Momentum Interrupted
Just when the industry was breathing a sigh of relief that the tariff stalemate seemed to have quieted down, the coronavirus (now named COVID-19) has turned everything on its head. During a 2020 forecasting session for the LED global market that I attended last month, the speaker admitted that the data he had meticulously prepared might now be invalid as the coronavirus’ impact on LED production was unforeseen and continues, at press time, to be unpredictable.
Coming at the worst possible time – right on the heels of Chinese New Year, when factory production is halted for one month – the coronavirus will have snowball effect on the bottom line of businesses for the rest of the year. Manufacturers might not be able to produce or ship the introductions they launched at the January trade shows and retailers will not see the lamps and fixtures they purchased at these shows most likely until the end of summer. Organizers of the Mobile World Congress in Barcelona, Spain – one of the most important shows for the mobile phone industry – cancelled the show amid travel and medical concerns, and in our industry, the Hong Kong International Lighting Fair postponed its April show to July for the same reasons.
Showrooms who rely on just-in-time inventory practices will also face losing business as impatient consumers take their orders elsewhere to companies who can supply them with what they need right away. In a move that has been counter to what has been happening in the industry, the retailer with the most inventory will very likely come out on top this year.
Apple Inc., Royal Caribbean Cruises Ltd., Hasbro Inc., Hilton Worldwide Holdings Inc., Nike, Under Armour, and Ralph Lauren are among the recognizable names warning investors of lower earnings.
The ripple effect for lighting remains to be seen. WAC Lighting assured customers in February that it was open for business, stating, “While the outbreak has caused the quarantine of entire cities and the shutdown of public transportation, we have taken extra measures around sanitation and segregation procedures that have met sufficient requirements that as of Monday 2/10, we have been granted unrestricted permission to operate the factory.
Dirk Wald of WAC noted that none of the employees had contracted the virus, and that the manufacturer ‘s customary preparations before Chinese New Year to increase inventory in advance had “thankfully provided a cushion to this unforeseen delay. As more people are slowly and carefully coming back to work daily, we are improving from our position [on February 10] of just over 50 percent capacity. Other factories in the country and many sub-vendors are not as fortunate.”
The year 2020 is shaping up to be one of unpredictability. The best advice for surviving this bump in the road is to focus on promoting the inventory you have on hand and excelling in customer service to strengthen customer loyalty.
