Steering Clear Of Challenging Times

TFG’s Ross McKenzie spoke to Vlad Vassiliev, CEO at eCommerce company Vape Club about some of the biggest challenges around the current coronavirus outbreak.

As an e-commerce business, constant focus and planning for the future is essential. In the wake of the recent COVID-19 global pandemic, communication within all facets of the company and fine-tuning logistics sets the precedent of what to expect. TFG spoke to Vape Club’s Vlad Vassiliev about some of the supply chain disruptions and strategies eCommerce companies are undergoing to navigate unchartered waters.

Ross McKenzie: What is the current situation of your supply chain, and how complex is it?

Vlad Vassiliev: As a vape supplier and distribution company in the form of Vape Club, this is no different. In truth, our supply chain is fairly complex with over 100 worldwide suppliers stretching all corners of the globe; approximately 70% of our stock is sourced from the UK, 10% from the US, 10% from China and 10% from mainland Europe. When ordering from a UK or EU supplier, it usually takes 2-3 working days to arrive, whilst the US takes a week and China around 1-2 weeks.

Supply chain disruptions lie ahead

RM: Has COVID-19 impacted your business – how so?

VV: This of course has been heavily impacted during the height of Coronavirus, specifically with hardware products which predominantly derive from China. Coupled with the fortnight closure of manufacturers due to the Chinese New Year in late January/early February, many orders were delayed without a designated reschedule date. Many importers and factories accommodate for the usual annual short term disruption to the supply chain, through stocking up in January with a view to having enough products to fulfil demand during the holiday period.

We normally expect delays to shipments in February each year as China comes back online, therefore we had more than enough stock to last. By the beginning of March, around 50% of our supplies from China were able to be fulfilled on time. As of mid March, over 70% of our supply chain from China were back to normality and in full operation. The backlog of purchases proved to affect us mildly in terms of demand and workload, yet products were able to move out of the country relatively quickly after workers returned. Due to our planning, resources and experience, we were able to progress through this minor hiccup relatively unscathed.

Of course this was only the tip of the iceberg, as by this point mainland Europe and the UK were mostly unaffected by this new strain of respiratory virus. Whilst we expected it to cause inconvenience in Britain over the ensuing weeks maybe months, admittedly like the rest of the nation, the magnitude of the outbreak and its repercussions on all sectors of the economy were underestimated.

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RM: What was the impact to your business once COVID-19 hit the UK, and what measures did you take?

VV: Over the course of the week commencing 16th March, when the virus started to vastly increase its spread in the UK, we saw an increase of 42% in orders which translated to a 61% surge in sales. We also saw an increase of 50% in new customers, possibly attributed to people being conscious of life choices which impact their health. Admittedly though, we realised this boost in purchasing was mostly down to customers bulk buying and adhering to social distancing protocol, evidenced by the average basket value rising by over 20%. Ultimately, we came prepared for this rapid spike in demand, whilst taking all of the crucial hygiene and sanitation guidelines outlined by the NHS.

We envisaged that sooner or later staff would need to self isolate, therefore we instigated a warehouse training program for office employees who we then sent to work from home. This allowed us to have the reinforcement available for the warehouse side of the business, which of course is the foundation of the company, meaning once people have to isolate we had all of the necessary measures in place to keep up with processing and sending out orders.

RM: What do you think are the wider impacts of Coronavirus on eCommerce?

VV: As Britain embraces to weather the storm ahead caused by Coronavirus, the market has seen a drastic shift in consumer behaviour to online transactions. It’s estimated in 2019, 18.7% of all retail sales in the UK were from e-commerce transactions, yet this has since seen a global increase of 52% compared to the same time frame last year

Whilst this acceleration in growth has benefitted many online companies financially, there are major concerns that supply chains will be affected by the global movement restrictions. This will likely add 20-100% additional time for parcels to move locally and internationally. As well as this, some raw materials may not be available temporarily, so a small portion of the supply chain may experience short term supply issues. Infrastructurally, many businesses who operate as distributors simply won’t be able to keep up with the rise in workload, particularly as more staff are likely to be affected by the virus.

Whilst China’s industry and manufacturing seem to have returned to relative normality, it is anticipated there could be more supply chain issues closer to home in the UK and Europe. The US is also likely to be severely affected by lockdowns, in efforts to control the spread of the virus. Of course this will no doubt affect all industries, including the vape industry, yet with hard work and following some key steps businesses can cope with this unpredictable period.

Navigating unchartered waters

RM: As a supply chain expert, what advice would you give to other eCommerce businesses navigating these unchartered waters?

VV: Our advice for any business is this; ensure you are monitoring sales closely to spot any trends and adjust quickly. This relates to close and regular communication with the supply chain, which is key to be able to make decisions ensuring continuity and flow of the industry. Whilst this upward surge of buying habits is likely to dip soon, it would be foolish to assume that these patterns of panic buying won’t be repeated. Different businesses may see aggressive peaks and troughs, which could see a make or break climate initiated.

It’s also worth researching all local incentives and help being offered by local and national governments and initiatives. It could also be beneficial negotiating short term credit agreements with suppliers, helping to keep more stock on hand to fulfil short term spikes in sales or interruptions in the supply chain.

In house, it’s imperative to ensure contingency plans are in place just in case the main workforce have to self isolate. Communication with customers and keeping them informed of the status of service is also critical, whilst also letting your staff know that you have their backs in this crisis. We are all in this together and although it may be a tough fight to stay afloat, clarity and honesty goes a long way.