Daily Management Review

Coronavirus Infection Of Chinese Workers Threaten Business Of Amazon Merchants


Coronavirus Infection Of Chinese Workers Threaten Business Of Amazon Merchants
Fear of the fast spreading coronovirus could keep Chinese workers of Amazon.com Inc sellers away from work for longer which could result in shortage of products for the sellers.
A Reuters report mentions about Brandon Young, owner of a company that sells portable Apple Inc watch chargers on Amazon and has an average annual turnover of more than $10 million, could be facing shortage of supplies as the products are manufactured only in China from genuine Apple components. The seller could find it virtually impossible to replace the China made products.
And for the founder and owner of Plugable Technologies - Bernie Thompson, that sells the triple display laptop docking station, inventories are .likely to reach zero even if factories in China resume production of the product starting next week as planned
According to reports, there are more than 1 million such Amazon sellers who completely depend on factory workers in China to keep their businesses running. The novel coronovirus has so far killed over 600 people in China while more than 30,000 have been reported to have been infected by it.
Sellers on the largest e-commerce platform of the world face the predicament of loss of livelihood if there is are worker shortages or prolonged factory closures in China because of the fast spreading virus.
Small businesses can be completely wiped out if they run out of products to sell on Amazon. Top place on the list is given to those Amazon sellers who have the briskest and most recent sales which is decided by the platform’s algorithm. Such prominent placement helps increase even more sales.
“Going out of stock is the best way to kill that,” Plugable’s Thompson told Reuters.
A little more than 19 per cent of the net revenue of Amazon in 2019 was accounted for the revenues generated from services to third-party sellers. That figure is without the advertisement revenues that the company generated from such small third party businesses. About 58 per cent of the physical goods sold on Amazon in 2018 were accounted for by those independent merchants, Amazon Chief Executive Jeff Bezos said in a letter to shareholders.
“Currently, there is no interruption to our operations,” Amazon said in a statement.
That is partly because of the stocking up of inventories by many Amazon sellers just before the long Lunar New Year holiday when millions of workers in China travel out with their families and when there is a virtual stop in manufacturing activities in the country for about two or three weeks at a stretch, said Young in an interview to Reuters.
“People do have extra inventory, but that will quickly run out” if factories remain shuttered or workers do not return, said Young.
An advice to Chinese sellers to try and prevent shortage of inventory and delays in shipments because of the coronavirus was issued by Amazon in a post published on its Chinese website last Saturday. Amazon suggested that Chinese seller should delist products and put their virtual stores into inactive mode.
And after having hit by the protracted trade war between the United States and China all through last year, the coronavirus epidemic is the latest hit to US sellers.
“This is insult to injury,” Michael Smerling, president of Chicago-area LCI Brands, said referring to the coronavirus.  Profits were reduced by as much as 75 per cent last year because of the tariffs, he estimated.