Chinese New Year is awesome, but it could also be a pain for e-commerce entrepreneurs

The Chinese New Year is unlike any other celebration in the world. For starters, the entire country celebrates it in unity and it spans weeks; not a single day like is typical in the U.S. and most other countries.

Many Chinese citizens take this time to travel back home, often times a small village in a remote area, to celebrate with their families. It’s a rare treat and not something that’s taken for granted.

This year the Chinese New Year preparations will begin on January 28th with the New Year itself being celebrated on February 5th, and the final festivities ending on February 19th. The Chinese celebrate many things during this time making it a very busy season, but a joyous one at that.

During the celebration almost every factory will be shutdown for an entire month, sometimes even longer as they wait for their workers to return. Unfortunately, for some factories, workers don’t always return for a variety of reasons such as finding a new job or deciding to stay home and work in the village.

This means major delays and an increase in production errors during and shortly after the Chinese New Year season. This is why it’s highly recommended that buyers make plans to produce more inventory than necessary during the ordering period before the holidays as it might be awhile before production is running at full capacity again.

What’s the Chinese New Year?

The Chinese New Year is a month long celebration that includes the Spring and Lantern festivals as Chinese families gather together. It is supposed to be a two week long holiday, but in reality lasts much longer. Most factories will take two weeks to a month off. If you’ve found one that claims to take only a week off, you’re in luck!

Historically, the Chinese New Year marks the end of a year of hardwork and a time where families can get back together to unite, celebrate, relax, and take their salaries home to support their families. Think of it like all the major American holidays combined.

For Chinese people that work in larger cities, this time often marks the only point in the year where they get to return to their hometown. When family ties in China are often more important when compared to the West, it’s almost considered a duty for sons and daughters to return home. Otherwise, it might be seen as a disrespect to their families.

What Makes this Impact so Dramatic?

Most of the workers in factories are migrant workers. They travel hundreds of miles away from home, a journey that can take days to complete. It’s estimated that 340 million workers make the annual trip from their places of work to their hometown, that’s roughly the size of the entire population of the United States. Some historians call this the “largest human migration in the world”.

With so many travelers in China during this time of the year, many workers try to beat the rush and head home early. This is why factories start closing a few days before the holiday.

There is a term in Chinese called “Zao Zou Wan Hui” (早走晚回), which means “Leave early and return late”.  It perfectly describes how the Chinese people view and celebrate their New Year.

How Does this Impact Production?

Chinese factories are closely intertwined with each other. If you’re producing a pair of shoes then the factory you’re working with most likely has an entire 3rd party supply chain to support that production.

One factory will produce the raw materials, another factory will produce the laces and a third factory will focus on producing the metal lace loops or velcro strips. The factory you’re working with may not actually produce any raw materials and instead use materials from a number of different factories to put your shoes together.

Since the Chinese New Year is celebrated differently by each factory that means your factory might be without laces for 2 weeks after they start producing shoes again.

If you’re lucky enough to be working with a well stocked factory that has enough supplies to last during a 2 week lull then you need to worry about logistics. The entire country takes off during the New Year and logistics and shipping providers are no exception, your goods may end up waiting in a warehouse for a few weeks longer than expected.

To cut to the point, there are a number of ways your supply chain will be affected during the Chinese New Year and you need to be planning ahead to not miss a beat.

The time after the holiday can be challenging for factories as well. Often times, workers who return home, don’t come back! They reflect and realize that they miss their families and friends in their hometown too much to return.

Instead of working factory jobs faraway, they’ll seek out service oriented jobs in their hometowns. This is widely affecting the newer generation, as they may not be willing to work the same jobs as their parents.

From the macro perspective, the Chinese government may be happy by this shift. They are often incentivizing ways for China to be more a service-oriented economy and while gradually moving away from its role as the “world’s factory”.

In some industries, this can cause a turnover rate of 30%, causing a massive headache for factory owners. The other balance is labor wage increases. Many factory workers expect a significant pay increase the longer they stay at a factory. If they don’t get a increase in pay, they’ll be more willing to jump ship to another factory, often bringing along trade secrets from their previous factory.

This mean they have to not only balance the hiring process of new works, but also the training process of new employees they’ve hired to replace the ones who have left. From a manufacturing perspective, this means the productivity of a factory often decreases after the Chinese New Year and it may take a full month for them to increase back to full capacity.

Now that you know the history and impact of Chinese New Year, it’s time to understand how you can manage this from a sourcing perspective.

Place Orders Even Earlier

This might not be your first time producing through Chinese New Year. Regardless, it’s always best to place orders no later than November so the factory will have 60+ days to get everything done before the holiday. This will drastically increase your odds of receiving your goods before the holidays.

If your normal lead time is 30 days, be prepared for the times to increase by 50% to 100% during this time of the year, as the factory will be slammed with orders. Placing your order early enough will ensure that your goods get produced before the mad rush.

Ship Before the Rush

If you’re planning to ship via oversea freight, book a vessel a few weeks in advance to avoid the huge risk of getting your goods stuck and missing the boat. We recommend booking through our partners, Flexport or Freightos.

Don’t always trust the factories own cut off dates. Even if they promise they can delivery up to the official yearly start of the Chinese New Year, it’s not worth the risk of having your goods stuck.

If they aren’t able to ship before the Chinese New Year, be aware that this could add 30 to 45 days. For a business that runs out of inventory, this could result in thousands of dollars in lost sales.

Place Larger Orders

If you have the cash balances to place a larger order before Chinese New Year, go for it. This time of the year is when you should be investing more in inventory, as lead times will be longer during this holiday.

With that said, it’s not always worth straining your budget unless you know you’ll be able to sell through that inventory. This is one of the biggest dynamics in ecommerce, as you need to have money to market your product and handle the logistic costs of getting your product to your end consumer.

Going Outside of China

The Chinese New Year is what often pushes professional sourcing agents to look outside of China for factories. Having this long of a downtime is never good and is what further motivates people to source across countries like India, Pakistan, Thailand, and Vietnam.

With labor wages increasing in China and the government continuing to put new environmental restraints on factories, prices have risen significantly compared to what they once were twenty years ago.

Be Prepared Moving Forward

If you purchased your order to late, miracles unfortunately won’t happen. Expect your goods to be delayed and prepare for it. You can create hype around products that have been sold out and even process pre-orders through your site.

The worst approach is to push your supply chain stakeholders overboard. They are likely already under a lot of stress and by putting even more pressure on them, more mistakes can rise.

To wrap everything up, the best way to handle the Chinese New Year is to prepare. Don’t be single sourced and start to look outside of China for manufacturing partners. Sourcify works with factories across Asia and Mexico, helping companies like yours have smooth production runs around the world.