by Ker Zheng
The global Covid-19 pandemic has severely constrained global shipping capacity and supply chain operations.
We take a look at how cross-border e-commerce merchants are being affected and what they can do to improve their situation.
Update #1: Direct shipping routes and prices continue to be adversely affected by the Covid-19 pandemic
There is a severe shortage of international flights due to the Covid-19 pandemic. Given that half of air freight shipping was conducted on passenger flights last year, the current availability of air freight space across the globe is at a low. Prices are high and while freight forwarders can help find solutions, it may take multiple legs of flights for goods to be shipped to China.
Update #2: China customs is checking all postal items due to the Covid-19 pandemic
Before, international cross-border e-commerce merchants could ship products one by one through the postal channel to reach Chinese customers. A small percentage of these items (<5%) would be inspected and taxed by customs if they were found to be commercial items masquerading as personal items.
Now, because of the Covid-19 virus, customs officials are checking a larger percentage of items and shipping through the postal clearance model is less tenable. Shipments are backed up at customs and more orders are being taxed.
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How Can Global Merchants Selling to China Optimize Their Supply Chain Operations?
We recommend that merchants try to move to the bonded warehousing model, in which they ship goods in bulk to warehouses in free trade zones in China, such as in Ningbo or Guangzhou. The goods are then shipped to end customers after they have made purchases on the respective e-commerce platforms.
Both Alibaba and JD.com have such warehouses and prefer that brands stock inventory there to provide the end customer with faster delivery options.
In the past, merchants were averse to moving inventory to these free trade zones for fear of incurring inventory risk - if they couldn't sell, it was difficult to move the inventory back out and merchants had to write the inventory off, incurring losses.
But now Cainiao (Alibaba's logistics arm) and customs authorities have streamlined the process so that merchants can more easily move products out of the free trade zones. This is useful in case they want to sell to other markets in Asia such as Japan.
Those who still do not want to move products to Chinese free trade zones can instead elect to stock inventory in Hong Kong, which is a free trade port city and oftentimes serves as a hub for selling to the entire Asia-Pacific region.
Stocking inventory in Hong Kong enables quicker delivery to end customers in China, but merchants can also ship goods to Southeast Asia or Japan if they decide to enter those markets.
The only downside is that the costs of stocking inventory in Hong Kong can be higher than those of China free trade zones.