Cross-border e-commerce reaches a new level of intensity, with fierce competition after the cancellation of the small-amount exemption | Focus Analysis

Author | Zhang Ziyi

Editor | Yuan Silai

On the first day of the new year's work, Jack, the head of an overseas warehouse, found that the number of merchants making inquiries has increased significantly compared to before the New Year. These merchants used to do e-commerce business in the United States through the "small parcel direct mail" model.

Jack estimates that for merchants who originally used the "small parcel direct mail" model, most of their products are small and medium-sized items with a lower value. After using the overseas warehouse model for delivery and adding tariffs, the overall cost of the products will increase by 20% to 30%.

Overseas warehouse enterprises will also welcome a large number of new customers this year. They are small and medium-sized sellers who have never used a third-party overseas warehouse in the past and need to relearn the logic of selecting, stocking, and selling products for cross-border e-commerce. The vision of "starting a cross-border business with 5,000 yuan" will become a thing of the past.

All of this stems from the executive order signed by US President Trump on February 1, involving a series of tariff policy adjustments, including the cancellation of the tariff exemption policy for small goods worth less than $800 (referred to as: small-scale exemption), which came into effect on February 4.

The "small-scale exemption" policy allowed goods worth less than $800 to enter the United States without paying tariffs and without going through complex customs inspections. After the policy was cancelled, in the future, all Chinese goods entering the United States need to be declared for import normally: fill in the origin, tax number and other information and calculate the tax amount accordingly, and the customs clearance time and commodity cost will increase significantly.

Currently, the policy of canceling the "small-scale exemption" has been suspended, and it is not certain when it will be implemented again.

What is certain is that the window period for cross-border e-commerce to use the "small-scale exemption" policy will not be too long. The requirements for operating funds, the understanding of the overseas market, and the awareness of international relations will all test cross-border sellers, and the entrepreneurial threshold will be raised again in 2025.

The same is true for cross-border e-commerce platforms. Some businesses of Temu and SHEIN rely heavily on the "small-scale exemption" policy. Small packages carrying the goods of the two companies once caused a shortage of aircraft capacity and a significant increase in shipping volume to the United States last year.

Some foreign media reported that after Trump's tariff policy came into effect, American shoppers found that Temu and SHEIN removed many low-priced products, and the prices of goods also increased.

Low prices are no longer the magic to attack the US market. Platforms and sellers need to adapt to the new market: the US market with repeated and uncertain policies, but still with huge potential.

01 Reshuffling of Small and Medium-sized Sellers

After Trump signed the executive order, the staff of Yuntu Logistics accelerated the loading of goods onto the plane, trying to send the goods to the United States before the order came into effect.

On February 4, the US Postal Service announced the suspension of accepting packages from the Chinese mainland and Hong Kong, China. The goods could not be sent out, and the company apologized to the customers and prepared to return the goods. Then, the US Postal Service resumed accepting packages, and the staff of Yuntu Logistics quickly sent the goods away.

Chasing after policies will undoubtedly become the norm for cross-border e-commerce practitioners this year. After all, being fickle has always been Trump's governing style.

Some sellers, although still doing full trusteeship on Temu, have begun to select high-quality SKU products and prepare to stock them in overseas warehouses. Previously, he never considered using an overseas warehouse, believing that the cost and risk of overseas warehouses were too high.

Some sellers who have already turned to the semi-trusteeship model on Temu said that she must increase the product price by at least 20% to 30%, otherwise the cost cannot be covered.

Hua Chuang Securities believes that the impact of tariff increases on cross-border e-commerce is related to the gross profit margin in the United States and the proportion of sales in the United States: the higher the gross profit margin in the United States and the lower the proportion of sales in the United States, the smaller the impact.

Take Saivian Era as an example. Its sales revenue in the United States accounts for 90%. If the tariff is increased to 40%, the net profit rate will decrease by 6.8 percentage points, and the terminal price needs to be increased by 14% to offset the impact; if the tariff is increased to 60%, the net profit rate will decrease by 11.3 percentage points, and the terminal price needs to be increased by 23% to offset the impact.

Increasing prices is an inevitable choice for cross-border merchants. Whether American consumers will continue to buy after the price increase will test the product operation ability of merchants.

In Jack's view, the competition in cross-border e-commerce this year will reach a new peak of involution. Previously, sellers who adopted the "small-scale exemption" policy model, their stocking logic was mostly to purchase goods in small batches and with high frequency. After the goods were sold, the funds could be quickly returned, the capital turnover speed was fast, and the cash flow situation was good.

Using a third-party overseas warehouse requires merchants to use the overseas warehouse to stock up in advance. Merchants need to purchase in large quantities in the initial stage, and the "product selection" ability becomes the key. After stocking up in overseas warehouses, there is also a "trial order" process. Only after the product trial order is run can the replenishment level be known. Moreover, compared with the "small parcel direct delivery" model, merchants using overseas warehouses have a long transaction cycle. Most merchants can only achieve a turnover level of two to three times a year. The capital turnover speed is slow, and the degree of capital occupation is high. Therefore, there are quite high requirements for capital strength.

"The logic is completely different from the original small parcel direct delivery, and many points are more difficult." Jack told Yingke. "In the fourth quarter of last year, many merchants increased their stocking volume, trying to replenish the goods overseas before the tariff increase. The overall cargo volume has increased by two to three times compared to 2023. In the future, there will also be a problem of oversupply. If the sales situation is not good afterwards, there will definitely be a wave of merchants being reshuffled."

02 Reconstructing the Overseas Warehouse and Platform Model

The challenge is not only for cross-border merchants, but also for overseas warehouse service providers.

The cancellation of the "small-scale exemption" policy is to some extent beneficial to overseas warehouses. Nowadays, the competition in the overseas warehouse pattern is not sufficient. The overall overseas warehouse area of Chinese companies exceeds 10 million square meters, which is far from meeting the new market demand. The rent of overseas warehouses is likely to continue to rise due to the impact of demand in the future.

According to GoodCang Overseas Warehouse, the warehouse rent in the United States in 2024 has basically doubled compared to before 2021. Last year, even many freight forwarding companies joined the overseas warehouse business.

Yingke also learned that in addition to expanding the overseas warehouse area in the US market at the beginning of the year, some overseas warehouse enterprises are also preparing to adjust the proportion of small and medium-sized packages and large and medium-sized packages in the warehouse, increase the proportion of small and medium-sized packages in the warehouse, and accelerate the construction of small-piece automated warehouses, hoping to accommodate the explosive growth of goods after the policy change.

In a state of panic, overseas warehouse enterprises may be one of the few participants who can remain optimistic. More and more sellers who consider using a third-party overseas warehouse will increase. The challenge lies only in how enterprises can serve new customers well.

Jack told Yingke that in addition to accelerating the expansion of the overseas warehouse area in the United States this year, his company is also trying to reduce the threshold for using overseas warehouses in internal operations. For example, it will launch a "fixed price" quotation model for small and medium-sized sellers, and share teaching materials to allow sellers to learn relevant knowledge such as the stocking logic of overseas warehouses.

As for cross-border e-commerce platforms, Temu and SHEIN vigorously promoted the semi-trusteeship model last year. Under this model, platform merchants need to batch the goods to the overseas warehouse by themselves and then ship them locally. In addition to effectively expanding the product category, it can also deal with the impact after the cancellation of the "small package exemption" policy.

Temu has recently launched a presale function, which is only open to enterprise stores in the Chinese mainland or Hong Kong, China. This function aims to reduce the inventory pressure that sellers will face in the future, reduce warehousing costs and extrusion risks, and help sellers improve their cash flow and quickly respond to market demand.

It is worth noting that for domestic e-commerce platforms, the presale function has been frequently criticized by consumers. This is still under the premise that the logistics cycle is controllable.

Jack believes that for cross-border e-commerce platforms to do the presale model, the performance cycle is more uncontrollable. Especially in the peak season of e-commerce, various links of cross-border e-commerce will have problems such as delays, explosive orders, and stops, and the performance efficiency will be greatly affected.

For practitioners in the entire chain of cross-border e-commerce, the challenges have just begun, and the model of each link may be reconstructed in the future.