How to prepare your eCommerce store for Chinese new year shutdowns

Every year, people across China celebrate the region’s biggest holiday of the year: Chinese New Year. Offices and factories throughout the country close to allow workers to travel to their hometowns and spend the holiday with their families. This break can last anywhere from just a few days to three or four weeks, depending on the employer.

If you, like many eCommerce brands, order manufacturing from China, you’ll need to prepare for Chinese New Year factory shutdowns in advance. These closures often cause production and shipping delays, and can even lead to stockouts if you don’t plan ahead.

This year, Chinese New Year falls on Sunday, January 22, 2023. Officially, the holiday begins the evening before, on January 21, and lasts 15 days, until the first new moon of the new year occurs. However, it’s important to remember that some workplaces and factories close several weeks ahead of the Chinese New Year to give workers plenty of travel time. It also tends to take factories up to a month to ramp up production back to pre-holiday levels, so don’t expect things to go back to normal as soon as the holiday is over.

Chinese New Year, also known as the Lunar New Year or Spring Festival, is an annual 15-day celebration honoring the new moon with colorful lanterns, red envelopes, street festivals, and more. People who live in China are usually given at least seven consecutive days off work to commemorate the occasion, and many Chinese employers grant even more leave.

How Chinese New Year Affects ECommerce

This year, eCommerce sellers would do well to begin preparing for Chinese New Year at the end of 2022. While some factories are only closed for a few days in celebration of the holiday, others shut down for a month or more. Each factory has its own schedule, so it’s a good idea to check with your suppliers well in advance so you can thoroughly prepare.

The factory shutdowns naturally contribute to supply chain delays and disruptions. In addition, due to the sheer number of orders before and after Chinese New Year, there are more frequent quality issues. Many suppliers try to get as many orders out as quickly as possible, leading to lower standards. Therefore, it’s wise to do some extra quality control around this time.

In addition to the usual challenges around Chinese New Year, there are some other setbacks to watch out for this year. In recent years and on the heels of the Covid-19 pandemic, the supply chain has already become more unstable than in the past. Lockdowns and factory closures created further problems for some suppliers.

While the situation appeared to have calmed, recent widespread protests in China are once again triggering worries of supply chain disruptions. With global inflation and prices rising across the board, early preparation is more important than ever.

Here are some top tips on how to prepare your eCommerce business for Chinese New Year 2023.

1. Order inventory in advance

The best way to avoid Chinese New Year delays is by ordering enough inventory in advance. This is particularly challenging, however, because Q4 is such a busy time for eCommerce sellers.

Despite the fact that many brands are running all-out campaigns through the months of November and December, it’s important to remember to look ahead. Waiting until Q1 might be too late for sellers to order more inventory since some factories start slowing down production as early as a month before Chinese New Year actually begins.

Pay attention to demand forecasts so you can order an optimal amount of inventory to carry you through February. If you don’t order enough, it might be hard to get more in stock. However, as always, don’t order too much or you’ll be stuck paying extra storage fees.

2. Reach out to, and build rapport with, your suppliers

If you aren’t doing so already, now is a great time to build rapport with your overseas suppliers. The Chinese refer to this relationship building as Guanxi, and it can lead to better prices, shorter delivery times, better product quality and more. In fact, Guanxi is a vital part of doing business in China.

Chinese New Year is an exciting time and a well deserved holiday break, so make sure to acknowledge this in any upcoming communications with your supplier. You can also consider sending a gift item to the manufacturer as a nice gesture.

Here are some questions you should ask  your supplier about Chinese New Year:

• How long will your factory be shut down during Chinese New Year celebrations?
• When will production resume after the holiday?
• How long will it take an order to be finished after the factory reopens?

3. Consider air freight for rush product orders

The key to surviving Chinese New Year shutdowns is to stay fully stocked throughout the celebrations. Going out of stock can cause a costly chain reaction for your eCommerce store, impacting everything from product listings and marketing to customer service.

While ordering enough inventory before factory shutdowns is the best strategy, this isn’t always possible. Changes in demand, supply chain delays, and other factors can lead to the need for additional inventory orders. If this is the case, turning to air freight can be a good solution.

Air freight speeds up product deliveries and lets you avoid shipping delays, but it is an expensive alternative to cargo ships. To save on costs, remember that you don’t have to have all your products delivered by air freight. Instead, just get enough product to keep best sellers in stock.

4. Use downtime to focus on other areas of your business

Once the factories shut down, you likely won’t be able to get new orders moving for one to four weeks — unless you seek out a domestic supplier or find another international supplier you trust. Be proactive and use this quiet time to invest in other areas of your business, such as new product research and development. You can also brainstorm new marketing strategies, implement new technology for your storefront (such as chatbots), and become an omnichannel merchant during the festivities.

This can also be a great opportunity for sellers to look ahead and plan out the rest of their year. Supply chain and cash flow planning are valuable tools for eCommerce sellers, but they can take time. Utilizing down time at the beginning of the year for this important process can help you later on.

In addition, when things are slower, you have the time to review your supply chain management and identify areas that need improvement. It’s wise to periodically take a look at your various expenses and seek out areas where you can cut costs. Chinese New Year is a good time to do so.

5. Advertise potential delays on your online storefront

Maintaining a good relationship with your customers is important for your business. Therefore, you don’t want to leave them in the dark when there is a greater potential for delays and disruptions. Let them know what’s going on, and they’ll be more likely to understand and continue to feel positively about your brand.

Keep customers in the loop by updating your online storefront to feature copy about the upcoming shutdowns and possible delays. Consider adjusting shipping promises and take down product features for any items that may go out of stock.

Manage customer expectations by reminding them about delays even after an order is placed. You can set up trigger emails to keep your customers in the loop. It’s also a good idea to provide customers with alternative options if an item does go out of stock. Setting up alerts so customers can sign up to be notified when the product they want is back in stock can also save a sale and keep customers loyal.

6. Keep working capital on hand for any curveballs

The dynamic nature of eCommerce means that you never know when a new issue will head your way. If a product sells out unexpectedly, or the last shipment before the factory shutdowns arrives with damaged goods, you may spend Chinese New Year in crisis mode.

Get ahead of potential problems with efficient supply chain cash flow. Whether you need to find a backup manufacturer or air freight an overnight delivery, having plenty of working capital available can help you move fast and stay smart in spite of factory shutdowns.

Stay prepared by making sure you have working capital on hand before Chinese New Year factory shutdowns begin. If this is a challenge for your business, you can find a financing solution to help. 8fig, for example, offers flexible, continuous capital designed with your cash flow in mind.

7. Know which niches may be impacted

While Chinese New Year does fall during a quieter sales period, you should be aware of profitable niches and opportunities that you could miss out on if you go out of stock. Valentines Day, which is a nearly $24 billion sales opportunity, falls directly within the Chinese New Year Celebrations and Mardi Gras isn’t far behind it. Stockouts on cold weather products, such as ski wear and winter clothing, could also be costly.

If shortages of these products are likely to hurt your business, it’s a good idea to stock up on inventory well in advance of the factory shutdowns. You don’t want to find yourself low on stock without any way of ordering more.

You can also seek out suppliers in areas that are not affected by Chinese New Year. Having a backup domestic supplier is a good way to make sure you don’t run out of options when Chinese factories close.

8. Bump down your ad spend

If there’s a chance you could sell out of certain products at the beginning of Q1, consider reducing your ad spend on those items until after the Chinese New Year. This lets you divert cash to other opportunities and improve your customer service. Plus, you don’t want to waste valuable capital on ads for products that are likely to sell out anyway.

Make sure to stop running ads for items that are already out of stock, too. Remember to remove any listings for out of stock products on Amazon or other marketplaces to minimize organic ranking impact.

Funding to Get You Through Any Challenge

Chinese New Year is the biggest holiday of the year in China, and factory shutdowns allow workers to celebrate. However, these shutdowns inevitably bring with them supply chain delays and disruptions.

This doesn’t have to harm your business, though. Planning ahead and making sure your business is ready for anything will help you continue to scale and get ahead of any curve balls thrown your way.

Staying ahead and pivoting at the last minute takes working capital. If you need extra funds to order enough inventory or shift to air freight last minute, 8fig can help. 8fig’s continuous capital and planning solutions help you stay flexible and adapt, so you can take advantage of every opportunity in 2023. Start building your Growth Plan today.