UPDATE: the effect of the Coronavirus on Ecommerce and factory closures in China: What can you do about it?

If you’re sourcing products from China then the Coronavirus or COVID-19 is affecting your business.  As you’ve seen on the news the Coronavirus has been declared “a global emergency” by the World Health Organization as the outbreak continues to spread in and outside of China.  

There are over 2,200 deaths and 76,000 confirmed cases reported as of now.  

Where is the impact? 

As you can see from this map illustrating the effect of the Coronavirus, it is mostly concentrated in China (Source: Johns Hopkins University). 

The city of Wuhan in the Hubei province is where the disease began and entire cities have been locked down with people holed up in their homes.  

Map of the effect of the Coronavirus

Which parts of the supply chain have been affected? 

Factories 

Originally scheduled to close for Chinese New Year in late Jan and return to work in early/mid-Febuary, now given the Coronavirus scare, factories are waiting for government approval before they can reopen.

Some factories in southern China have allegedly already gotten the go-ahead to reopen but they face a new challenge.  For factories to resume production, they need to instill safety precautions in the workplace to prevent the spread of the Coronavirus. 

According to my sources, the main issue is the lack of MASKS.  There is already a severe shortage of masks to protect against the spread of infection in China.  So if factories were to reopen they would need to make sure to have a stock of masks to protect their workers who would work in proximity to others and work in an enclosed area.  

Another challenge is that most factory workers are hesitant to return to work and risk getting infected.  This is because the majority of factory workers in China returned to their hometowns during the Chinese new year.  And their hometowns normally are not the same town as where the factory is located.  

In order for the worker to return to the factory, they must brave the trip which would entail traveling to a crowded train station, sitting in a train car most likely for a 10-20 hour trip before they can get to the factory.  All of these instances may risk infection.

Moreover, even if they do arrive in the town of the factory, they may risk being quarantined for up to 14 days.  Government policy is not transparent when it comes to this.

All in all, this means even when factories get approval to resume production, they will face a labor shortage in that most workers are hesitant to return to work, especially during these uncertain times.  

This does not mean that factories will be totally offline.  In fact sales staff who can work remotely and not needed to physically be in the factory are likely to answer emails and phone calls from clients.  This means that you can still get quotations, get questions answered and such but just not begin production until things resume some semblance of normalcy. 

Logistics and Shipping

One of the commonly overlooked parts of the supply chain is trucking or moving goods from the factory to the Port.  As of mid-February, freight forwarding and shipping companies have faced a huge headache in the lack of truckers that are available to move finished goods from the factory to the port where they can be loaded onto an ocean vessel.  

This means that even if your products are finished at the factory, there may be delays due to the lack of truckers to deliver these products to the port.  

So this is one of the weakest links in the supply chain as of now.  

What can you do as an ecommerce seller?

I recommend if you’re sourcing from China to stay in constant communications with your suppliers to be aware when they will be able to resume production.  

Also, it’s a good idea to ask about shipping schedules and how much of a delay they would expect.  

In addition, I’d be curious how things are going in their hometowns or factory towns because what we hear on the news may not be accurate as getting an actual on the ground perspective.

If you’re just getting started, even though factories haven’t resumed production yet, it still is possible to begin the sourcing process of requesting quotations and learning more about your suppliers and doing the due diligence that doesn’t involve physically being in the factory or having the factory operating.

This way once things resume you will hit the ground running to quickly get back on track.  

It also may make sense to look for sources outside of China if the shutdowns continue.  I’ve summarized the options my article titled “China on lockdown due to the Coronavirus – how to deal with it as an E-commerce Seller?” 

When will things get back to normal? 

The short answer is nobody knows.  The closest scenario that we’ve seen in recent years was the SARS epidemic in 2003.  I was living in Shanghai at the time and witnessed firsthand how a megacity of over 20 million people became a ghost town seemingly overnight.  For several months people were afraid to leave their homes, businesses took a “time-out” for safety reasons, and basically the whole economy stopped for several months.

However, once the virus was under control, people were eager to resume their normal lives, business picked up quickly and with much vigor.

Fast forward to 2020, optimistically speaking if the virus can be controlled in the next month or so, then things could factories could be back online in the next few weeks.

On the other hand, if the outbreak continues then we will have to wait and see.  

We have already seen numerous trade shows canceled (in Europe) or postponed.  

In my opinion, we will have a clearer picture in the next few weeks as workers travel from their hometowns back to the locations where they work.  This migration of hundreds of millions of people could trigger another spike of infections or it under control OR it could be the confidence boost China needs to restart its economy and day to day life for its people.

In any case, the best we can do now is to prepare what we can and wait and see.  

I’m curious if you’re sourcing from China, how have you and your business been affected by the Coronavirus?   What’s your plan?  

Hit reply and let me know!

Stay safe everyone!

-Gary

PS: TLDR? Here’s a short video I shot summarizing my thoughts about the effect of the Coronavirus on sourcing from China

Author: Gary

I work with many Amazon sellers to help them source from China. I’ve managed multimillion dollar sourcing campaigns and have been sourcing from China since 2008. I also am an Amazon Private Label seller myself so I know what you’re going through. My goal is to teach you how to source from China quickly and easily so you can own a 7-figure online business.

Leave a Reply

Your email address will not be published. Required fields are marked *