Thursday 5 March 2020

E-tailers to rejig supply chains on shortage fears

E-tailers to rejig supply chains on shortage fearsBENGALURU: Amazon and Walmartowned Flipkart are scrambling to minimise the effect of Covid-19 on the supply chains for two of their largest categories — smartphones and large appliances. These account for about half of their sales, four people aware of the matter said. The virus would start affecting availability of consumer goods on these platforms by mid-April, and might even lead to an increase in prices, the sources added.

Both Flipkart and Amazon, through their private labels like MarQ, AmazonBasics and Solimo, sell large appliances. The e-tailers rely heavily on China for manufacturing. Now smartphone launches slated later in the summer are predicted to be delayed.

Another cause of concern is the fact that many of the established large appliance brands are from South Korea, which is one of the worst affected countries outside China. These companies are now trying to tap new markets to plug the supply delay from China, while asking sellers to supply goods for their own private labels instead of selling them as a third-party brand. “We are tapping into California, and gradually within India to source goods. For mobile accessories, the price difference is about 25% higher compared to China,” a seller who sources goods from China said. He supplies to both Amazon and Flipkart, and added that the platforms are now asking him to sell most of his inventory as they look to increase reserves. Bigbasket CEO Hari Menon said he has started sourcing home and kitchen goods from within India at a higher cost.

“For Amazon, the problem is not just about India as almost 50% of their sellers are from China. At some point in time, Walmart will also feel it (the problem). As of now, companies are not in a position to pass on the increased cost to consumers because they are thinking many times before spending online,” said Satish Meena, senior forecast analyst at research firm Forrester.

Amazon said it is taking appropriate steps as needed, while Flipkart said it is in touch with its seller partners. “But we have not yet started seeing any major impact at this moment,” a Flipkart spokesperson added.

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