Originally published on February 28, 2020, updated May 13, 2020
By now, you’re well aware of the coronavirus outbreak that’s terrifying people around the world. Visit the most popular areas in Beijing, and instead of bustling crowds and a vibrant nightlife, you’ll discover a ghost town. People are scared — with good reason — and the number of cases is quickly multiplying. There’s no doubt about the fact that illness and loss of life is devastating, but there are also implications for eCommerce.
A major side effect of the spread of coronavirus is that we’re beginning to see an economic downturn. For now, small and medium sized enterprises seem to be the most impacted. Whether you’re running a coffee shop in Shanghai or an Amazon merchant sourcing materials from China, you’re probably already feeling the consequences as this outbreak inches closer to pandemic status.
We have no idea what’s going to happen, but this blog post will discuss some of the potential issues you might face, as well as possible actions you can take to protect your Amazon business.
This might surprise you, but most of us have contracted a form of coronavirus in our lifetimes. The common types tend to hit us as kids, causing ailments such as sinus and upper throat infections. You might also, however, be familiar with the more dangerous strains that have caused illnesses such as severe acute respiratory syndrome (SARS) and Middle East Respiratory Syndrome (MERS).
Now, the history books have a new entry, COVID-19, the name given to this particularly virulent type of coronavirus. First detected at the end of 2019 in Wuhan, China, what started as a few suspicious cases has nearly grown into a pandemic, impacting people in more than 30 countries and killing thousands worldwide. Since this all began, the number of infected has risen steadily and exponentially.
The scientists are still trying to understand COVID-19, but here are some things we know now:
Naturally, people are concerned about catching coronavirus. With so many variables still unknown, many are taking every possible precaution. That includes being very wary of products coming from Asia.
In recent years, we’ve seen many economists debate whether China had achieved superpower status. Some have even argued that they’d overtaken the United States. Those conversations almost feel like distant memories when we look at how the coronavirus outbreak is impacting China’s economy. In many ways, the country has been brought to its knees with no end in sight.
Let’s look at what’s happening to the bookstores, for example. There are more than 70,000 brick-and-mortar bookstores in China. As the outbreak continues to grow, the ones that have managed to stay open have seen their sales drop by 90 percent. These retailers were already feeling the pressure from online shops and eBooks. Could this permanently change how books are sold in China?
It’s not just small businesses that are worried, though. Apple was among the first major corporations to issue a warning about the potential negative impact of the coronavirus outbreak. We won’t know the full story until this is all over, of course, but we can’t continue to pretend everything is okay — because it’s not.
At LandingCube, we've noticed a significant drop in traffic from China. And as much of our team is based in Vietnam (which shares a border with China), we are seeing first hand the lengths that governments in Asia are taking to prevent the spread. Schools are shut down. A village of 10,000 has been quarantined. The business side effects of the coronavirus are not likely to end very soon.Thomas Pruchinski
We’re already hearing reports of supply chains being disrupted, consumer activity dramatically slowing in China, and major shipping delays and/or shortages. This is not the time to take a “wait-and-see” approach to protecting your business. You need to be proactive before it’s too late.
In an op-ed published in the Wall Street Journal supply chain expert, Yossi Sheffi, explained: “Coronavirus could cause supply-chain disruptions that are unlike anything we have seen in the past 70 years. For now, the best course of action for companies is to analyze possible outcomes in the context of known supply-chain risks based on historical precedents, and to take precautionary measures that minimize exposure to future disruptions.”
Whether you’re a manufacturer, distributor, or simply a seller who sources products or materials from China, there are ways to minimize the risks this disease poses to your business. We might all get lucky and be able to forget about COVID-19 in a matter of weeks, but having some sort of plan is always better than taking a gamble in these situations.
How bad can things get? Some experts believe that several international economies, including the United States, could go into a recession if things don’t turn around soon. Exacerbating the situation, many doubt that China is telling us the whole story, so it’s almost impossible to have any sense of what’s truly going on and how long it will last.
We asked Meghla Bhardwaj, founder of The Asian Seller, for her advice regarding alternative sourcing options. Here's what she had to say:
"Supply chains across China have been disrupted due to the spread of COVID-19. Factories and offices remained closed for weeks after the Chinese New Year holiday, while entire cities were quarantined and people were locked in.
Even as many factories and offices have started operations this week, it will take time for things to get back to normal. There still are raw material shortages and factories don't have enough labor as workers are delaying their return to factories from their hometowns.
There is a backlog of orders that will take factories time to clear. Most suppliers will prioritize orders from their larger clients before processing orders from their smaller buyers. This means Amazon sellers might be at the end of the line and should expect longer lead times.
Keep in regular contact with your factory and finalize purchase orders as soon as possible.
Keep in regular contact with your factory and finalize purchase orders as soon as possible. You want to make sure your orders are at the the front of the line when factories start production.
In the short-term, it may not be possible to source existing products from another country. Developing a new product, finding new and reliable suppliers is a long process that takes time and effort.
But in the long-term, you should consider a China + 1 strategy to diversify sourcing and mitigate business risks. Consider sourcing from other countries such as India, Vietnam, Turkey, US, Australia, Mexico, etc.
China is the main production hub for almost all products and that is not expected to change in the future. In fact, alternative sourcing markets are not able to produce all product categories like China does. There are certain categories that these countries are competitive in and you can try to source these categories for your business in the long term.
India, for example, specializes in home products, gifts, cotton-based textiles & fabrics, apparel, eco-friendly products, leather, etc.
With the US trade tariffs in 2018, Hong Kong protests in 2019, and now COVID-19, many Amazon sellers are realizing that they cannot keep all their eggs in one basket and they absolutely have to diversify their sourcing to other markets."
In addition to considering supply chain alternatives, there are other challenges for eCommerce merchants to consider. Read on to find out what to expect from customers and which products are in high demand.
Last month, 109 people attended an international sales conference in Singapore. Unbeknownst to them, they were exposed to COVID-19. As the attendees flew home, they took the contagion with them, leading officials to search a British pub, French Alpine ski town, and other destinations to prevent clusters of outbreaks.
Meanwhile, the popular online company Wish.com has had to reassure potential customers who are worried about buying anything that ships from China. They cite the World Health Organization (WHO) which has yet to recommend restricting trade to and from the Asian nation. Wish.com does add, though, that they will be closely monitoring for any updates. In the meantime, they’ve turned the outbreak into an opportunity to sell what they’re calling “coronavirus supplies.”
While we’d never recommend capitalizing on a situation like this, it is important to note that certain items will be in extremely high demand right now. They may be over-sourced and hard to keep in stock, which is why inventory management tools such as RestockPro can really come in handy in situations such as these.
Here are some products that even local retail stores are struggling to keep on the shelves:
Demand is incredibly high (the FBI reportedly ordered more than $40,000 worth of these items), so if you’re selling these products, or planning to, be prepared. If you’re concerned and trying to stock up for personal use, you may want to grab what you can right now in the even that these things become difficult to find in the coming months.
Either way, if you haven’t already come up with a plan to protect your business, now is the time. Do not wait for things to get worse before you do something. Unfortunately, some businesses may not make it through this rough patch, but you’ll give yourself the best chance by being proactive and creating a strategy. By thinking ahead and using the right tools you might just weather the storm.
Originally published on February 28, 2020, updated May 13, 2020
This post is accurate as of the date of publication. Some features and information may have changed due to product updates or Amazon policy changes.