Tim Jordan has built a career out of selling goods on Amazon and teaching others to do the same.
Lately, though, he’s been busy fielding questions about how to find manufacturers outside China, where factories shut down by the COVID-19 epidemic have been slow to reopen, creating concerns about stock shortages that risk devastating an Amazon seller’s ranking on the world’s largest e-commerce platform.
“I have seen a large uptick of students that are now looking to India, where they wouldn’t have been three or four weeks ago,” said Mr. Jordan, who has sold more than a million dollars in goods on Amazon and is an influential figure among the marketplace sellers who account for more than half the goods sold on Amazon. He has hosted events and coached roughly 100 other sellers.
Many of those sellers, who use Amazon as a platform for their own goods, have built livelihoods on products manufactured in China. Right now, however, “people are apprehensive to continue completely trusting China,” Mr. Jordan said. “We can’t put all of our faith in this country.”
He’s following his own advice: Roughly 70 per cent of the goods he sells on Amazon are made in China; he hopes to bring that down to 50 per cent by the end of the year.
Most large-scale manufacturers can’t move quickly. New factories take years to build, and supply lines in different countries are difficult to reconstitute.
But smaller vendors on platforms such as Amazon, which boasted roughly three million third-party sellers like Mr. Jordan in 2019, can be more nimble – in fact have to be, as they are more vulnerable to supply disruptions.
Some had already begun alternatives, as the tariff war between the United States and China eroded profit margins.
Rising wages in China have also diminished its standing as a low-cost manufacturer.
COVID-19 has only added a sense of urgency to such business decisions – and not just outside China.
Chinese companies, too, have been forced to consider how the wide-reaching manufacturing shutdowns have disrupted the domestic supply of critical goods. In recent weeks, Chinese makers of protective masks and pharmaceuticals have approached the National Federation of Industry and Commerce of Cambodia to ask about shifting production to that country, which has become a key destination for Chinese investment. “Several companies have come to us to negotiate plans for moving factories to Cambodia. Everything is under way,” said Ge Yunming, president of the federation, a Chinese trade group based in Phnom Penh.
"The virus shutdown is, of course, a major element pushing companies to places outside of China,” he said.
“There is a concerted effort to get out of China – a deliberate sense of saying, ‘Anything but China,’ ” said Hiten Shah, president of MES Inc., which sources lighting, transportation and agricultural components from around the world. His company works with several Fortune 500 firms, including global automotive brands that have requested parts from places outside China. “A lot of tier one suppliers, they’re like, ‘We don’t want China options,’ ” he said.
The big move away from China came to the fore last year, as the slow progress of trade talks between Beijing and Washington eroded faith in quick solutions. “Everyone has come to grips that the U.S. and China are going to continue to be in economic conflict for a long time,” Mr. Shah said. His company has already made adjustments, with the majority of goods destined for the U.S. now made outside China. “We’ve reduced our tariff exposure by about 70 per cent in these 18 months,” he said.
China is racing to reopen factories and resume work, with President Xi Jinping making detailed remarks at a Politburo Standing Committee meeting Wednesday about the need to minimize economic losses. He called for employees to get back to work, consumers to start buying again and work to accelerate on infrastructure and other major construction projects. He also said China must maintain “the stability of the global supply chain.”
On Wednesday, the country reported just 122 new COVID-19 cases.
Outside China, however, “people are in a panic mode,” said Raymon Krishnan, president of the Logistics & Supply Chain Management Society.
“The big worry now is: When will China reopen their doors so we can start getting our cargo again? Once that has happened, people are then going to continue looking at alternatives,” he said.
For Amazon sellers, however, the situation is more acute. Running out of stock can cause the platform’s algorithms to demote a seller in search rankings. It can take months to recover. Colin Raja, an Amazon seller with a sourcing agency in India, is ”working with 40 projects right now to make sure they don’t go out of stock and help them to procure product from some other places.”
However, “if China comes back, we will definitely go to China,” he said. No other country can match the density and scale of manufacturing in China, which dominates in the production of highly machined products and sophisticated goods such as electronics and has invested in world-class infrastructure that speeds the movement of products. “We use China as a very predominant market for us to source new products,” he said.
Still, other countries have developed advantages in more labour-intensive forms of manufacturing. India, for example, has grown as a source of goods made from leather, textiles, ceramics and wood. “I’m seeing a lot of these Amazon sellers moving their sourcing to India or trying to look for suppliers for these kinds of categories,” said Meghla Bhardwaj, who has organized a buyers’ trip to India and runs a Facebook page on sourcing from India that counts more than 3,000 members.
She has spent almost two decades in sourcing and has lived in China for 10 years. But a shift is under way, she said. “People are looking for alternatives.”
With reporting by Alexandra Li
Nathan VanderKlippe