That might seem like a long way away, but instead of panicking last-minute as your suppliers close shop in favor of mooncakes and family reunions, why not roll up your sleeves now to make a plan that will spell success for your store?

The festive atmosphere in China and other countries where the Lunar New Year is celebrated is similar to the energy surrounding Christmas in the US and other western countries.

But when it comes to this particular holiday, celebrations can go on for weeks.

For online retailers, that presents a major problem. After all, China remains the leading supplier of goods to the US, with products from China accounting for nearly 19% of all imports in 2020.

With Chinese suppliers shutting down for anywhere between three weeks to a couple of months, planning for CNY must be a part of your business strategy. And with on-again-off-again Covid lockdowns, ongoing supply chain drama, and a shifting economic landscape — a proactive plan for navigating factory shutdowns has never mattered more.

But here’s the good news:

Planning ahead is totally doable. Not only that, the right planning for CNY can save you from major inventory and supply chain headaches all year-round.

The Scoop on Chinese New Year Shutdowns:

  • What’s the supply chain situation during CNY?
  • How can Chinese New Year affect your store?
  • How can online retailers prepare for Chinese New Year shutdowns?

Looking for more ways to win with Chinese suppliers? Learn how one Amazon seller increased her buying power with a little help from a seamless borderless payment solution.

What’s the supply chain situation during CNY?

While CNY has always had a significant impact on the global supply chain, the post-Covid market might soon be engulfed in an even worse situation than seen in previous years. This is mainly down to the forecasted port congestion and high container rates predicted for 2023, a not-so-fun leftover from the pandemic.

But supply challenges are only half the problem. Economists are forecasting that economic growth will decelerate from 5.5% in 2021 to 3.2% in 2023, while global inflation continues to increase the cost of goods.

And if port shutdowns, rocky supply chains, and a sluggish economy weren’t enough, staff turnover in many Chinese factories has reached record levels as workers quit their jobs on the assembly lines to join the gig economy. In fact, only 36% of companies in Zhejiang — home to China’s hardware capital Yongkang city — reported having no problems finding employees.

As suppliers take additional weeks (or even months) to get back to their normal operations after Chinese New Year, ecommerce sellers may see:

  • A shortage of inventory
  • Poorer quality of goods
  • Delays in shipping
  • A rise in cost of production

With exacerbating factors on the radar for CNY 2023, all of the above could be amplified. But there is an upside.

Accounting for these setbacks by planning ahead could help you establish a resilient year-round supplier network. And for merchants who sell in countries where CNY is celebrated, you may even see a spike in sales.

By the way, you do have an inventory plan in place for Q4, right? Get prepped for a profitable holiday season with our Guide to Q4 Inventory Planning.

How can Chinese New Year affect your store?

Now that we’re clear on the bigger picture, let’s break down the CNY supply chain challenges in a bit more context. 

What specific issues could you encounter with Chinese New Year 2023? And why should you start preparing now?

#1. Little to no supplier communication

If you’ve been through a Lunar New Year or two, you already know it can be hard (or downright impossible) to get timely updates on inventory during the weeks leading up to and after CNY. Order management, production, and shipping are all put on hold — often with no end or certainty in sight.

China is currently experiencing Covid-related closures in important commercial hubs like Shanghai. Add lockdowns to the mix and the situation is looking to be just as bad, if not worse, in 2023.

But with economic pressure ongoing, there may be a ray of hope. FitchRatings recently revised its forecast for China’s economic growth, raising it to 5.2% from 5.1% — but this is only if China pulls out of its zero-Covid policy responsible for the shutdowns.

Monitoring China’s policies and restrictions, particularly those related to Covid, could help you gauge the level of expected factory shutdowns and the supplier communication challenges you might be facing next year. 

#2. Shaky production environment

Production pre-CNY and post-CNY can be completely different worlds. In 2021, we saw a mass exodus of workers from outside China going back home during CNY due to Covid lockdowns. Unfortunately, very few of them returned due to the strict restrictions around quarantines and testing. 

China’s ongoing zero-Covid policy means factories may be in a similar pickle in 2023, scrambling to find enough skilled workers to get production back on track. 

This also means factories may be behind in production causing them to rush jobs and potentially reducing the quality of products. Suppliers and manufacturers across the supply chain may also have a hard time procuring raw materials for products, leading to even more delays in production.

#3. Unprecedented shipping delays

Immediately after the festivities, suppliers are likely to be swamped with pending orders. An overload of shipments could lead to delays, mix-ups, or even misplacement — adding additional strain to an already overburdened supply chain. 

Then of course, there’s the pandemic factor. 

If even a single case of Covid is found at a supplier’s factory or on board a shipping vessel, employees could be required to undergo a seven-week quarantine period, and sellers might see shipping delays that are just as bad as they were in 2021. 

As mentioned, China’s zero-Covid policy is under pressure because of its serious economic impact. But even with increasing pressure, experts predict that the chances of this policy shutting down are low. 

The best thing online retailers can do is to simply account for the potential delays and order pile-ups caused by factory shutdowns, and stock up on inventory well in advance.

How can online retailers prepare for Chinese New Year shutdowns?

Clearly, ecommerce sellers are up against a lot when it comes to planning for CNY 2023. But it’s not all doom and gloom.

Let’s dive into some measures you can take to keep your inventory and sales on-track during one of the world’s largest holiday breaks. 

Stay ahead of the game

One great advantage ecommerce sellers have when facing the challenges of CNY is that we know it’s coming. 

While it might vary by a week or so every year, you can account for these challenges as part of your planning and strategizing for Q4. 

By spending a little extra time refining your inventory forecasts, you can stay one step ahead of the shutdowns and shortages.

Which leads us to our next tip: stock up!

Stock up!

Now that you know what to expect with CNY 2023, you can use your sales and inventory data from previous years to estimate the amount of buffer inventory you’ll need in order to stay in stock while supplier factories are closed. 

But proceed with caution. Don’t let CNY factory shutdowns push you into panic-stocking. 

Instead, rely on sound sales and inventory data to place an order for the right amount of buffer stock well ahead of time. From there, you can establish a network of new or temporary backup suppliers in case additional quantities are needed. (More on this in a minute!)

Remember, waiting until October is already too late. It’s crucial to stock up in tandem with this next step, coordinating with suppliers.

Coordinate with suppliers

The Chinese New Year is similar to Christmas not just because of the grand festivities, but also because of the huge migratory population during this time (even the pandemic couldn’t stop the celebrations!). 

For brand owners, this can mean only one thing: disruptions in supplier communication.

The truth is, it would be near impossible to expect smooth communication with your suppliers during this busy holiday season. 

So expect them to go dark and prepare for it in advance by coordinating on additional inventory and getting a clear date for when you can expect suppliers to resume regular operations.

Consider temporarily switching suppliers

While this might not be the ideal solution, it’s definitely an option to consider. 

Like most sellers, you’ve likely worked hard to build your network of reliable Chinese suppliers. Deviating from those hard-won relationships is probably the last thing you want to do. But with port shutdowns and supply chain challenges now happening on a global scale, it doesn’t hurt to have options.

For example, you could think about taking on a local supplier on a short-term contract basis and resume operations with your previous supplier once the uncertainty of CNY has died down. 

Just be sure to look into your contract obligations with your existing suppliers before taking steps toward making a switch. If you’re not able to (or don’t want to) switch suppliers, consider other shipping options. Some international shipping companies try to maintain normal operations during CNY and may be able to fulfill your deliveries on time.

While it can be challenging to switch suppliers on short notice, taking advantage of borderless payment solutions like our Digital Wallet can help you make timely payments in your supplier’s local currency and help make the transition smoother on both sides.

Don’t let factory shutdowns slow you down

With Covid disruptions, port shutdowns, shipping backlogs and an economic recession on the radar, keeping your store’s operations on track during Chinese New Year isn’t going to be easy. 

But it doesn’t have to slow you down either.

By working to secure inventory in advance, establish additional supplier and shipping relationships, and making sure you’ve got a plan in place to keep sales and inventory on track — you’ll be able to maintain business as usual during one of the world’s longest holiday shutdowns.

At SellersFunding, we’ve seen firsthand how the needs of even the largest ecommerce sellers can change from day to day. 

With our all-in-one ecommerce funding solutions — including our fast and flexible Working Capital and borderless Digital Wallet, we help brand owners keep their sales on track, even during hectic seasons like Q4 and CNY.
Planning ahead can get you where you want to be in 2023. Learn more about how we can help you secure the inventory and supplier relationships you need with a quick two-minute demo.

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