This is something I wondered about all week and even talked about in a few videos. However, while there was also speculation among others, nobody was able to formulate how things were being affected by the coronavirus.
Today, I came across the first article detailing that things are truly being affected.
Third party sellers on Amazon are finding that their inventory is getting low and there is the possibility that restocking could be difficult. This could affect the rankings with Amazon's algorithms, meaning one could face a significant drop in business long term.
Earlier this week, Amazon sent notice to resellers on how to protect their business.
Amazon has been advising sellers on how to manage the impact of the coronavirus on their businesses. Earlier this month, the company sent a notice to sellers advising them to cancel previously placed orders that they’re no longer able to fulfill. The company also suggested they put their businesses in “vacation status” to protect their listings from being demoted in search results by its ranking algorithms. Sellers said Amazon will push listings down further in search results if it detects they are running low on inventory or are out of stock.
China is obviously an epicenter for manufacturing. Products that end up consumed all over the world are made there. Overseas companies often place large orders just before the Chinese New Year. The items are manufactured after the holiday ends. In other words, it is a time of large production.
Not this year.
The virus has stalled the return to factories. Those that are open are producing very little with many closed altogether.
How long can the world operate under these conditions? We now live in a world where most major companies operate on a "just in time" inventory basis. This means they only keep enough inventory in stock for a short window, perhaps 4-6 weeks.
With the interruption, those who are in this situation will face shortages in the next couple weeks. The effects of this could ripple through the global economy quickly. What would have to follow are layoffs.
In other words, this is have a global recession could happen in a short period of time. We could already be seeing a change in sentiment which causes consumers to slow down their spending and hang onto their money longer.
At this point, it is evident that supply chains are about to be interrupted on a large scale. How far this travels is something to keep an eye on.
Image from article linked
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