Just a short blog post today, but it’s about an important topic: Chinese New Year!
If you source your manufacturing from China, you’ve likely run into this event before. You need to make a plan months in advance, because before you know it, factories across the country are shut down and your chances for emergency product orders are out the window.
Chinese New Year is based on the Chinese lunar calendar, so the exact date changes every year. This year, it’s relatively early: the holiday occurs in January 28th, 2017.
However, celebrations begin earlier than the new year itself — sometimes, people begin their celebrations up to three weeks before the eve. Amazon sellers should know that factories may begin to shut down around January 19th.
What Does This Mean for Me?
As we’ve said, if you’ve sourced your products from China for at least a year, you probably know the drill. In case you don’t, though, here are the basics.
Come January, factories across China will be shutting down for weeks, so you need to get your orders in early to stock up for the holiday season.
It’s especially important that you get your orders in as early as possible, because every factory in China will be dealing with an increased production load. Orders from sellers everywhere will start stacking up as everyone tries to get ahead of the shutdown, so you may face increased lead times and reduced quality control as a result.
In general, the earlier you can place the POs you need, the less chance there will be of running into delays, manufacturing shutdowns, or product defects. So do it now!
Hopefully, you understand your supplier’s lead time at this point, so do the math, figure out how much you need for the holidays, and place the orders.
An Extra Consideration: Amazon Storage Fees
FBA sellers will run into an extra kink when it comes to holiday inventory: storage fees.
Last Q4, so much inventory arrived in Amazon warehouses that they basically ran out of space. These overfilled warehouses cut into Amazon’s profits, despite the gentle price hike on storage fees that they thought would make sellers rethink their inventory quantity.
This year, that price hike isn’t so gentle. Storage fees will be increased to $2.25/cubic foot for standard-size products and $1.15/cubic foot for oversized products. Compared to last year’s 72 cents/cubic foot for standard-size and 57 cents/cubic foot for oversized, that’s a big increase — 3x the normal rate for standard items and 2x for oversized.
Thankfully, there’s a bit of consolation: weight handling fees will be reduced for November and December. The reduction will be anywhere from 10% to 25%, depending on the size of the item — larger items will get marked down more. It’s not much, but it’s something.
Basically, Amazon wants sellers to only store the inventory they know will move — and are rewarding that even further with the weight handling fee reduction.
You’ll have to strike a difficult balance: too little inventory, and you might be run dry mid-holidays with no backup POs available; too much inventory, and the storage fees for products that aren’t moving will devour your margins. Normally, I would recommend erring on the side of too much, but in this case, you’ll need to limit the surplus to your highest-velocity items. In others areas, you’ll really need to trim the fat and make sure you don’t order too many non-movers.
Chinese New Year, even if you’ve come across it before, presents some interesting new challenges this year. For one, it’s earlier, so you’ll have less time to formulate a plan of attack. Second, Amazon storage fees mean you’ll have to think long and hard about which products are worth the exorbitant storage fees, and which products are better off being cut back a little.
Have any questions, comments, or additions? How are you approaching inventory this Q4? Let us know in the comments below!