Businesses Rethink Supplier Relationships as Global Disruptions Continue

eCommerce firms clearly are looking to expand their businesses across borders in a turbulent world. Geopolitical tensions, including the ongoing war in Ukraine, create supply chain disruptions. Ongoing supply chain constraints because of demand exceeding supply are stubbornly persistent even as business hedges its bets over concerns of pullbacks or even recession. A strong dollar influences trade economics.

One of the many lessons from the pandemic is that supplier diversity and resilience is essential in the face of black swan events, according to David Messenger, executive chairman of Hangzhou, China-based LianLian Global.

He shared his perspective with PYMNTS’ Karen Webster in a Fireside Chat during the recent Freightwaves Supply Chain meets Fintech Virtual Conference.

“No one can afford to have all their eggs in one basket. Up until recently, China has been the manufacturing hub for the world, and we solely relied on that as the supply chain,” Messenger said. “With the risk of ongoing shutdowns in China and disruptions there, you must broaden the base. I think it’s about becoming more diversified, more multipolar and looking at redundancy in your supply chains.”

LianLian has helped over 1.4 million eCommerce customers grow their cross-border businesses through its global platform, which provides payments and other services, including marketing and compliance services.

End of an Era?

Messenger said, “We’ve had a golden age of globalization where that seemed to be the driving factor, and that age is over.”

He foresees a new era of rebalancing. Companies need to take control of their own destiny based on an understanding of the ramifications.

Up until recently, China has been deemed manufacturing hub for the world, and companies solely relied on that. As the supply chain faces problems, particularly with the risk of ongoing shutdowns in China and disruptions there, companies must broaden the base. It’s about becoming more diversified and more multipolar — and building in redundancy.

However, Messenger doesn’t see a broad decoupling from China in the future, outside of certain strategic industries. It took 20 to 30 years for China to become the world’s factory; similar transformations can’t happen in other regions and countries overnight, according to Messenger.

Where in the World?

According to Messenger, supplier diversification opportunities exist throughout Asia.

“I think there’s going to be some rebalancing and certainly we see that already. Vietnam and other Southeast Asian countries are starting to develop those capabilities.”

FX Complications

Sourcing in a variety of countries brings FX complications into play. Cross-border sellers need a multicurrency wallet that allows receipt and management of any currency. As you diversify, you really need that sort of flexible financial platform to support the business, according to Messenger.

Go-to-market Diversification

Messenger said the theme of diversification extends to the go-to-market side of eCommerce.

“A lot of sellers have recognized it’s not enough just to rely on Amazon or any one platform. You need to explore all your options. One of the big shifts is companies wanting to build their own brand, go direct to consumer using Shopify, or one of those platforms, rather than just the big traditional marketplaces,” he said.

Happy Holiday?

Macro uncertainty may make for a muted holiday season in the West, according to Messenger.

“People are anxious, they are uncertain, and they are going to be muted in what decisions they make. And there are so many factors at play here at the macroeconomic level, down to the more local level. I think it’s going to be more of a wait and see, quiet holiday season.”

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