In many Western countries, including the United States, the Chinese New Year is often overlooked as the holiday season has just ended. However, the Chinese New Year is arguably the biggest public holiday in the world– drawing nearly ten times as many travelers as Thanksgiving (the United States’ busiest travel holiday). The holiday also provides the Chinese people an entire week off from work– temporarily halting factory production. Other Asian countries, including Hong Kong, Taiwan, Singapore, and more, also celebrate the holiday and will be closed for similar periods. For that reason, it’s important to that private label ecommerce businesses prepare for Chinese New Year now.
While the United States may not celebrate Chinese New Year, at least not to the same extent, the holiday still has a large impact on business. For ecommerce businesses, especially those that sell private label products on marketplaces, like Amazon and Shopify, Chinese New Year means potential delays in inventory shipments. Between temporarily stalled inventory production and increased demand upon reopening, the Chinese New Year often creates a bottleneck effect. Although the holiday shopping season will have ended in the US, these delays can still create cash flow hiccups for your business early on in the 2024 fiscal year or create challenges in reaching your Q1 or Q2 financial goals.
In this article, we’ll review important dates to keep in mind when preparing your ecommerce business for the Chinese New Year and help you prepare ahead of time for cash flow challenges in early 2024.
2024 Timeline to Prepare for Chinese New Year Shutdown
In 2024, the Chinese New Year falls from February 10th to 24th, and the country will be essentially “shut down” on holiday from the 9th to the 15th. However, festivities for the Chinese New Year often begin several weeks early and employees will not all return to factories at the same time. As a result, delays extend for much longer than a single week and it will be almost a complete month before operations resume as normal.
Late January: Suppliers will begin to stop production
Early-mid February: Employees begin leaving the factories to return home
February 9: All employees have left the factories
February 10: Chinese New Year begins
February 24: Chinese New Year ends
Late February into early March: Employees return to factories
Mid-March: Operations are mostly back to normal
How will the Chinese New Year affect your business?
As mentioned above, Chinese New Year is a public holiday in many countries where it’s celebrated and people get up to a week or more off. While most factories and businesses in the United States stay open in the days leading up to, and in many cases even on, holidays, virtually the entire country shuts down for many days to celebrate Chinese New Year.
All of the factories close down and in that time no inventory will be produced. This also means it’s unlikely that you’ll be able to get in contact with your suppliers during the Chinese New Year. Not only will inventory manufacturing come to a halt during the holiday, but inventory order acceptance will also temporarily cease–meaning that when factories reopen they’ll be slowed down by the sheer amount of backlog orders.
As the Chinese New Year shutdown happens every year, many businesses try to prepare for the factory break by increasing their orders a month ahead. While the logic in this decision is sound, and it may help improve your experience, this has become a common practice among many private label ecommerce businesses. Increased demand for inventory from most businesses right before and right after the Chinese New Year still means that lots of packages, potentially including yours, may be delayed to ship, even if production is ongoing.
Cash Flow Hiccups
Money tied up in inventory orders that haven’t yet shipped can leave your business operating on razor-thin margins for months before and after the holiday, creating a serious cash flow crunch. On top of that, if your business runs out of inventory during that period your business could even dip into negative cash flow (and risk being dinged by Amazon for lack of inventory). Even if these cash flow challenges only persist for a month or two they can have long-lasting effects on the health of your business.
How to Prepare for Chinese New Year Shutdowns
In order for your business to avoid these potential challenges and more, it’s important to start preparing for the Chinese New Year, and the factory shutdowns that come with it now. Reduce the possibility of unforeseen delays and keep your business running smoothly by embracing these strategies:
Place Orders for Inventory ASAP
Prepare your business ahead of Chinese New Year by ordering ahead instead of waiting till December, it’s wise to start increasing your inventory now. Use historical data to help forecast what sales will look like throughout Q1 of 2024 and consider placing an order in October or November. By ordering now and increasing inventory over the next few months, you’ll ensure that you avoid any shipment delays and that your inventory is delivered on time. This will also help prevent your business from facing any shortages due to depleted stock after the United States holiday season.
Consider Seasonal Products
Although the Chinese New Year isn’t as popular of a holiday in the United States, there are still millions of Americans who celebrate. In keeping with tradition, many decorate their homes and businesses, wear brilliant red and gold clothing, and exchange gifts throughout the holiday. If your ideal customer demographics include Asian Americans or anyone who might celebrate the Chinese New Year, it might be worthwhile to offer seasonal products for the holiday. These can include decorations, such as red lanterns or festive lunar calendars, red envelopes to store gifts and money in, or even traditional Asian foods and ingredients.
Making early inventory orders and increasing stock is expensive, but running out of stock and facing a cash flow halt is even worse. Consider taking outside working capital for your ecommerce business now so that you can invest in early orders, greater storage space, or even build up a cash flow buffer throughout the holiday season.
Even the healthiest cash flow can benefit from external funding, especially right before an event like the Chinese New Year. Many ecommerce businesses struggle when their cash flow is tied up in inventory, but a healthy dose of funding has the double benefit of helping you increase your buying power by negotiating better terms on larger quantities and ensuring that you avoid shortages. By taking on ecommerce funding from solutions, you’ll guarantee that the Year of the Dragon begins on the best possible note for your business!