it. This momentum seems to be increasing. In 2019, Amazon’s global market has more than 6 million sellers. According to research data from Marketplace Pulse, from 2017 to 2019, 3.3 million new sellers have joined the Amazon platform worldwide, of which more than 1 million sellers have joined Amazon’s US site. This data is equivalent to 3,317 new sellers every day in the past 1,000 days. Although 3.3 million new sellers have joined the Amazon platform, in the same period of time, the number of sellers with sales of more than $100,000 has only increased by 180,000.
Product “homogenization” and “price war” are two bottlenecks that cross-border e-commerce sellers urgently need to break through. Faced with declining sales and competition from peers, the only way for many sellers to continue operating is to lower prices to the lowest, and survival is becoming increasingly difficult.
The “price war” itself is a “war without gunpowder”. The behaviors of price cutting, exclusion, poaching and other behaviors that disrupt market rules and order are happening all the time. The final result of this vicious cycle can only be a lose-lose situation.
The strict rules and restrictions of the platform are a major problem encountered by many sellers. When many platforms first entered the market, they only focused on attracting a large number of merchants. Once a certain scale of sellers was formed, the platform began to introduce various policies to regulate the platform to transform towards the direction of boutique and branded operations. For example, Wish’s “US$2,000 fine for inactive accounts” policy and “brand traffic support (big seller) plan” and so on.
Boutique and branding are certainly good things for the development of the platform, but for tens of thousands of small and medium-sized sellers on the platform, the platform’s inclination towards brand traffic will only accelerate their decline, and they will eventually be forced to withdraw from the market.
In addition, due to the influx of a large number of Chinese sellers into the European and American cross-border e-commerce market, the rapid increase in online transaction volume has directly led to a decline in sales of physical industries. The “new species” of cross-border e-commerce has begun to be “targeted” by various countries. In order to protect local trade, most European and American countries have begun to impose cross-border e-commerce taxes.
In the United States, the Supreme Court’s new tax policy stipulates that “out-of-state online retailers must pay taxes to the state if their annual sales in the state reach $100,000 or they conduct more than 200 transactions involving the state.”
In Germany, the government requires sellers on e-commerce platforms to register for German VAT (Value Added Tax) and declare it, including a standard rate of 19% and a low rate of 7%, and declare it 13 times a year.
In the United Kingdom, sellers must register for British VAT and declare it to the British Revenue and Customs (HMRC) every quarter. There are three main British VAT rates: standard rate (20%), applicable to most goods and services; low rate (5%), applicable to some goods and services, such as child car safety seats and household energy materials; zero rate (0%), applicable to zero-rated goods and services, such as unprocessed food and children’s clothing.
In Sweden, Swedish Customs has been collecting VAT on all non-EU e-commerce items (including mail) since March 2018. The collection method does not distinguish between the value of the goods, and VAT will be collected from the recipient. The Swedish VAT rate is generally 25%.
Since January 2019, Switzerland has collected VAT from cross-border B2C sellers with a turnover of more than 100,000 CHF (Swiss francs).
In summary, it can be seen that more and more countries are implementing tax policies. Low product prices were originally the biggest advantage of Chinese sellers, but now sellers have to raise prices to make up for the high taxes. In order to develop better, sellers have to choose lower-profit products or focus on emerging platforms with large traffic.