Strategy For Dropshipping Business During Coronavirus, Message From Dropshipping Expert
Many dropshippers are asking, “what should I do during the coronavirus outbreak? When will factories reopen?”
Shawn Zhao, HyperSKU’s CEO shared his opinion and suggestions for dropshippers on handling the coronavirus situation.
If you are a dropshipper who source from China, especially if you are using AliExpress supplier, you might find this article helpful.
1. What is the current status of the Coronavirus epidemy?
To get a better understanding of the current situation, referring to the past data of similar epidemy as the Coronavirus might help. The H1N1 flu was present in approximately 60.8 million cases, caused 274,304 hospitalizations, and 12,469 deaths in the United States and SARS had 8096 confirmed cases and 774 deaths. Coronavirus is a new strain of virus with much stronger infectivity.
Confirmed Suspected Cured Death
63932 10109 7019 1489
Global: Confirmed: 505 Death:2
2. How many factories are back to work?
There are no official data, and whether a factory can resume work depends on the following three conditions.
- The severity of the epidemy in the area where the factory is located. The resumption of work at any factory needs to be approved by the government. Adequate anti-epidemic materials and anti-epidemic programs must be prepared in order to get this approval.
- Availability of labor force. Because of the Chinese New Year, most of the workers went back to their hometowns and are still stuck there to limit human immigration and the spreading of the epidemy. At present, only a small portion of the people are back to their working location and are required to self-quarantined for at least one week at the factory location.
- Availability of raw materials. Because the shutdown is at a national scale, even if the factories are back to work, they may still encounter problems such as failure to purchase raw materials, failure to receive orders from customers as they haven’t resumed work or the inability to ship packages as the domestic logistics are not operational yet.
As HyperSKU has been helping dropshippers to find factories in these past two weeks, we constated that only less than 20% of the factories are back and can process orders. It is expected that the proportion of workers who can resume work on February 20th will not exceed 35%. After the factories resume work, they will still need to get settled and sort out the unfulfilled orders during this long break. Basically, production should start by March.
Taking one of China’s largest domestic jewelry factories as an example, the company resumed work on February 10, the factory will start producing on February 17, and the first shipment could be shipped out on March 10th.
3. How many AliExpress sellers are back to work?
As you can see from AliExpress, AliExpress has extended the delivery cycle. AliExpress sellers are spread all over the country, mostly in coastal areas, and Guangdong and Zhejiang are the provinces with the highest proportion of AliExpress sellers, accounting for 60-70% of the country. Both provinces are in areas with high outbreaks, and most companies ( Sellers) have not been allowed to return to work. Many of which are involved in the commodity industry belt. The following is a picture of the industrial belt HyperSKU made. By comparing the pictures below, you can roughly know the production area of the products you are selling and the severity of the epidemy for each area.
According to HyperSKU’s preliminary survey of various AliExpress seller groups, almost 40-50% of sellers have started remote offices. But if the company and the warehouse are not resumed by the government, they will not be delivered even if the warehouse has stock. Please check with your seller carefully whether their area and warehouse are allowed to start to work.
4. When can we expect the resumption of resume work, and when will production capacity be restored?
This epidemy is a huge test for China’s economy. It is conservatively estimated to affect at least 2% of the national GDP in 2020. Therefore, the government is introducing measures to classify the regions according to the severity of the epidemy and arrange for factories and companies to resume work as soon as possible. But what everyone needs to know is that from the perspective of the government, many industries are far more important than the production and sales of consumer goods, such as the pharmaceutical industry, large-scale manufacturing, communications, and energy, which is highly understandable.
Therefore, factories related to the Dropshipping industry will not be preferentially opened or get supporting resources by the government.
5. What factors affect the efficiency of delivery?
(1) Domestic production, kindly refer to the previous section.
(2) Work resumption calendar, kindly refer to the section above.
(3) Domestic logistics. Because provinces and cities have corresponding blockage policies, to support the area highly infected by the Virus, the capacity of many large transportation companies has also been requisitioned by the government. In addition, many freight companies, including truck drivers, have not resumed work. At present, domestic land transportation capacity is insufficient. Only domestic air freight is still operating normally, with an efficiency of three days. It needs to be reminded that the cost of large air cargo is high. For example, a product weighing 450g was initially shipped for less than US $ 0.50. Due to the volume of 26.5 * 13.5 * 13.5cm, the domestic air freight cost became as high as US $ 3.
(4) Warehouse operations. Please confirm with your agent whether the warehouse has been approved by the government to resume work, otherwise, there is a risk of being shut down at any time. Also, check the number of packages that the warehouse can handle each day. HyperSKU has three warehouses running, and currently, it can only process 5,000 orders a day. Typically, it can process 30,000 orders a day.
(5) International logistics. Most of the flights from mainland China to overseas have been canceled, but flights departing from Hong Kong are still operational with sufficient capacity. The transportation from Shenzhen to Hong Kong is also carried out regularly, which will not affect the export of domestic goods. And now there are fewer shipments and there is no shortage of capacity. At present, no parcels from China have been forbidden to enter any foreign countries, and all stages of the delivery were processed as usual. HyperSKU delivery time in the past two weeks was within ten days, so the epidemy has a little effect on international transportation.
6. Does the package contain germs?
The short answer is No, but for more details, kindly refer to the official description of the CDC website:
7. What strategy should Dropshipper take?
(1) Product Selection
- Avoid trying out new products. In the case that the situation with the epidemy is not clearly improving, it is recommended not to develop blind new products, the supply chain is likely to be unable to keep up, resulting in a waste of advertising costs and the risks of compromising your FB advertising accounts and Paypal.
- Avoid oversized products. Don’t choose a product with a high volume as logistics costs would likely eat up your profits.
- Find trusted suppliers that can confirm in real-time the availability of the products. Keep in mind that available inventory now might not be available in the next hour.
- Make sure you have sufficient knowledge of the suppliers and confirm whether long-term cooperation can be foreseen.
- Have a backup plan. At least find an alternative supplier (agent) and give him/her a portion of your orders to be your fail-safe in case you need another option. Even if there is no epidemy, there may be other accidents. This is your disaster preparedness plan. Walmart will have more than two alternative suppliers for any product from different regions.
- Hold stock. For products that are continuously selling, it is recommended to negotiate with the agent for stocking. Try to buy as much inventory as there are in the market now, because the goods you sell may be sold by others, and everyone is rushing for the same products. As long as someone buys the inventory, you will have to stop selling. And the actual time for the factory to resume work is uncertain, and being able to own stock is the safest strategy.
- Avoid testing out new ad strategies. It is recommended to adopt a conservative plan to keep your original effective campaign, and do not try new campaigns.
- Adapt your budget. Plan your advertising budget according to the ratio of your daily order quantity and inventory quantity. If necessary, reduce the advertising budget appropriately.
- Get creative. Under the premise of sufficient inventory, you can consider some promotion strategies like “buy one get one free”, which will help reduce logistics costs, and suppliers will be willing to give you more discounts.
- Explore new territories. Under the premise of sufficient inventory, your competitors may have stopped advertising. At this time, it may be a good opportunity for you to expand your campaign to new areas. After all, international logistics is not affected.
- Be honest. If the order cannot be fulfilled, communicate with the customer in a timely manner, adjust the other party’s expectations, and even give certain discounts and electronic coupons and timely refund if necessary. I believe the last thing you want to see is customer complaints.
(5) Arrival time
- Anticipate a longer delivery time. Increase the promised delivery time to 19 days, give the supplier sufficient time to respond to the order, and avoid compromising your FB account with false promise. This may reduce conversion rates, but at least keep the business going.
- Follow up. Regularly check the delivery time with the supplier and check the logistics status.
- Add FAQs and banner notifications to your website about processing and delivery time
8. How can HyperSKU help dropshippers in this crisis?
HyperSKU team has been operational even during the Chinese New Year holidays and Coronavirus crisis.. Our warehouses were still operating, and our labor force at our warehouse can continue their daily tasks to this date but with extra precautions.
Below are what we can offer you:
- Mechanism to identify available inventory and active factories in a short time.
- Three warehouses with free space to stock your inventory.
- Customized shipping solution to provide 7-10 days shipping at current situation
- Shopify certified App for you to manage everything in one platform for free
- Dedicated account manager sto take care your sourcing and fulfillment hassle free.
To sum up:
The epidemy has no doubt affected everyone’s business, and the impact may last 2-3 months. In the process, some people may give up, some people wait, while others will do every details that can be done, and be fully prepared for everything to return to normal.
HyperSKU is here to support anyone who would like to find out about the availability of their products and solve their logistics problems. Let’s work together to get prepared for new opportunities.
If you would like to discuss more on the situation and how HyperSKU can help, feel free to find us here: