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The Chinese New Year and its impact on your business

By Manuel Becvar

So what is all this Chinese New Year delays and why are your factories telling you their staff hasn’t come back and they can’t make samples yet or production will be delayed?

I’ve been in China/Hong Kong for the last 11 years so I understand the problems and prepare myself but to many of you this period of time puts a big question mark on the spot. Let me explain why it is so difficult before and right after Chinese New Year to get factories working on your orders.

Wikipedia excerpt:

Chinese New Year celebrations traditionally run from Chinese New Year’s Eve, the last day of the last month of the Chinese calendar, to the Lantern Festival on the 15th day of the first month, making the festival the longest in the Chinese calendar. The first day of the New Year falls between January 21 and February 20.

chinese-new-year-lanterns

The Chinese New Year is traditionally a time to celebrate with family and friends.

Many workers will travel to their hometown during that time. Some workers come from far away provinces within China so they usually will be gone for at least 2 weeks. Why is this? Some rural areas in China do not have much manufacturing industries or employment opportunities, so people need to travel far to manufacturing areas for work. These workers will usually stay all year with the factory and then leave for 2 weeks during Chinese New Year to return to their hometowns.

 

Factories

What does that mean for your business? Factories will be closed for up to 4 weeks!

The actual public holidays are usually only 7 days (depending on the province) but factories take this opportunity to send their workers home, as this will be the only annual leave most workers have all year. The factory will most likely not give staff/workers any additional holidays during the year.

 

Staff/workers

Unfortunately for factories, many workers do not return to the factory after the holidays. The percentage of workers not returning can be up to 50% in some cases. In a recent case I heard from a factory of mine that only 20% of all workers have come back by now. This is a HUGE problem for the factory.

This leaves factories in a troubled spot. Not only have they been closed for weeks and losing business but now they can’t fulfill orders from clients that have stacked up since closing for the festivities and workers are scarce. It is important for you to also see the situation for the factory. It’s not that they aren’t willing to produce your goods or aren’t interested in your business anymore, they simply can’t fulfill your order. Many small factories actually close down for good after the Chinese New Year because either their workers haven’t returned or they went on to bigger factories who can offer a better salary.

This can result in long production times for you after the Chinese New Year.

It’s also difficult to reach many factories during the Chinese New Year. Sometimes it’s not clear how long they will be closed and who will return to answer your emails/phone calls. Make sure that you ask your factory/supplier for details on their Chinese New Year operation hours.

To battle this problem many factories have great incentives in place, such as bonuses, educational programs, free dormitories or lunch within the factory, which makes workers return.

As for regular staff of the factory this shouldn’t be a big issue for you.

Most staff has a higher salary than workers (sometimes it can be the opposite), which will include your sales contact at the factory. They usually enjoy more benefits than workers, such as health insurance, bonuses or provided accommodations.

 

Logistics

Since the factories are closed, most of the logistics companies will also close, but those will most likely only close for the official days of the public holidays.

Be aware that many companies try to ship out their orders before Chinese New Year. This is a very busy season for all parties involved. Logistic companies will also charge you higher than usual rates during this period. Many vessels will be fully booked, so make sure that you reserve and book your space when you have an upcoming shipment.

 

Solution

So how can you battle this difficult period of time? I wish I had a bullet proof system that can be applied to every factory but it really always depends on the product and factory. Here are some ideas that should help:

1) Look at your sales numbers in September/October and place larger orders right then and there in October to ship out before Chinese New Year. Place orders that will last you until May/June. I know this might be a impact on your cash flow but it is really the only guarantee not to run out of stock until after the Chinese New Year.

2) Try to work with bigger factories right from the start. I know bigger factories have higher MOQ’s so you can start with smaller factories but you should gradually move onto bigger factories. The bigger factories have more benefits for their workers and they are more likely to be in full production right after Chinese New Year.

3) Speak to your sales representative before the Chinese New Year. Ask for estimate delivery times and when they will likely be back at 100%. Plan accordingly.

And most important:

4) Do not rely on one factory only to produce your goods. This actually doesn’t only apply during Chinese New Year but it does especially in that period. If one of your factories closes down for good you may want to have a spare factory in hand.

Once you see your product is running well place re-orders and at the same time look for more suppliers that could potentially replace your existing one just in case.

So you see it is rather normal that you don’t get immediate responses from factories or that samples or orders can take much longer than usual.

Hope this gives you a bit of an overview and better picture of the situation.


Manuel Becvar is the founder of "Mandarin-Gear Ltd Hong Kong" a sourcing company based in Hong Kong. Previous to founding his own company Manuel had been working with large retailers as a buyer in Hong Kong for over 10 years. Apart from Mandarin-Gear, Manuel runs a blog: www.importdojo.com that focuses on helping buyers to import from China; especially for Amazon FBA buyers. He has also written 4 best sellers books about importing from China that are available on Amazon as well as in his online course on www.importdojo.com.

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