How Retailers Can Overcome the U.S-China Trade War and COVID-19
The U.S.-China Trade War has forced many e-commerce operators to implement agile and resilient operational strategies to stay profitable. After months of operational disruption from new tariffs, COVID-19 sent shockwaves across the globe.
The global pandemic has exacerbated underlying operational and supply-chain deficiencies. The sudden outbreak in Wuhan, followed by a country-wide shutdown forced retailers to look outside of China for manufacturing.
In a recent FloCast podcast, Skubana CEO Chad Rubin shared his experiences as an e-commerce seller using Chinese factories. He stressed that retailers need to diversify where and how they sell to sustain the impact of higher tariffs, trade wars, and COVID-19.
“My home appliance parts company Think Crucial got hit with a 25% tariff,” Rubin explained in the podcast. “With that duty, we essentially figured out . . . an advantage to gain by positioning inventory in other parts of the world.”
China has long been known as the Mecca of manufacturing. The ongoing trade war is now steering retailers elsewhere. Floship CEO Steve Suh suggests that many companies are moving their top-selling SKUs to the U.S. to avoid the heavy tariffs. That movement of inventory, however, is not an easy task.
“You need a platform that allows you to allocate and route orders appropriately [and] orchestrate those orders in the right places,” Rubin explains. Living in a direct-to-everywhere world makes it difficult to have a holistic view of your data. There are so many sales channels, and now there's stock moving around the world. There is a massive rise in multi-warehouse operations thanks to cross-border commerce and marketplace fulfillment services like FBA and WFS. Being able to track that inventory and not lose track of that inventory is vital.
If you're using spreadsheets or a system that doesn't automatically populate and update inventory and order data in real-time, those static numbers immediately become out-of-date. “Modern retailers need systems that can dynamically understand and keep track of stock no matter where it is, no matter where it's selling from, no matter which channel you're embracing in this crazy environment,” exclaims Rubin.
Retailers using Skubana’s multi-warehouse functionality to offset Chinese manufacturing tariffs have had an advantage during the COVID-19 pandemic. Skubana lets e-commerce operators efficiently route orders to different fulfillment centers based on pre-set automation rules. This feature has allowed impacted retailers to quickly re-route orders to a new location when warehouses or borders suddenly close.
Having visibility into actual stock movement also enables smarter purchasing decisions. Retailers are able to allocate cash responsibly based on real-time data, whether looking to grow or trying to cut back.
"It’s impossible to predict exactly what will happen between the two countries and their trade agreements," Rubin says. “By eliminating redundancies and risks in the supply chain, businesses can minimize the effect of any new regulations.”
The current political tensions between the U.S. and China coupled with the worst pandemic in recent history will have dramatic long-term effects. Economists predict that purchasing behaviors will look radically different in the coming years. But one thing is clear, that despite the devastation, growth is possible. With the increasing demand for online goods, logistics, and operational strategies need to evolve as well.
“If we look at the current administration and how they’re speaking of the coronavirus...there are a lot of implications that are intangible at this time,” Rubin states. “I think that will have just a lasting effect, certainly on just the relationship.”
It’s impossible to predict exactly what will happen between the two countries and their trade agreements. Retailers will need diverse and resilient supply chains to meet the needs of the new economy. Frequent stock-outs and shipment delays can kill a brand. A multi-channel, multi-warehouse system is the way forward. To support this you need a retail operations platform that is flexible, scalable, and adaptable.