Covid-19 Impact on E-Commerce Businesses & Strategies Going Forward
Covid-19 hits economies around the world hard and with it, online sellers. E-commerce businesses worldwide will face challenges, be it with a decline in demand for your products, or with your supply chain – getting your inventory from your factories or suppliers to your customers may be difficult.
A drop in available airfreight options, an increase in shipping costs and a lack of personnel in manufacturing facilities slowing down production may be some of the challenges your online business is facing. Steve Suh, CEO of Floship and Chad Rubin, CEO of Skubana discussed this very topic and had it recorded. In this article, we’ll be highlighting their key points. You may also choose to simply listen to the episode instead.
Listen to the FloCast podcast episode
Floship recently started its own podcast with FloCast, the podcast for online sellers and entrepreneurs looking to enter new markets through e-commerce initiatives or crowdfunding campaigns. On this episode, Steve Suh, CEO of Floship and Chad Rubin, CEO of Skubana, author of Cheaper Easier Direct who is also an online seller himself, discuss the impact Covid-19 has on e-commerce businesses and what you could do to keep your business going.
Trade Wars are still ongoing
Before we move on to the CoronaVirus situation, keep in mind that the trade wars between the United States and China are still ongoing. It may not be on the news as much and may not be on people’s minds, but it is still very much present and a challenge for e-commerce businesses.
The number one challenge online and offline businesses face due to this is the significant increase of tariffs on imported goods manufactured in China. This, needless to say, cuts profit margins and may challenge your business. Some sellers may decide to increase their prices towards consumers, others may look to cut costs elsewhere.
One of such ways is to move manufacturing facilities out of China, or have your warehouses or distribution centers located elsewhere. A perfect option for e-commerce businesses who source their goods from China is to have your fulfillment center located in Hong Kong.
Importing from Hong Kong to the USA will allow you to avoid many such costs as long as your parcels stay under the threshold value of $800. For more information, read our dedicated article on how to escape the US-China trade wars by shipping through Hong Kong.
You may also reach out to us directly and we’ll be glad to provide you with an expert consultation.
Articles covering Trade Wars
Calling Covid-19 the Chinese Virus Puts a Strain on the Relationship with Suppliers
Chad mentions that one of the issues with the current situation is also the politics of labeling the CoronaVirus as the Chinese Virus or Wuhan Virus. Having a government labeling the virus in such a manner puts a strain on a relationship between you as the online seller and your Chinese supplier. Opinions aside, it is advised to be aware of this situation negatively impacting a potential relationship with your supplier and as such to communicate clearly with the parties involved.
The consequences of the US government for instance, labeling the virus as the Chinese virus are of course unknown. Currently there is a 25% tariff on many imported goods, but what may be next? President Trump's administration has already announced that 'China will pay', so it is likely tariffs will increase yet again. Chad therefore advises online sellers to seriously start looking into diversification. This may mean finding factories in other countries, perhaps manufacturing locally. Have an open mind to limit exposure to possible consequences wherever possible.
Popular Manufacturing Location Alternatives to China
Already before the Trade Wars kicked off, many businesses were looking to other countries to move their facilities to or to source from. The pandemic furthermore makes you second guess your current strategies and whether or not you should be looking for alternative manufacturing locations outside of China. While China is here to stay and will continue to be 'the world's factory', you may want to look into manufacturing location alternatives outside of China anyway.
Chad advises sellers to diversify supply chains, have a preferred factory and some backup factories in place. Don’t just rely on one supplier, have multiple backup suppliers so that you can react to issues around the world as they arise. While the virus had a grip on China, you would have been able to rely on your facilities outside of China, and now as covid-19 is currently penetrating the United States and parts of Europe, it may be better to now open back up your China-based facilities again as business is seemingly back to normal again.
This will not be the last time the world faces such a pandemic. Many experts agree on this. As humans continue to close in on animal habitats, and there being hundreds of unknown viruses out there, it is very likely more zoonotic viruses will move from animals to humans in the years to come. Diversify and be ready for the next time around.
Trending product categories during Covid-19 Lockdowns
Of course things such as e-learning and entertainment are currently very popular as people sit at home feeling bored. Online games, tv series, apps to meet and talk to other people are all doing well. In terms of tangible products that you as an online seller can ship, Chad and Steve also mentioned a number of goods you could look into.
A first category Chad mentions is home hygiene products, such as vacuum cleaners and vacuum cleaner bags. Air filters do really well also. As people are home all day, more care is put in keeping the house clean and the air fresh.
Luxury goods take a hit, while essentials are skyrocketing. Consumer packaged goods (CPG) do really well, food products, lounge ware such as sheets, blankets and pillows do well too.
Hygiene products such as face masks, soaps and even portable bidets are selling like hotcakes.
It may come as a surprise that a product like a bidet is currently in high demand, but it has to do with the rush on toilet paper that took place in the past weeks. As people are concerned that supermarkets may be unable to supply sufficient amounts of toilet paper, a portable bidet suddenly becomes a popular alternative.
Other e-commerce products currently trending during the covid-19 pandemic may be home fitness equipment such as dumbbells, elastics, TRX suspension sets and yoga balls. Depending on the location, gardening tools and products sell really well also. Work-from-home goods such as laptops, webcams and microphones are also in high demand.
Articles covering Covid-19
Shipping from Hong Kong during Covid-19
Airfreight costs are currently going through the roof. Airfreight used to be a very popular option to get bulk inventory into the US and other parts of the world. With fuel prices at all time lows, you’d expect airfreight costs to drop as well, but the opposite happens. Steve mentions that there is a lot less supply of airfreight in the market, resulting in all-time high prices. Margins for couriers are higher than ever. Airfreight costs have gone up 3-5 times and continue to rise as the situation worsens. This really makes you wonder, what do you do? - Steve Suh.
Online sellers are hit hard with high airfreight costs, with China and not being able to manufacture as fast. While China is pretty much manufacturing at full capacity once again, sellers now worry about supply chain costs and delivering products to customers as soon as possible.
Sending goods from a Chinese manufacturer to Hong Kong currently may take around 2 days. When the goods arrive in Floship warehouses in Hong Kong, we are able to fulfill orders practically the same day, within 24 hours. Using an option like FedEx or DHL, we’d be able to ship to consumers within 1 to 3 days. You may think that lead times would be worse, but it is not. FedEx especially has a great network in the US, and even with the current situation we are seeing delivery time to be within 1 to 3 days, says Steve Suh.
With such options and others, you will still be able to keep up with demand. Want to learn more? Reach out today and one of our solution experts will gladly consult you on a strategy for your business challenges.
A word from our CEO, Steve Suh
Caution: Postal is heavily affected
Steve adds that Postal across the world is currently heavily affected and may not be as reliable. This comes down to the airfreight costs and availability in the market. As postal is not an all inclusive solution,the first part of the journey, parcels will go on to commercial airlines. As there are currently less flights going about and flights are getting cancelled, postal parcels will also experience delays. Several countries also suspended their postal services for the time being.
Keep this in mind when choosing a shipping option. Consult a fulfillment provider to make sure you got the right shipping strategy to meet customer expectations and demand. As things change overnight, speed is very important.
Communicating with customers during Covid-19
Both Steve and Chad mention that it is extremely important to communicate clearly towards your customers. Communicate what customers can expect in terms of delivery and delays. Let them know they may need to wait longer than they’re used to but do not need to worry that parcels will never arrive. During the shipping process, communicate the status and whereabouts of parcels clearly.
Some parting advice for Online Sellers
Stay nimble, have your contingency plans in place as this won’t be the last time the world will see such a pandemic. Stay as lean as possible, not just in terms of people but also processes and software. That way you’d be able to do more with less.
Steve says that rather than looking at this as a down-turn, look at the situation as an opportunity. Look at what works right now and take advantage of it. This may even be through ads, as many companies currently halted their ad spend, this may be an opportunity for you to gain market share.
Chad suggests to assess your exposure to the situation through a STRESS-test to figure out what could happen with worsening scenarios. Partner and collaborate with other companies in the space, for instance through selling gift cards ahead or talk to companies in your landscape to see where you can work together.
In short, it is advised to diversify your supply chain. Have a preferred factory or supplier and a few backups in other locations for now or for the next time the world faces an epidemic. Communicate clearly with your customers on the status of the parcels they eagerly await to receive.
Still shipping from China? Ship through Hong Kong instead. Floship has several shipping solutions that allow you to ship goods to clients around the world in as fast as 1-3 days. Reach out today for a global e-commerce order fulfillment solution.
Ramon den Hartog is Head of Marketing at Floship. Ramon writes about E-Commerce, Logistics, Marketing and Languages and is also the host for FloCast, a podcast initiative by Floship for online sellers looking to enter new markets.
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