Since Shopee announced the official launch of the full hosting model on July 27, full hosting seems to have suddenly entered an outbreak period.
At the 2023 Eighth Shenzhen International Cross-Border E-Commerce Trade Fair held from July 31 to August 1, full hosting has become the operating model promoted by platforms such as SHEIN, Wish, and Lazada. Entering August, a large number of rumors suddenly emerged in the cross-border circle that Amazon will launch a full hosting model in order to compete with competitors such as Temu and SHEIN, and first invite big sellers to settle in.
In part of the publicity, full hosting has almost become a model for merchants to "make money as easy as breathing and drinking water", because merchants only need to participate in their own product selection and stocking, and then send the goods to the platform warehouse, and all subsequent operations Payment, contract performance, after-sales and other links are all handed over to the platform, and the merchant can wait for the payment at the end. However, no matter from the perspective of the complex structure of merchants or the need for profit space on the platform, although the full hosting model meets the needs of some merchants, especially the source factories, it still cannot escape the fate of involution.
Come to think of it, what cross-border e-commerce really needs is to be able to realize low-cost and high-efficiency turnover sales in all links of the industrial chain at the same time. It is the last word to get rid of congestion points and improve ROI. Full hosting will certainly not be a good medicine for all platforms and businesses.
Disputes over full-custodial and semi-custodial models, merchants' right to speak is "confusing"
Despite all the news lately, full hosting isn't exclusive to this summer.
In September 2022, Temu, a rising star, took the lead in launching a fully managed model, relying on a similar self-operated operation method to quickly increase volume, breaking the original calm of the cross-border e-commerce circle, and quickly triggering competitors to catch up. In the first half of the year, North American technology e-commerce platform Newegg launched full hosting; in April this year, AliExpress launched full hosting; in May this year, TikTok Shop officially announced the launch of full hosting, and SHEIN is also fully rolling out the platform model at the same time , using a full hosting model similar to Temu as one of its three investment promotion models.
For now, this is just halfway through the all-hosting boom. The "US version of Pinduoduo" Wish announced that it will launch a fully managed mode from September to October this year to join the battle; "——As the name suggests, third-party links such as logistics are mainly entrusted to the platform, but the specific pricing, gameplay operations, etc. are still in the hands of the merchants themselves.
The essence of full hosting is a road modified from the platform supply model, and its core logic is not complicated: the platform concentrates traffic on top-selling models - removes intermediate links to reduce costs - realizes cost-effectiveness with small profits but high sales.
However, it is this ultimate goal of relying on cost performance with small profits but quick turnover that makes full custody fall into controversy.
First of all, judging from market feedback, the current full hosting of many platforms is still open to cross-border sales of specific categories. Because the carrying capacity of the platform has an upper limit, the fully managed SKUs cannot be too wide, and it is more suitable for brand sellers with specific categories and back-end supply chain guarantees. However, this process will also hand over the rights of front-end operations to the platform, thereby affecting the distribution of traffic. For Damai, the initial stage of platform package operation is worry-free. Will it lead to more excessive involution due to too many products joining the full custody model in the later stage, or will it lead to a major reshuffle and oligarchy in the industry? This is a big sale that must be considered.
Secondly, there is an irreconcilable contradiction in full custody: the interests of sellers/brands and the platform are mutually exclusive. The reason is that under this model, sellers lose their pricing power and rely on the platform’s background bidding system to price flexibly to promote sales. As mentioned above, this means that in market competition, the platform has become the dominant player.
In the current bonus period of expanding the market, in order to prove the value of the platform, sellers may still get some subsidy benefits, but when the full custody scale continues to expand and the supply capacity is not scarce, it will undoubtedly be easier to embark on a platform-led price war . At that time, big sellers or suppliers may lose their status.
So in the end, full hosting can easily turn into a price war among popular categories. The fully managed model will point to the issue of the seller's right to speak, which includes both the seller's right to speak in front of the platform, and the right to speak of the seller and its products in overseas markets. The stronger the ability, the more you can fight for your own interests. If everything is pinned on low-price competition, it will end up losing its "soul" on the basis of continuously reducing the profits of the industrial chain until it is unable to participate in market competition.
It is worth noting that precisely because of the special nature of full hosting, it actually provides opportunities for sellers of "integration of industry and trade". As the name suggests, relying on self-owned factories to take advantage of the supply chain seems to be a new business path for source suppliers who were unable to reach the consumer market. However, it is not easy to get this flywheel spinning.
Pursuing small orders and flexibility, cross-border e-commerce responds to the challenges of industry and trade integration
As we all know, there are several "chains of contempt" that have a long history and are deeply rooted in the hearts of the people in the cross-border e-commerce industry.
From the platform point of view, Amazon>eBay>AliExpress>Lazada>Shopee>Wish. After the rise of Temu, a group of new sellers and independent website players are looking for their own positions. From the model point of view, high-quality sellers with R & D strength and production capacity will undoubtedly "look down" on distribution sellers who rely on OEM and advertising. From the perspective of operational thinking, independent stations are consciously more valuable than those brands that are attached to platforms.
In this multiple chains of contempt, the standard of competition is nothing more than the value of the supply chain and production, the value of the brand, and so on. Therefore, if you want to enjoy the bonus of full custody, but also get rid of the fate of being a wedding dress for the platform, the answer lies in the structure of the cross-border e-commerce industry itself.
On the one hand, full hosting undoubtedly blew the whistle for industry structural adjustment. Whether it is a new or old big seller or a white card small and medium player, they all stand behind the starting line of this model. Although Dazai may start first, considering Dazai’s concerns about the independence of competition, white-label and small and medium-sized sellers have ample opportunities to expand their business flow by relying on full custody first. In particular, in order to promote the self-proven strength of full hosting, the platform will provide benefits in terms of activity slots and streaming, and at the same time help small and inexperienced players solve logistics and contract fulfillment issues.
On the other hand, full custody aims to cut out the middleman, thereby smoothing the transaction process. Since the functions of sellers on the chain have actually changed, the "chain of contempt" is likely to begin to adjust. Sellers who have their own production capacity can look down on sellers who have no supply. Even in essence, some factories can be transformed from suppliers to sellers, because the essence of full hosting is to transform the original sellers into suppliers of the platform - now everyone stands on the same starting line, "factory + trade" industry and trade Integration has become the ultimate direction.
Traditional factory-type sellers originally connected with large-scale B-end customers such as distribution-type sellers, and have formed a set of logic in terms of account period and inventory. This logic belongs to the manufacturing industry and is characterized by emphasizing production and neglecting operations. After docking with the fully managed platform, they have the ability to directly face the C-end market, expand the potential market space and improve the profit position.
The problem is that to break the low-profit curse of full hosting, suppliers must continue to innovate and develop, otherwise profits will easily stagnate. But the low price itself squeezes the future investment space and limits the innovation ability of suppliers. On the other hand, in the production under the fully managed mode, the supplier needs to cooperate with the rhythm of the terminal sales of the platform, and can no longer act as a shopkeeper after producing according to the customer's order quantity as before, and the difficulty of inventory management is enlarged.
Some platforms are also seeing these issues. In the process of promoting the full custody model, SHEIN provides sellers with a special permission: they can obtain the real-time business trends of the SHEIN platform, including real-time performance of products, sales status, etc. In this way, SHEIN intends to teach sellers the capabilities it is good at, such as quick response to small orders and flexible supply chains, to help them learn to respond to market demand faster, prepare goods, and establish a more efficient contract fulfillment system.
This is ultimately due to China's strong manufacturing capabilities. According to public information, SHEIN’s supply chain system has more than 6,000 factories. Especially based on Guangzhou’s extremely complete textile and garment industry chain, SHEIN has achieved extreme efficiency through the integration of supply chains. From materials to final product delivery, it can be delivered within 24 hours. completed within.
This state is called "industrial belt", and it is now an important pillar for the development of China's cross-border e-commerce industry. For example, Anji County, Zhejiang Province has more than 1,000 foreign trade export companies and several listed companies in the same industry. Its export volume will be about 40 billion yuan in 2022, three-quarters of which will come from home furnishing products. This is a home furnishing industry cluster line that also has Complete supply chain capabilities.
In addition, Shantou toys, Zhongshan lamps, Foshan home appliances, Xuchang wigs and other well-known Chinese industrial belts have been included in the scope of national policy support. The General Office of the State Council issued the "Opinions on Promoting the Stable Scale and Optimal Structure of Foreign Trade" in April this year, proposing to "support foreign trade companies to expand sales channels and cultivate independent brands through new formats and new models such as cross-border e-commerce... actively develop The "cross-border e-commerce + industrial belt" model drives cross-border e-commerce business-to-business exports".
The power required by the full hosting model is hidden in this huge industrial chain structure. All industrial belts need to make every effort to improve the quality of development, and many factories and industry-trade integrated sellers will skip middlemen and directly face the global market. The full hosting model is indeed a big springboard. It requires the transformation of factory-type sellers to industry-trade-integrated sellers. In essence, it requires its B-end awareness to be tilted to C-end awareness, and the traditional assembly line to be transformed into a flexible supply chain.
This process will be very long, and may be accompanied by the clearing brought about by industry involution. But we have reason to believe that this is also a process of "selecting the best from the best".
According to customs data, China's cross-border e-commerce exports have increased sharply from 798.1 billion yuan in 2019 to 1.55 trillion yuan in 2022. The scale is growing rapidly, and structural optimization is urgently needed. Next, sellers need to balance the relationship between full custody and third parties, and platforms need to think about governance strategies in the new ecological environment. With cross-border e-commerce gradually showing new attitudes, we are expected to see more value made in China in this round of waves.
Source: Songuo Finance