In today's video, I'll be answering questions from my Q&A Facebook group. If you'd like to get your question answered in an upcoming video, click this link to join the group:
Please note, you need to answer the questions that appear when you join or you won't be allowed into the group. I'm doing this to prevent spammers in the community.
Hey, how's it going? It's Ollie here.
So, how will the Corona Virus affect your business?
This is a question I've had multiple times in the past couple of weeks and I thought I'd make a video just to get clear on the facts and give you some pointers as to what's happening right now in the world with the virus, how it's affecting industry, what I think is going to happen over the next few months and when I think it will be contained. And also what actions you can do if you have a business that involves China and how you can prevent your business from being too disrupted because of this outbreak.
First of all, if we have a look at the map of China, you can see that the Corona Virus is mainly affecting the eastern side of China. Unfortunately, most of the areas where there are the densest amount of factories in China, where most of the stuff is produced, all fall on the eastern side of China as well.
As you can see from this map here, I found this on the economist.com, you can see that Beijing, Shanghai, Shenzhen, Hong Kong - all those areas are where probably your suppliers are or where they will be. And that's where most of the infected people are. So what this means is, yes, the virus is slowing down production and shipping in China dramatically.
So just a couple of points on exactly what's happening right now. As you know, a lot of factories go on holiday for Chinese New Year. Chinese New Year was quite early this year. It was right at the end of January, and the government have said to a lot of these factories to stay closed until we see progress with containing the outbreak. What this means is a lot of the factories are going to be closed until March. In fact, there's been a lot less shipments leaving China in the past couple of weeks.
One article from the New York Times said something like 350 million per week effect on the economy because of the Corona Virus spreading and some people at the docs said that they were dealing with a quarter of the volume that they usually deal with this time of year. A lot of people in China aren't going to work. They're working from home or they're just not working at the moment.. Everyone's wearing masks and walking around panicked they're going to get this virus and it is causing a big issue.
One of the biggest impacts has been to flights going in and out of China from effected areas. Now what happens a lot is, when you get air freight, then your products actually go on the cabin of passenger planes. So your products go in those normal planes. A lot of airlines have stopped these flights to China and therefore these trade routes have been completely disrupted. So this could be something that's going to affect your business, but I'll be talking a little bit later about what you can do instead.
In the meantime, there has been some talk of ships being stopped at customs and being quarantined so the goods aren't able to go into the countries. So US and UK, there's been some reports of this happening. From what I can see, it hasn't been too much of a problem just yet. And the reason why is, because the Corona Virus can't be transmitted outside of humans.
So what has happened a few times is, the staff onboard cargo ships have been tested before they can enter the country. But remember, you can't get the Corona Virus onto like an object, like a phone or something, and have it last for four weeks on a ship and then be transferred to someone because it dies within 24 hours of not being on a human or on an animal.
As of now, it doesn't look like customs are stopping products coming in and out of the country. Now, if you look back at the map, as you can see, most of the manufacturing happens in the East coast of China. But interestingly, because Hong Kong is separated from mainland China, it's part of China, but it is also its own separate country.
What that means is it's got its own borders, right? So Hong Kong's, say, down here, China's up here, there's borders in between. And what's happened is they've closed off a lot of these borders. So because of that, the virus hasn't spread as much to Hong Kong. So a lot of the factories in Hong Kong are still fully operational and a lot of the shipments are still leaving as scheduled. So one thing you can do, we'll talk more about this later, is find suppliers who are based in Hong Kong.
Also if your manufacturer has a partner warehouse based in Hong Kong, it's very likely that they are still going to be fully operational over the next few months. So that's what's happening at the moment with the outbreak.
But how long is this going to last? And when will this be resolved so things can just go back to normal? Well, one of the things that's always good to do when you're trying to predict what's going to happen with something like this is look at history.
If we look at SARS and have a look at how that effected the economy back in 2003, we can get a rough idea of what's gonna happen with this current virus. So there's an article from a CNBC who talked a little bit about how SARS effected the economy back in 2003 and they said the economic growth slowed from 11.1% year over year in the first quarter to 9.1%. So, that means that that was basically a 2% decrease in growth.
Now I've read in some other articles that they expect that the Corona Virus could reduce economic growth to 5%, which is a little bit worse. It's considerably worse than SARS. But also they say the growth in retail sales and industrial production in China with SARS was also slower around May. But the expansion and exports remained steady throughout the year. So I'm assuming that the Corona Virus is going to be a relatively similar case to SARS.
Now it seems to be more aggressive. It has infected more people, but it doesn't seem to be quite as deadly. Because with SARS, you have 8,000 people infected throughout the whole period and 1,000 died. Or 800 died. It was like a 10% mortality rate, whereas Corona Virus has something like 60,000 and we've had 1400 deaths. So it seems like it affects a lot more people, but not as many people die fortunately. So I would assume that it's going to be a similar case.
Now, if we look at this article on Wikipedia it gives you a rough timeline of the SARS outbreak, what happened, and how long it took for it to be contained. As a Wikipedia article, I would assume that it's relatively reliable, but to make an educated guess about what's going to happen, this is probably our best bet, right?
So if you see, the first case was reported in November, 2002. And that's when the world started to realize that SARS was going to be a problem. So it happened in the 16th of November, 2002. And with the Corona Virus today, the first reported case was December the 31st 2019.
Now it starts the way it always starts, right? You have one person who, I think they call it a super carrier, who goes out and infects loads of people and then obviously each one of those people goes and infects four or five people and it just starts to spread like that. And when there's loads of people traveling around and hotels and airports, you know, it's not very long before we've got tens of thousands of people affected.
And yet in 2003, the whole thing seemed to be wrapped up by July. In fact, during July, the World Health Organization declared SARS was contained around that time. July 2003. So it took them about six or seven months to completely contain the virus.
They're saying that the Corona Virus is a little bit more aggressive than SARS. So I would assume that it would be wrapped up by July, hopefully by September. In other words, with any luck, by quarter four hopefully, this stuff won't affect manufacturing in China anymore and hopefully things can progress normally from then on.
So those are some of my predictions as to what I think is going to happen with this virus. Now let's talk about what you can do with your business to avoid all the disruption. So the first thing you can do is just contact suppliers anyway. Whether you are looking for new products or whether you're reordering a stock that's already selling, contact your factory anyway.
They might not be at work right now. They might get back to work soon. They might be answering emails from home, but if you message them, they can let you know what's going on with their particular factory in their part of China. Not every factory is going to be exactly the same. They're going to be differences depending on where your factory is based.
As I mentioned earlier, it might be that your factory has a partner factory in another part of China such as Hong Kong or maybe Shenzhen or just a place where there isn't too much disruption and they can manufacture the same thing for you and ship it to you without too much of an issue. So definitely contact your supplier and see what they can do because the likelihood is they have a solution for you.
One thing you could do is see if any other factories can make the product while your factory is being closed or has major disruption because the likelihood is, especially if you're sourcing private label products, if your factory has the template and the mold they use to build your product, another factory could probably do the same thing. So it's worth contacting around if there's an absolute no-go from your factory, see if another supplier can help you just for, you know, one shipment, while we're waiting for the outbreak to be contained.
Another thing you can do while we're waiting for things to settle down is instead of sourcing from China, especially if you're doing test batches, you could try sourcing locally or maybe sourcing from another country. So if you live in the UK and you're selling on Amazon UK or another e-commerce provider, or your own website, then go and contact wholesalers, manufacturers, people who might be able to provide you with 50 or a hundred units or a pallet of stock that you can test without going to China because there might be quicker and easier and cheaper anyway.
And if there's any time to do this sourcing locally stuff, now is probably the best. If you can't get any more stock, sometimes that's going to happen, then one thing you can do is just slow down your sales for now. I think this whole thing is going to be wrapped up within a few months at least, it's going to be under control hopefully. So what you can do is, let's say you have 300 units left in the warehouse, they're selling 10 units a day. You could just put the price up and then what will happen is you'll get more profit per sale.
The sales volume will decrease. Maybe it'll sell half as quick and then hopefully by the time the sock sells out, you'll have another shipment in ready to go. And finally, if it's okay to manufacture the stuff but it's the shipping that is being problematic because there's been some air freight that has been cut out completely because of this outbreak, then instead of shipping by air freight or air cargo, you could ship express.
So it might be, once you've done all the figures, it might be more sensible to express ship a load of products from China and pay a little bit more than just completely miss out on a reorder that you need to place just because you want to save money on shipping. Losing all those rankings with your product or upsetting customers who are expecting the product might not be worth it.
It might be better just to take a hit on the cost of express shipping and maybe order a smaller amount for now, just while we're waiting for the flights to all take place normally again.
So those are my tips for what to do with the Corona Virus. A few estimations and predictions for when it's going to be fixed. Hopefully you found this video helpful. If you did, leave a like, leave a comment as well, and let me know what your plan is to do with your business over the next few months and we'll speak very soon.