Editor’s Note: This article is part of a series that explores the impact the coronavirus crisis is having on the world of ecommerce. Here are additional resources to help you navigate your marketing strategy during this time.
It’s no secret that the world is facing a serious global health crisis thanks to the coronavirus (COVID-19) outbreak. It’s not only a potential public health pandemic, but it’s also having a critical impact on global supply chains and markets worldwide have been on a rollercoaster as a result of the economic impact it could have.
On the supply side, businesses are grappling with how to continue their manufacturing operations since so much of that activity stems from where the outbreak has been most severe: China.
Factories have been closed for extended periods of time and many aren’t yet re-opened or operating at full capacity, which leaves retailers wrestling with current and potential disruptions in their production processes. Many brands are seriously concerned about their ability to supply goods to customers without major delays—if at all.
In the face of a potential supply chain crisis, how can online brands continue their operations and what can they do now if they aren’t fully prepared?
Earlier this week, I caught up with Josh Behr, director of marketing and ecommerce at Amerex Group. As we started talking, I mentioned a fellow Klaviyo who he’d chatted with the week before we spoke.
“[Jake] asked me an interesting question,” Josh said. “He asked me, ‘What’s your number one fear right now?’ And I said, ‘The coronavirus.’”
Read on to learn why and what Josh says his organization is doing to prepare to handle a potential supply chain crisis.
Katie Tierney [KT]: What does your company, Amerex Group, do and who you work with?
Joshua Behr [JB]: We manage multiple licenses to manufacture clothing for brands like Vince Camuto, Kate Spade, Carters, OshKosh, Jessica Simpson, and Dolce Vita, for example. We don’t make all of their clothes, but we manufacture outerwear for men and women, outerwear for kids, and ladies swimwear—three main areas of our manufacturing, the majority of which is done in China.
We also have three proprietary brands: Bleu Rod Beattie, which is women’s swimwear, Red Carter, which is women’s swimwear, and 1 Madison, which is ladies’ outerwear. We own the direct-to-consumer (DTC) end of those businesses so we run those ecommerce sites, which I use Klaviyo to support.
[KT]: In what ways has the coronavirus outbreak has impacted your ability to deliver products to your customers?
[JB]: Today, it isn’t impacting us. Thankfully, we’re ahead of our plan on the calendar. What we’ve seen, though, is that our future development for future deliveries expected in May, June, July, is already being pushed out a good 30, 60, sometimes 90 days.
We’re currently selling outerwear for the next season and, as we make changes and those items are being made, we don’t have the ability to make them as quickly. We’re seeing factories opening up at 20-30 percent capacity from their normal workload. We’re not the only company working with some of these factories, so it makes it very complicated to get products made. With some stuff, we don’t even know when it’s coming yet, the factories can’t give us an accurate timeline.
[KT]: That must be incredibly challenging. How are you adjusting your operations in response to these issues and the threat of more substantial supply chain issues that might arise if the outbreak worsens globally?
[JB]: We’ve started sourcing in new areas so we’re able to move beyond China. We’re looking to see what capabilities domestic manufacturers can provide, and we’re looking in other countries so we can plan accordingly and plan ahead.
[KT]: I spoke with someone recently who also talked about diversifying their production in different regions. He told me that a lot of the factories in different regions are now operating at capacity because of an increase in demand and many are charging more as a result. Is this something that you’re seeing, too?
[JB]: Yes, we’re seeing the same thing. One thing we’re seeing is that if you can come in with large orders and give a factory more money, they’ll prioritize your order and this is something that can have a really big trickle-down effect on some of the smaller companies. Many just don’t have the resources to compete with a larger company that’s placing an order for 10,000 units versus their 500 units of product and they’re willing to pay a premium for those goods whereas many smaller companies may not be able to do the same.
[KT]: What are some of those smaller companies doing if they can’t compete with the brands coming in with larger orders and more money to move them along?
[JB]: They keep looking. I’m friendly with a lot of people who run smaller ecommerce brands and many have told me they’ve moved production to India to allow sourcing to continue. They’ve added an additional 30 days to get goods in, but they’re still able to get them… or at least they’re being told that they’ll be able to get them.
They’re also shifting production domestically. You pay a little more here to get production done, but it allows for flexibility and continuity. I spoke with a company that did this and they paid an extra two dollars per unit, but they can continue to operate their business.
[KT]: What kind of business continuity plan do you have in place?
[JB]: We do have some staff in China, so we actually heard about the issues we might face as a result of this outbreak early on and that helped us to proactively start moving our production around. We’re not 100 percent moved around, but we’ve made a lot of progress.
We started looking for new factories as soon as we learned there might be an issue—we didn’t take the wait and see approach for 35 days or more, which a lot of companies were doing. We looked into trying to move some things domestically to get reorders in and finding other factories beyond China.
The big problem with factories in other regions, though, is that they all get fabric from China. Even if we source production from another country, the mills that make the fabric for the end product are still in China and that’s still a problem so we proactively bought a lot of the fabrics we’ll potentially need and some of it won’t be used.
We did a lot of proactive planning, not just with production, but we also started planning in advance of what’s going to happen if and when the outbreak worsens in the U.S.
We asked ourselves questions like, “How are we going to continue to sell? How are we going to work from home? How is everyone going to communicate effectively? How do we keep everyone from traveling as much as possible?”
Big conferences in our industry are being canceled and there are others that we still don’t know if they’re going to happen or not that we’re trying to prepare for.
Cash is going to be very important for all companies, so we also looked at how we can ensure we’re not spending while the country might not be spending. We sell a lot of swimwear, but people who buy it may not be thinking about vacations and that can impact our sales. Because of this, we had to think about how we can ensure we buy in tight supply and plan ahead as much as humanly possible.
Some of our business at the end of the season turns into an off-price business, so now we’re thinking about whether we should hold that inventory and use it to our advantage instead of off-pricing it to places like TJ Maxx. We’re looking at whether we should hold some of that inventory instead of just off-pricing it for a much lower margin to allow other stores to buy it or sell it on our ecommerce channels.
[KT]: You mentioned that because you have people on the ground in China, you learned about this potential supply chain crisis very early on. With the business continuity plan you put together, was that something you were prepared for because of previous planning you’ve done for potential disasters?
[JB]: No, we weren’t. Thankfully, we’re nimble. We know we have to be ready to make changes and adapt at moment’s notice and that’s how we operate. We had to ask ourselves things like, are we going to match last year’s revenue or do we need to adjust our plan based on what could happen? And if nothing ends up happening, how do we get back into finding product quickly when the rest of the market is still behind.
In this instance, we knew we also had to look beyond production and sales, and examine our marketing strategies. We asked ourselves if it still makes sense to be doing certain things like spending money on Facebook ads, for example, if people aren’t traveling as much as they would normally and if they’re not thinking about swimwear as much as a result.
[KT]: You mentioned pulling back a bit on Facebook advertising. What other marketing strategies have you adjusted?
[JB]: The brands we work with like Vince Camuto and Kate Spade control their own marketing, but for the three brands we control, we’ve adjusted our messaging strategy.
In normal circumstances, with might talk about going on a vacation but in this instance, when people might not be traveling internationally or by air as much as they would normally, we use messaging that talking about buying stuff for the beach or other things they might be doing locally.
With an adjusted messaging strategy, we keep a close eye on performance to see if people are opening and clicking on these communications. Are they still going to the website? Are they still converting? Are they still buying? Does it even make sense to push it? How much email marketing are we going to do in regards to promoting a lifestyle that people may not be able to live shortly? These are all questions we’re actively asking ourselves every day.
The outbreak itself hasn’t spread across the States as extensively as it has in other countries yet, but we saw the stock market crash over the last week which impacts people’s daily lives. It sparks fear about their retirement funds and things like that. When people worry, they change their spending habits and they may not go on vacations, which has an impact on how we sell our products.
[KT]: What are some things ecommerce brands can do if their inventory is tied up in China or if they produce elsewhere but the materials for them are tied up as you mentioned earlier?
[JB]: I speak to friends in the ecommerce space and I think a lot of people in the apparel industry, especially, are exploring things like print on demand garments. That way, they can fulfill print on demand orders if they find proper places to work with to source their goods.
Another thing I see when inventory is tight is that smaller ecommerce brands need to be spending quietly, holding inventory, trying to make sure they’re giving away fewer discounts than they normally would, and looking more towards high margin goods and strategies.
[KT]: Going back to that business continuity plan you spoke about earlier, for brands that might not have been as ahead of things as you were able to be, what should they be doing now to plan for their business and, realistically, how nimble can they be at this point?
[JB]: I think they can still be very nimble. I’d recommend they look at three things.
First, I’d say look at your inventory position to see what you have in stock. Do you need more? If so, can you source locally, even if for a limited quantity of units, to keep things running for the next 30-60 days while things hopefully shake out overseas?
Next, I’d suggest looking at your cash flow. Make sure that if you’re spending money on advertising, you’re getting the margin or the cost per acquisition that makes sense for the business. Use channels that don’t have high acquisition costs, like email marketing with Klaviyo, and use them to your advantage.
Then, ensure you have a remote work strategy in place. How will your team continue to communicate? Whether it’s through Slack, Asana, or email, make sure your team is continually communicating. Communication is going to be the biggest part of this whole process, and ensuring that everyone on your team is continuing to be in touch with each other during this time will help everybody keep moving forward.
[KT]: Speaking of communications, how should brands be thinking about maintaining the relationships they’ve built with their customers in the midst of these operational challenges? Have you seen any companies proactively communicating that they might experience inventory issues with their customers?
[JB]: On the ecommerce side, we’re only shipping out based upon inventory that we have, so there’s no delay on our end. Personally, I haven’t seen other brands proactively communicating disruption issues like that yet, but I imagine it would be a smart thing to think about a proactive communication strategy so you have it if and when you need it.
On the wholesale side, we’ve already communicated to our wholesalers and the companies we work with about any delays we’ve seen. Most companies on the wholesale side are hearing and feeling the same thing. A lot of the stores they supply don’t even know how much inventory they want to take on from their own risk perspective. That conversation with most stores is pretty fluid. If you can confidently supply inventory, I’d be more bullish right now. Depending on the store, they may not be getting enough inventory in so you could have an opportunity to gain some wholesale traction that they’re not normally used to.
[KT]: Do you have any last thoughts or insights that could help someone who’s running an ecommerce business?
[JB]: Stay positive. We don’t know what’s going to happen, but I’m hoping that it’s not going to last too long and I think the economy will come back very strong. If anything, I think this will actually allow many ecommerce brands to succeed. If people are home, they’re going to be spending more time on their phone shopping, so I actually think people will become more accustomed to going online, buying online, and not running to the stores as often. At the end of it, I think the short-term hurt that brands may experience will hopefully lead to their long-term gain.
Looking for more resources to help you effectively manage your inventory and drive sales? Learn how you can predict when your customers will place their next order.
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