Being an online retailer, you must know that some Chinese sellers supply several products at a very low price with free overseas shipping. Moreover, Chinese dropshipping suppliers are frequently selling on eBay, Amazon and other channels at very affordable prices. How could it happen? Do they still make a profit?
The fact is that Chinese sellers do make a good profit in most cases. Retailers from the United States and other countries which have started dropshipping from China are also making a considerable amount of money too, but how?
There are several reasons which empower Chinese sellers to ship products at a low price:
7 Reasons for China's Cheap Shipping
1. The Cost of the Product
Chinese products are inexpensive due to mass production and low labor costs which get shipped all around the world. In the past, China has made a huge investment in building required infrastructure such as electricity generation, ports, highways, etc. to increase productivity. Moreover, they quickly modified their procedures for launching businesses within specific economic zones that further attracted huge foreign direct investment in China. They are focused on mass production which reduces their overall cost significantly and enables the products to be made even cheaper.
2. World Class Infrastructure
China has already invested a huge amount of money to improve roads, rail network, ports, etc. which allows the industry to move the raw materials and well-manufactured products easily. World class infrastructure reduces the time and cost required to transport merchandise while improving productivity. Besides, there is also the practice of delivering in bulk and consolidating to deliver many products to the same destination. The small box your customers have received shared the same flight with several others products transported to the same place.
3. Productive Labor Force
The cost of wages has continuously been increasing in China, and today it has become the 2nd largest economy in the world. Nevertheless, the productivity of the labor force in China is considerably higher than any other place due to their emphasis on skill development programs. The greater productivity and lower wage structure are the reasons why Chinese products are available at the lowest price.
4. Reverse Engineering Processes
The Chinese do not have as stringent restrictions on intellectual property laws which ultimately allow the industry to imitate any product produced elsewhere in the world. There are cases where China manufactuers study imports and deconstruct the popular products from various countries. Then, they simply mimic the design and manufacture the product in large quantities which has freed the industry from investing hugely in R&D.
5. Leveraging Their Currency
China is known for skillfully manipulating their currency value. Besides, the Chinese government has refused to sign a WTO agreement due to undesired transparency obligations. In order to maintain their products competitiveness for exportation, they intentionally keep their currency weak against the US Dollar. So, credit for the success of the Chinese industry should be given to the well-planned policies of its government.
6. Agreement between USPS & China Post
In 2011, the USPS officially announced a new shipping service and agreement with eBay China and Hongkong Post, allowing packages from China and Hong Kong to receive first-class mail service along with tracking confirmation services. This shipping method, ePacket is a quick and affordable solution, making shipping from China to the United States way cheaper. In the past few years, ePacket shipping has grown and expanded into 35 other countries.
So, these are some of the reasons which empower Chinese ecommerce stores to ship their products at cheap rates.
The U.S. Postal Service rates are continuously increasing, but Chinese sellers are still able to ship their products thousands of miles away at the lowest price. Being an e-commerce merchant, you should understand the USPS ePacket program and how it helps China ship their products at affordable prices throughout the world.
7. USPS ePacket Program - The eCommerce Dropshipping Solution
The ePacket is a widely provided shipping method offered by online retailers in China and Hong Kong. It allows them to offer a faster and cost-effective shipping option for small packages. If you’re still using AliExpress or Oberlo to dropship products to your customers, then you must consider using ePacket shipping to avail more benefits.
Shipping with ePacket has made it easier for consumers to receive their products that were shipped from China and Hong Kong. Earlier, most sellers used to prefer China EMS which was the only affordable option to ship products overseas to consumers. However, it would often take a month or longer to deliver the purchase. Other faster options were too expensive, especially for small and low-priced products. With ePacket shipping, your customers receive the products in a reasonable timeframe. It’s also known as the most reliable solution for retailers and customers. Other shipping methods might not be as consistent unless you chose more costly shipping options from China.
If you are looking for the cheapest way to send packages to the United States, ePacket is the most recommended option available. Today, it has become one of the most popular shipping methods from China and Hong Kong.
How to Reduce Shipping Cost?
One of the important aspects of running a dropshipping business is choosing the best shipping strategy. Keeping shipping charges down is essential for both your eCommerce business and customers.
The total amount customers are required to pay for shipping can be the primary reason why they do or do not make a purchase at your store. In order to optimize shipping rates, you need to look at what your competitors are providing. Remember, potential savings on shipping can influence even the most loyal customers, so try to provide something better or comparable.
Here are some of the most popular shipping cost optimization strategies:
Most online retailers offer free shipping because so many customers expect it nowadays. Well, you can provide “free” shipping to your customers without actually making it free. It is basically a psychological strategy to make website visitors feel like they are getting a great deal. Today, most dropshippers include the shipping price into their MSPRs, so customers are paying for it in the end. By including the shipping charges in the price of the product and provide “free shipping” this encourages visitors to buy from you while still maintaining profit margins.
Flat Rate Shipping Fees
By charging a flat rate fee, you can optimize your shipping strategy in the best way possible. It makes it easy to manage shipping costs with a flat price since customers are paying the same amount for shipping. The most practical way to determine the flat rate fee is to calculate the average shipping costs of all the products you sell. If you offer a wide range of items with varying weights and sizes, provide multiple flat rates by distributing your products to different groups and assigning each group an appropriate price.
With a flat rate shipping strategy, you may lose profit on some orders and make a significant profit on others depending on what products were purchased. The goal of this approach is to make money in the long run.
Actual Shipping Cost
Specifying exact shipping on a website is the right way to assure you never lose money on shipping charges. In order to use this shipping strategy, you will need to use an eCommerce platform which calculates shipping charges for each product. This method isn't profitable for drop shipping and becomes quite challenging when customers buy multiple products from different suppliers. Moreover, it can quickly become costly to your potential customer, leading to more abandoned carts. If you want to use this shipping strategy, make sure to observe your abandoned cart rate which will further help you analyze how customers are responding to your shipping costs.
Promotional or Tiered Shipping
This drop shipping strategy is the combination of all three methods mentioned above. It’s an effective approach to keep customers happy and optimize shipping costs while limiting a loss in profits. Using promotional approaches like “free shipping on orders above $100”, or “free shipping on all cameras for the month of March”, allows you to provide attractive deals for customers. However, you need solid data and analytics to find out what strategy works the best for your business.
Reducing shipping costs is undoubtedly a challenge for most online retailers, especially those who deal with dropshipping. Always use a shipping strategy which keeps your customers’ satisfaction at the forefront without affecting your profit margins. Be consistent and calculated with your every approach and you will have satisfied customers and successful dropshipping business.
So, now it is no longer a secret how can Chinese merchants can ship products at such low prices. With ePacket shipping, mass production, world-class infrastructure, and a productive labor force, Chinese ecommerce stores are able to ship products at lower rates than the rest of the world. This reality is empowering many retailers to dropship from China and make big profits without stocking and shipping the products themselves.