In recent weeks, COVID-19 has illustrated why international e-commerce retailers must plan for emergencies and market disruptions to future-proof their businesses.
COVID-19 has quickly become a global public health crisis, with outbreaks reported in dozens of countries and new cases reported each day. Global financial markets have reacted sharply, demonstrating in real-time just how connected our global economy is.
There are a variety of natural and man-made incidents that can cause market disruptions or decrease demand. This is the latest example of how unforeseen events, whether quickly spreading viruses or natural disasters, can upend systems and processes that we usually take for granted.
In today’s increasingly interconnected business environment, the fallout from a global incident no longer stays in the geographic area where it first occurred. Even natural disasters that take place thousands of miles away can shake things up at home and in other regions. As a cross-border e-commerce retailer, it’s important to plan for the unthinkable and create a crisis response plan in case of an emergency. For online brands, ensuring frictionless cross-border e-commerce in a world where local market disruptions can happen overnight should be a critical part of operating in each market where you do business.
According to Deloitte, there are three main areas in which the COVID-19 virus is impacting the global economy:
- Production of goods. Manufacturing in China has been disrupted, particularly in Hubei province. Large brands such as Apple have already felt the pain of closing their main production hubs. And now, smaller brands are experiencing angst. For a third-party retailer like LCI Brands, a maker of backpacks and bags for larger retailers like Nordstrom and Amazon, losing Chinese production facilities has resulted in layoffs and uncertainty.
- International supply chain. An unforeseen crisis can cause transportation restrictions in affected countries. Cathay Pacific, a major cargo airline for China and Hong Kong, announced plans to cut its flight schedule to mainland China in half through the end of March. Additionally, UPS recently canceled 22 cargo flights to China and has since made flights to affected areas voluntary for their pilots.
- Financial markets. Many cross-border retailers rely on sales from overseas to meet their quarterly and annual financial goals. With China at the epicenter of this public health crisis, companies that do business there are readjusting their revenue guidance, and financial markets have responded to the uncertainty. We saw just this week the worst performance for major stock markets since the 2008 financial crisis.
This type of disruption isn’t unique to a public health crisis like COVID-19. As recently as last fall retail sales declined dramatically in Hong Kong amidst the political protests. Brands and retailers can minimize the effects of these three factors on their own production and supply chains — regardless of the nature of the emergency — by diversifying their supply chains and creating contingency plans. While brands obviously can’t control the global financial markets, they can control where their products are made, how they are distributed, and which markets they focus on when others experience disruptions.
Here are some steps cross-border e-commerce companies can take to ensure that international emergencies don’t completely derail business operations.
Diversify global supply chains. E-commerce merchants should build resilience into their supply chains ahead of an emergency. There are many different schools of thought on this, but the ideal multi-sourcing strategy includes partnerships with a small pool of vendors and augmenting these relationships with other third parties who have the ability to quickly fill in as needed. Businesses that plan in this way will be well-positioned for success and growth, even during a market disruption. These businesses will also retain an adaptive advantage by engaging with companies and partners of all sizes, from large manufacturers to locally-owned small- or medium-sized players, as well as companies based in different geographies. This approach minimizes dependence on manufacturers and distributors in one region so if a global event disturbs operations, businesses can quickly shift their manufacturing operations to unaffected regions.
Ramp up e-commerce sales in unaffected markets. Cross-border sellers need the flexibility and agility to quickly localize their e-commerce website for any market. Smooth and rapid market entry requires organization and a strong awareness of local preferences in markets they want to enter or increase their presence. Providing a localized experience for your target market, including currency display, accurately calculated duties and taxes, and the right mix of local payment options are all crucial for seamless market entry. By focusing on markets that are unaffected by a global market interruption, e-commerce businesses can stay afloat and even make up for lost revenue in other markets.
Provide transparent communication. Clearly communicate any delays in delivery and replenishment of out of stock items as a result of any production or transportation disruptions. It’s important for businesses to be transparent and thoughtful in how they communicate with customers. For example, your business should provide regular information relating to adjusted delivery windows for customers that have already placed their orders. If customers choose to cancel an order because of the added delays, businesses should respond with leniency and flexibility regarding cancellation policies. For customers who have not yet placed an order, it is important to clearly communicate throughout the website any updates on delivery timing or any additional delays that might be expected due to the circumstances. If there are any countries that your business is unable to ship to due to a crisis, then it would be important to communicate this information upfront as well. If the disruption appears to have a larger impact on the business, then it might be important to post updates about the situation as it unfolds and how the company is responding to it.
When disaster strikes, smart brands should be prepared to respond and communicate with customers, and COVID-19 is a sobering reminder of this. Brands and retailers must have a “plan B” that protects employees while ensuring that their supply chains and production hubs are stabilized to meet customer demand. And, if supply chains are disrupted to the point of delaying delivery of purchased items, brands must be transparent and communicate this to customers at the time of the sale and at regular intervals afterward. Proactive and transparent customer communication is one of the top three expectations of global consumers, whether in times of crisis or not.