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COVID-19 & Trade Wars Impact on E-Commerce Businesses

FloCast is a podcast sponsored and organized by Floship, one of Asia’s leading e-commerce fulfillment providers. Hosted by Ramon den Hartog, the podcast features conversations with e-commerce professionals from around the world exploring topics ranging from new market exploration, crowdfunding, marketing tips to finding the right 3PL.

This episode is a fireside chat between Floship CEO Steve Suh and Skubana CEO Chad Rubin about the impact US-China Trade Wars and Covid-19 have on global e-commerce.

Listen to the Soundcloud podcast or read the transcript below.

https://soundcloud.com/floship/flocast-skubana-x-floship-ceos-talk-about-covid-19-trade-wars-impact-on-e-commerce-businesses

Ramon den Hartog:

Welcome, everyone, and thank you for tuning into Flocast, the podcast for online sellers looking to enter new markets, be it as an e-commerce brand or through a crowd-funding campaign. Flocast is made possible by Floship, one of Asia's leading e-commerce logistics specialists. My name is Ramon den Hartog, head of marketing at Floship. Today, we'll be having a chat with two amazing entrepreneurs and CEOs about the ongoing trade wars between the United States and China as well as the impact COVID19 has on e-commerce businesses worldwide, and what you could do to keep up with demand and keep your business going.

Ramon den Hartog:

With us today, we got our very own CEO, Steve Suh, and our honored guest for today is Chad Rubin, CEO of Skubana, author of Cheaper, Easier, Direct. Welcome, guys. Thank you for taking the time to join us today.

Chad Rubin:

Glad to be here. Thanks for having me.

Steve Suh:

Thank you, looking forward.

Ramon den Hartog:

Awesome. Can you give us a brief introduction about yourself before we get started?

Steve Suh:

My name is Steve Suh, CEO of Floship. Floship is a global, cross-border fulfillment company. We work with a lot of emerging brands, particularly selling on platforms such as Shopify or Magento, BigCommerce, WooCommerce, and more. We really focus on brands that are also manufactured in China. With our presence in Hong Kong and in China specifically, we're able to ship goods direct to the consumer all over the world. We have a lot of automation built by the platform that we developed in-house. Our goal is to make our online retailers' lives a lot easier, help them grow and scale internationally.

Chad Rubin:

I'm Chad Rubin. I am the founder, co-founder, and CEO of Skubana. Just a brief background on myself. I actually got my career started in e-commerce about a decade ago where I started a home appliance parts company, manufacturing and selling vacuum filters, air filters, and coffee filters. That business was started in '09, actually out of a recession which is really fascinating because now we're about to move into one. I've been able to emerge out of it and see through it. A lot of amazing opportunities have come out of it.

Chad Rubin:

Out of that e-commerce business, I started Skubana. Skubana is an operations platform to run and automate your business. A lot of household brands that are direct to consumer, or I should say direct to everywhere, are using our platform today. I also wrote a book called Cheaper, Easier, Direct.

Ramon den Hartog:

Thank you so much for that. Originally we planned to talk primarily about the impact of the ongoing trade wars that it has on e-commerce businesses. We'll also be doing that today, but soon after we planned this session, COVID19 showed up. I believe it will be very helpful to our listeners to discuss the whole coronavirus situation and what sellers could do to keep up with demand and disruption.

Chad, I heard that you are also an e-commerce seller yourself. From your experience and from what you hear from your clients at Skubana, could you tell us what you have noticed so far about the ongoing trade wars and the impact it had on you or your clients?

Chad Rubin:

Yeah, for sure. I'm definitely happy to speak on experience and also what I've been seeing from brands that are using Skubana. I can speak directly to the fact that my home appliance parts company called Think Crucial, got hit with a 25% tariff that is actually, it's a pretty big increase. With that duty, we essentially have been able to figure out an advantage in the system that you can gain by positioning your inventory in other parts, in other geographies. We've been able to do that very strategically. From other companies that I've seen that are using Skubana today, a lot of those costs were either passed on to the customer or actually just bit into their margin profile.

Ramon den Hartog:

Yeah, 25% is indeed a lot. That's of course why we're having this whole conversation. Moving your inventory, however, seems like a very good idea, suggestion. Steve, what are your thoughts on this?

Steve Suh:

I mean just in terms of what we've been noticing at Floship is as Chad mentioned, we've definitely seen a movement of manufacturing. China is definitely the manufacturing if you can say mecca, in the world. Emerging economies such as Vietnam, Cambodia, Myanmar, et cetera, definitely have become more of a place for textile manufacturing. Textiles could even include even backpacks, accessories, et cetera. I think a number of our clients decided to move manufacturing into these places. They were able to hedge the risk in case Trump decided to raise tariffs in other areas.

The other thing is we've received a lot of requests, especially as tariffs have gone up. Businesses that were fulfilling out of the US coming to us because they can ship direct from Hong Kong or China into the US. Really the model comes into play because of the $800 US dollar duty and tax threshold. That is still what you can call a loophole when selling to US consumers. It's a relatively large threshold. You can imagine that most e-commerce products are less than $800 US dollars. We've been seeing a lot of companies shift their model during this Trade wartime.

Something else that we've also been seeing is, as Chad mentioned, the 25% duty and tax payment, but in terms of percentages of increases we've seen is basically going from 10% to 25% overnight. Yeah, there's been a lot of companies definitely affected by it. It sounds like maybe through the coronavirus, the trade wars would be somewhat minimized, at least temporarily. I would imagine that after all of this, it'll be back on, right? It's almost like retaliation by Trump and maybe even impacts on the recession that would further that. This is just my crystal ball kind of thoughts, but we'll see what happens.

Ramon den Hartog:

Chad, when you mentioned the loophole by moving your inventory somewhere else, are they the same countries that Steve just mentioned?

Chad Rubin:

There are other countries. For me specifically, I've been able to migrate a lot of goods shortening my lead time to Mexico. Then we take part in section 321 that allows us to ship cross-border as long as it's under the $800-dollar threshold. A lot of our customers are either doing what Steve mentioned or doing what I'm doing. In order to do that, you need a platform to allow you to essentially allocate and route orders appropriately, orchestrate those orders in the right places. That's really how Skubana has really become the number one platform in the States. The fact that you can have multi-warehouse functionality. I think right now, especially in this environment, with coronavirus happening in the United States it is a benefit to have your inventory in multiple locations because if you're in a location that's affected, you can just route those orders to a different location.

Ramon den Hartog:

Yeah, that's definitely adding a lot of value to online sellers if they can use multiple warehouses. I don't believe most platforms can actually handle that, so that's excellent. When you mentioned that you move your inventory to Mexico, that doesn't mean you also manufacture there, or do you still manufacture things in, for instance, China and have them ship it to Mexico?

Chad Rubin:

Yeah, so right now we make everything in Asia. All the manufacturing facilities are actually in Asia. I think Dyson recently moved their factory to maybe Taiwan to protect certain trade secrets. I think you're going to see a lot of people trying to diversify their supply chain once COVID subsides.

Ramon den Hartog:

All right. That makes perfect sense. Steve, how do you feel about that, moving inventory that's produced in China to Mexico and then from Mexico into the US? Is there a better option? As a logistic specialist.

Steve Suh:

No, I think that's definitely one way to do it. Mexico and the US, they're very close to each other. I would imagine shipping times to be similar, especially because they're being transported to the southern states let's say like Texas. Maybe Arizona, these types of places I could imagine shipping times to be very similar to shipping domestically. Yeah, I think that's definitely one way to do it. I'm not sure maybe Chad could know more about maybe shipping solutions from Mexico into the US and the cost side of things.

The other way to do it, of course, as this is where Floship really excels is in Hong Kong especially, there are just so many different shipping solutions when you think about just e-commerce and cross-border selling. Cross-border selling has been popular since around 2005, a good 15 years. There's been a lot of infrastructures that's been developed, a lot of global postal companies, and express companies that have decided to set up in Hong Kong. You can ship postal solutions into the US basically at the same price as the domestic shipping within the US, and even last mile being handled by USPS as well. You can ship as fast as one to three days if you're shipping with express. There's just a lot of different options.

Strategically, it's really up to you in terms of how you want to run your supply chain. You can run leaner inventories if you do it out of Hong Kong, but maybe Mexico the cost base would be quite low when you think about storage and pick and pack. I think it's up to you, to put your entrepreneur hat on and make a smart business decision based on what makes the most sense for you and your business.

Ramon den Hartog:

I think that's a valid point. If your goods are very trendy, then there's not too much concern about having a large inventory store in Mexico, for instance, because you'll probably be able to sell it pretty quickly. If it's a product that doesn't sell very well or you're not sure yet, then the Hong Kong approach might be a better option, would you say?

Steve Suh:

Yeah, I think that's very valid.

Chad Rubin:

It comes down to what product you have, what kind of lead time you want to have, what the shipping costs look like from say Hong Kong to the United States versus from Mexico to the US. It's important to just have an open mind and figure out what's best to support the category that you're selling into and to support your brand.

Steve Suh:

I mean truthfully, I think trade wars are not exactly on people's minds as much during this time, right?

I think it's more, right now it's COVID-19. It just seems like we've been through various seasons in e-commerce. Right now, everyone's just thinking about COVID and how to manage and safeguard the business.

Chad Rubin:

It's like when you have an iPhone or an Android, you have many different apps that are open. Right now, the corona app is open, but the background app [is really US-China relations], if you look at the current administration, the way they're speaking about coronavirus, they're calling it the Chinese virus or the Wuhan virus. For that, I think there's a lot of implications that are intangible at this moment in time. I think that'll have a lasting effect, certainly on just the relationship between the US and China.

We'll see what happens come election day, but if there are another four years, I think that could put a strain, a little deeper strain on the relationship between the US and China.

Ramon den Hartog:

What would you think are the consequences of that?

Chad Rubin:

We, of course, don't know the wildcards of consequences resulting from another four years of Trump. It seems like he looking to maybe make this all about China and less about the United States, even though the United States has really failed to address this pandemic in a fast and efficient way to limit the loss of people's lives.

Ramon den Hartog:

What would you advise to online sellers that are dealing with these kinds of discussions with their Chinese wholesaler manufacturer, the supplier?

Chad Rubin:

I think it's just important to have a clear line of communication and just be upfront with the communication that you're giving to them. It's fine, but again we can't limit exposure to what Trump does after this, right? Right now, there's a 25% tariff, but what's next, right? What kind of things are going to be put in place? It's really important to start thinking about diversifying your supply chain. I think that's really the outcome from this is to find redundancies, whether it's finding factories in other countries, maybe trying to find sourcing in the United States depending on what you sell. We do have some manufacturing capacity here in the United States, but having an open mind of where you can buy from to limit exposure and downsize any new trad plans that are administered by the government.

Ramon den Hartog:

That's very good advice. I've also been reading this lately that a lot of US sellers are actually moving their manufacturing facilities elsewhere. Would you say that within your clientele, what is the percentage that's talking about moving their manufacturing facilities? Are you having these conversations with clients?

Chad Rubin:

I think everyone's having supply chain issues right now trying to get out of most countries. Even in the United States, we're being affected. Interestingly enough, China is now starting to ramp back up. The United States is starting to shut down. Certain factories are social distancing and physical distancing. In fact, if you had your factory in China right now, you probably can get product out of China quicker than you can get product out of certain specific geographies in the United States.

From a client perspective, this shift to manufacture in the United States on specific items has started maybe in 2010 timeframe where you've got apparel moving back to the United States. You've got big appliances moving back to the United States because it was definitely costly to ship those on containers. They take up a lot of space. That shift has sort of happened, but it's not the majority. I think this pandemic opens up your eyes to finding redundancies in your supply chain, finding other people that can manufacture for you, and multiple factories. You can have a preferred factory and backup factories.

Then obviously as COVID starts to penetrate the United States, open back up your factories in China and you can start importing goods again. Steve, if you don't mind sharing ... Hong Kong is pretty far ahead when it comes to COVID. Now, I think in Hong Kong right now, you're at a point where are you seeing recovery? I understand we'll talk about the cultural impact in a second, but are you seeing things recover right now? Are things starting to open back up?

Steve Suh:

Yeah, you know that's a great question. If you've seen some of the headliners where basically maybe Hong Kong let their guard down and basically we're on our second wave. What happened was the virus actually came back because of international travel, people that traveled outside and came back or that were in the hard-hit countries and are coming back as well. Then of course we have our party district here in Hong Kong called Lan Kwai Fong where you have large crowds and those people that are coming from abroad and are partying and letting the virus out and going everywhere. That was quite chaotic there.

Now we have a social distance rule where you can only gather in fours publicly or maybe even house parties would be parties of four as well. That's been in effect for about a good week now. We're on week number two. When I look at the case counts, during the early days of the second wave, we saw about 50 to 60 cases per day. Now we're looking around in the 20s. It looks like in large part, the government's done a pretty good job to contain this virus. I mean in terms of overall working, it's almost voluntary. You can work from home, or you can work from the office. People are going out, but if they're going out of course they're still wearing masks.

Even our fulfillment centers are at 100% capacity. But we are making sure that before workers enter the facilities, they're being temperature checked, every single person. It can't be over ... That's the funny thing. I'm from the US, but from a temperature standpoint, this one I only know because Hong Kong, they go by Celsius and not Fahrenheit. Celsius measures 37.2 degrees, so if it goes over, you literally have to go to the hospital, admit yourself to the hospital. Anyone that's lower can go to work. The interesting thing is actually yesterday we had a false alarm at a warehouse because someone had a high fever. They were admitted to the hospital immediately. Luckily, with great relief, this person did not have COVID, because warehouse operations are full capacity right now. I would say almost business as usual. Once this week passes and no surge in cases, I think we'll be even at a faster pace.

Chad Rubin:

Do you foresee people wearing masks in the future?

Steve Suh:

Absolutely. I mean, you see what's going on in China. You say, oh yeah, China's back to normal now, but the ironic and funny thing is the movie theaters started opening up in China. No one would show up to the movie theaters because they still don't trust it. After about a week, all the movie theaters decided to shut down. People are still wearing masks in the street, so I would imagine the same thing happening. This is the scary part, right? Even though that the case counts may go down in various parts of the world, it might be a good month or two before people actually feel like they can roam around freely and live life as normal again.

While Asia is easing up, the Western world is still, even America, had the largest daily increase in cases. I feel like America is still a good month away where this really starts stabilizing. Even after that, give it another month or two for life to be going back to normal. I think it will go into around July, right, in terms of America going back to normal.

Chad Rubin:

Sure. Well, I've been able to see this from not only from brands that are using Skubana but my own e-commerce business, and also my wife has a yoga business. She was the first to be affected. She has a studio called Soul Flight where people hang upside down and do yoga poses and sort of expand their muscles using this contraption. She was the first to get hit. The government forced her to close down. Now she's gone completely virtual. Then my e-commerce business which is called Think Crucial, actually has started to trend upwards. We sell a lot of essential items for the home, so as long as more people are spending time in their home, they're doing home improvement things. They're changing their vacuum filter. They're replacing their air filters.

Chad Rubin:

We've actually seen an effect of an upward trajectory for our business because of COVID-19. Specifically, pointing to the fact that we make a vacuum bag that uses the same belt-blown polyester material used in N95 masks. We've partnered with a few different companies, but you can essentially take our vacuum bags and cut them into different sizes and insert them into mask filter pockets. We had our biggest day on Sunday for our entire business because of that. Pretty interesting times to say the least, if you are cutting vacuum bags, synthetic cotton vacuum bags, and putting them into masks. Obviously I'm thankful.

Then as it relates to Skubana, we've seen brands, you see the luxury premium brands that are more discretionary, we've seen them take more of a hit and get substantial revenue disruption. Then we've seen essentials skyrocket for specific brands. They're doing great. I think as you have these non-essentials going downward, you've got the essentials going upward. It just has balanced each other out for us.

Ramon den Hartog:

That's really interesting, Chad. What kind of product categories do you see trending at the moment?

Chad Rubin:

Oh, man. Let's see. Consumer packaged goods, CPG, that's one category that's done extremely well. Food has done well. Anything that's in the home like loungewear has done well. Sheets, blankets, accessories for the home, home improvement. That's a good start.

Steve Suh:

I think just to piggyback on that at Floship, the interesting this is despite what's going on with COVID, you would think that discretionary spending is going down. Of course, you don't want that particular party outfit for the weekend anymore. It's no longer something that you absolutely need or have this urgent buy that you would normally make. Overall, I think we haven't seen, at least for our respective clients, volumes going down as much as we thought it would, even if it's non-essential. Maybe it could be lucky in terms of the brands that we work with, but of course as Chad mentioned, there are particular categories that are just exploding.

Thanks to you, Chad, for introducing Tushy to us. Talk about a product that has just been exploding during this time. If people aren't aware of Tushy, it's basically a bidet brand. I would say it's more for today, nothing more of the older days in terms of how to use a bidet. It definitely has more knowledge and sophistication to it, but it's been a great substitute for toilet paper. Everyone's panic buying and buying toilet paper. We've seen the brands, I'm not going to report particular numbers, but volumes surging. From a Floship side of things, why did they decide to migrate over to us versus their traditional model where they would fulfill directly from the US and send products to customers? A lot of it's because of high demand.

Once you have high demand and you're manufacturing in China, how do you keep up with the demand and make sure that the customers receive the product within a good timeframe? Right now, what we're seeing is just air freight cost going through the roof. You used to pay a lot less to transport air freight, and air freight was definitely a very popular option to get your bulk inventory into the US and parts of the world. You also have sea freight as an option as well, but right now with fuel prices at all-time lows, you would expect that air freight costs would follow the same way.

The funny thing is there's just a lot less supply of air freight in the market, and as a result, the air freight industry has decided to just make air freight costs an all-time high. Of course, for them, margins are the highest ever, but at the same time, they're in this position to sort of monopolize the market. We've seen air freight costs go up three to five times normal. That number continues to rise as cancellations continue to happen, especially in the US as case counts rise. Now, you think about that from a supply chain standpoint, what do you do? It's been disrupted heavily right now, and poor online retailers. Costs are just so much higher because with China, with their disruption and not being able to manufacture as fast, now they're starting to come up and basically at full capacity but now they have to worry about supply chain costs and delivering products to customers as soon as possible.

Back to Tushy, they decided to come to our model because after the manufacturing run is done, they're able to track their goods in about two days or so. They're actually doing their manufacturing a little bit farther away than a lot of our clients. As soon as we receive their goods in our warehouse, we're able to fulfill the goods practically the following day and use a shipping option like FedEx or a DHL. They're able to ship to consumers within one to three days. That's the crazy thing right now.

You would even think lead times to be delayed quite a bit. From what we're seeing right now, and particularly for a courier like FedEx, they have a very great network within the US. We're still seeing the shipping times being within one to three days. With that, you're able to meet the demand that you had and not having to worry about any long queues or paying the high air freight costs.  If you have a high-demand product or are selling in those high-demand categories, this is something that I think Floship can really help out with because you're still able to meet the delivery lead time needs for your end customer.

Chad Rubin:

Steve, so do you get ... For items that are one ounce to 13 ounces, are you getting the special USPS rates? Did Trump change those yet? I know they put in an order to change them, but I don't know if they actually went through.

Steve Suh:

Yeah, so that hasn't been changed at all. I think Trump is just very focused on whether it be the commodities or not really thinking about the size of the shipment so much. That has not changed yet. I think you're still able to enjoy very good postal pricing. At the same time right now, just to caution everyone, the postal system right now has been heavily affected. Once again, it comes back to the air freight cost. Postal is not an all-inclusive sort of postal solution right now.

The first leg, whenever you're shipping out of Hong Kong or even in China, it's going to go on like a commercial aircraft. Maybe it could be, when it's going to the US, it could be American Airlines or United Airlines or ... Hong Kong, we have a popular airline called Cathay Pacific, but as mentioned, cancellations in flights lead to a lot less supply in the market. Basically, that first leg air freight cost has a contribution in terms of what we're seeing called emergency surcharges with all of our postal carriers. In addition to that, there are a lot of delays that are happening. Even suspensions of postal services to various countries as well. It's been a tough time.

Honestly, my work has been doubled or the entire company's work has been doubled due to these delays in suspensions, but the great thing is we have security with couriers like a FedEx or a DHL that are still running quite well. While there have been minor surcharges, it hasn't been so great to a point where our clients are panicking because the costs are too high.

Chad Rubin:

Right. In terms of what you're seeing from Floship customers, I can share what I've seen some Skubana customers do, have you seen any good things that companies have implemented to stabilize operations, to play offense?

Steve Suh:

Yeah. That's a very good question. There's another client that I won't mention during this call because we're just still in the infancy stages of working together. One strategy that is allowing brands to benefit from COIVD19. A lot of these high-demand brands are being super transparent about delays and implementing waiting lists, and it's really smart. You can follow what Tushy is doing. They're saying that, hey, if you want to receive this product, if you order now, expect to receive this by around this time, right? Let's say it's the end of April, and then you have a second phase or a second wave, and you're going to receive the product on May 10. The next wavey on May 20th, et cetera.

I think that's been very smart because you're able to sort of continue to pull in those orders. As a customer, you have the assurance that you're still going to receive the product but maybe in a delayed timeframe. What this particular client is doing is maybe they're trying to send some shipments in advance into the US. You know, they're even having challenges with air freight costs going through the roof. In addition to that, lead times have been increasing. It used to be about three to five days to do air freight into the US or maybe just a little bit longer than that. Now that number has doubled to 14 days. Who knows what it is today? Maybe that's gone from 14 days to 20 days in a matter of a week. It's getting challenging. How do you navigate that?

Another very large brand actually just contacted us over the weekend. It's a large motorcycle brand. Once again, I won't name them, but they were traditionally manufacturing in China, sending the goods over into the UK, and fulfilling orders globally from the UK. Once again, because of air freight, they weren't even able to book air freight going from let's say China into the UK. They came to us and said, "Hey, can we basically move our fulfillment to Hong Kong and fulfill over the world?" For large brands like that, to be heavily impacted right now, people are scrambling right now.

I think there's just the matter of, Chad as you mentioned earlier, about diversifying your supply chain right now, and hopefully, as a company you're technology is sophisticated so that you can basically with whatever platform you're using ... We have integrations even at Floship or Skubana to basically turn on just a flip of a switch to be able to move your fulfillment center to another location and import your orders to the fulfillment center or to your order integration platform and start shipping to your customers directly. Yeah, I think there's a lot of strategies right now that you could potentially employ. Yeah, definitely seek consultation, and do it fast because you don't know how long COVID19 is going to last. Things just are changing overnight.

Chad Rubin:

Yeah, speed is so important. I think just the wait-and-see approach is just a nonstarter in this environment. You have to be able to make moves quickly. One of the things that we've seen companies do here in the United States, because we didn't know what we were dealing with at first, so we saw people appointing one dedicated boardroom team member to focus on strategies all day. Those strategies could be, "Hey, what are we doing about our employees? What are we doing about our customers? How are we looking at our P&L, our profit and loss statement?" To understand, hey, if there's ... What's the best case, what's the worst-case downside scenario during all of this? Then what can we do to stabilize the business and then to conserve cash? There's been a lot of different strategies that our brand ... we've seen e-commerce brands at least in the United States do to essentially play offense and not play defense.

Ramon den Hartog:

We also heard that Amazon is currently not shipping non-essential goods. What would your advice be for these online sellers that are facing these kinds of problems with Amazon? If that's their only store, what do they do?

Steve Suh:

I think Chad would be the best person to answer that one.

Chad Rubin:

Yeah. Right now, Amazon is actually shipping both essential and non-essential goods in the United States. If you don't have a Prime membership, then you're going to be getting your delivery a month out, maybe even longer. If you have Prime, they're definitely prioritizing Prime first and foremost. They're not allowing you to actually send non-essential items into their warehouse. Amazon's not a business of storing your stuff. They're in the business of selling your stuff.

Steve Suh:

Exactly.

Chad Rubin:

Right now, trying to get stuff out of their warehouse by focusing on those priorities and those essentials overtaking discretionary items. In Europe, we've seen actually Amazon completely stop selling non-essentials. I think we're not sure what to expect at this point. I'm really hoping that Amazon keeps doing what they're doing, but we are seeing a lot of brands, because they don't want to wait for Amazon to ship, say a month or three weeks or whatever it is. Amazon's out of stock of a lot of things. People are starting to actually focus on some of these emerging brands that are out there. I think that's really interesting.

I think the other thing that's interesting is that we were talking about the shift of culture and shift of behavior. In the United States, e-commerce traditionally has represented somewhere between 12 to 14% of all retail sales. I do believe that this is going to open up sales to be much more than that for e-commerce businesses. Online spending and shopping is just, for me, I'm like, wait a minute, am I ever going to go to a grocery store again? Because I can just order it right from my phone. I'm ordering meats from these farms in the middle of the United States that are grass-fed, and they deliver the next day. I think that there's going to be a shift that's a positive one for e-tail.

Steve Suh:

No, I can't agree any more with that one. I think you have a lot of people that were maybe averse to e-commerce and they weren't really online buying in the past. Then all of a sudden, they basically have no choice. They don't want to go out to the supermarkets or risk anything. Now, they're buying online. I feel like those habits may continue. People that weren't online buying now will start online buying, and that will continue for them because they realize the convenience factor of e-commerce. That's what we've been seeing in Hong Kong especially. If people don't really know about the Hong Kong e-commerce market, just in a small nutshell.

I mean we're 7.5 million people. Hong Kong is quite behind in terms of e-commerce. Access is very easy to go to the shops and buy whatever you want, but with COVID, I can't say ... There's one particular marketplace called HKTD Mall, and they're just exploding. They kind of have this online to offline kind of model where if you make a purchase, you can go to the store and pick up the item, but of course right now you don't want to do that. Right now, you want to do e-commerce and have the deliveries at your door. That's all of a sudden now people are thinking about e-commerce more than ever in Hong Kong. I think it's a global phenomenon for e-commerce where e-commerce sales are just going to take off. Even during this tough climate, e-commerce is that one sector that's thriving right now.

Chad Rubin:

Got it, cool. Ramon, is there anything else you wanted to ask?

Ramon den Hartog:

Yeah, maybe one last question could be doing you have any last advice that could be helpful for online sellers before we part ways?

Steve Suh:

Sure. Advice for online retailers. Well, I think it's a recap of what we discussed and maybe more an abridged version for this. I would just say stay nimble. Understand what's going on in the world on a day-to-day basis. Have your contingency plans in place right now. I think more than ever, cash is king. Make sure that maybe even from a hiring standpoint, just stay lean as possible. When it means lean, it doesn't just come to people, but it comes down to processes. It comes down to software that you're using so that you're able to do a lot more with what you had or do more with less. Yeah, I think that's what my advice is and maybe the last advice is I think rather than looking at this as a downturn in the market, look at this as an opportunity.

Maybe there's a particular part down the market that you could potentially leverage into your portfolio. Basically, what's going on with COVID, you could take advantage of it or maybe even from the ad-buying standpoint. We mentioned earlier that ad spend is a lot lower, so maybe it's an opportunity to maybe dial it up a notch and increase your conversions. Yeah, I mean that's my advice to online retailers.

Chad Rubin:

There's a lot they need to do, right? I would assess your exposure to this. Here in the United States, it's still early days. I would try to understand and model forward with a stress test of what could happen if things got worse with worsening scenarios. Not to be dark on the call, but I think there's more downside to go here. I think the opportunity from all of this is partnering with people like collaborating with other folks in the space, selling gift cards if you are really affected where you can sell a gift card that serves as a bond almost. You're like, "Hey, I'll sell you this gift card, $75 gets your $100 at our company."

Those are things that you can be doing along with thinking about M&A right now. As you're seeing competitors suffer, maybe certain competitors weren't very deliberate with their cash. Start seeing, hey, what does the landscape look like? Maybe you want to start consolidating different companies that are in your landscape. I think that could be a big opportunity because I think things are very cheap right now. Those are my parting words. I could go on and on about it, but I think those are a few things that you can do right this second to survive and thrive during this time.

Ramon den Hartog:

All right, those are some awesome parting words.

Yeah, some advice maybe from a marketing perspective, I think it's also very important to keep in mind not to simply assume that your customers always know what's going on. Corona is all over the news and the newspapers, on social media. Everyone's talking about it, but still, you shouldn't assume that clients know why their shipments are delayed or why their parcel has not yet arrived. Always be transparent and communicate with your clients. We've seen too many companies that don't do this and end up getting a lot of bad reviews. You don't want it if you've been building a good reputation all this time. You don't want to go down just because of that. Just let them know what they can expect. If they can expect a delay, just tell them. Just keep them posted on the whereabouts of their parcels.

Ramon den Hartog:

All right, so yeah, I'd just like to thank you guys for taking the time to take part in this podcast.

Chad Rubin:

Thanks for having us.

Steve Suh:

Thanks a lot. It was great. It was really good chatting with you, Chad. I enjoyed this conversation. Just someone else that's involved in the e-commerce world and sharing similar roles in the company. Yeah, it was a very refreshing talk to have. Very insightful, by the way.

Chad Rubin:

Ditto. Stay safe, and just don't touch your face.

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