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The Impact of Chinese New Year on Dropshipping: Preparing for CNY 2021
Many dropshippers learn about the Chinese New Year (CNY) the hard way: when the factories that they rely upon completely shut down for several weeks (or more) at some point between late-January and mid-February – leaving those overextended by pre-sold orders buffeted by refund requests and chargebacks. In this post, we explore:
- The Chinese New Year
- Its impact on eCommerce
- A few suggestions
The Chinese New Year
In China, the Chinese New Year, also known as the Lunar New Year and the Spring Festival, is the biggest holiday event of the year. Hundreds of millions of people travel home for one or more weeks – making it something like Thanksgiving or Christmas in the United States, but on a much larger scale and over a significantly longer period of time. In 2021, the Chinese New Year falls on Friday, February 12 and unofficially ends with the Lantern Festival on Friday, February 26.
The Impact of the Chinese New Year on eCommerce
Though the Chinese New Year is technically a one-week holiday (the second week running through the Lantern Festival is unofficial, but widely recognized), most factories and logistics providers begin to slow down in the weeks leading up to it and only slowly recover to full capacity in the weeks following it – with only the most important orders and customers tending to be prioritized. Though the Chinese New Year always presents problems for dropshippers, 2020 was especially painful as the Chinese government extended the holiday as part of an early COVID-19-related lockdown. Heading into CNY 2021, this is somewhat less of a concern as COVID-19 appears to be largely under control in China; however, given the sheer amount of travel (which always taxes China’s transportation infrastructure even in the absence of safety precautions related to COVID-19), the possibility of regional lockdowns and/or extended delays should not be ignored.
A Few Suggestions
Heading into CNY 2021, dropshippers would be wise to consider the following:
- Dropshipping goods originating from China beyond January 15, 2021 is generally risky unless the factories have a proven track record of turning orders around in less than a few days (for a particular seller – not just in general). As the holiday approaches, the risk increases by the day.
- Dropshipping goods originating from China can generally be safely resumed within three weeks of the holiday; however, there is quite a bit of variability from one factory to the next.
- Keep in mind that factories may not be fully offline for all that long; however, their capacity tends to diminish steadily as the holiday approaches and recover somewhat slowly in the weeks that follow – leaving non-core accounts in something of a precarious position.
- COVID-19 is the real wild card this coming holiday. As a whole, China appears to have a pretty good hold on the coronavirus; however, hundreds of millions of people travelling at the same time is almost certainly going to lead to spikes. Additionally, it is likely that many will travel earlier and/or later than normal to avoid congestion which is likely to extend the time frame for capacity problems.
- Many dropshippers have done severe damage to themselves during the Chinese New Year. Pushing the envelope materially increases the likelihood of refunds and chargebacks – not to mention the resulting merchant services and ad account headaches.