Marketing

Dropshipping from China: Risks and Benefits

Is Dropshipping from China really worth it? Learn the pros and cons of this ecommerce business model.

Amanda Pofahl

Latin American Market Expert
March 20 2018 · 8 min read

In today's ecommerce market, dropshipping is considered as one of the most promising ecommerce business models due to its simplicity and low-level risks. With drop shipping, you can sell products to your customers without actually stocking the merchandise yourself. Some of the most popular online retailers such as Amazon, eBay, and Sears have already adopted this viable business model and become highly successful.

Today, 33% of the worldwide ecommerce industry is using drop shipping as a primary inventory management model and China has emerged as the top dropshipping supplier. By dropshipping from China, you can quickly get your ecommerce website up and running while lowering financial investment.

Now, you must be wondering if dropshipping from China is a profitable model for your business or not? If you are looking to use this popular supply chain management method for your online store, first you need to consider the risks and advantages associated with it. Let’s have a look:

The Advantage of Dropshipping from China

Drop shipping comes with several advantages which makes it possible for a startup to collaborate with global partners while following the best industry standards and business terms possible. It also provides retailers with convenience so they can manage their business from anywhere in the world.

But, what makes China a popular destination among retailers and startups?

China's advancements in the last 30 years can be described as a massive economic success. In addition, the country has also made some crucial modifications to its existing legal structure which regulates all the procedures of foreign trade. As a result, China has turned into a growing business destination which holds an extensive appeal for investors and startups all over the world.

Today, China has become the 2nd largest economy in the world after the United States. It is also known as the world’s largest exporter and biggest trading partner for a majority of Asian countries. There is no wonder why most foreign investors and growing startups are showing interest in dropshipping from China. With extensive strength due to strategic business processes and permissive legal framework; the country is recognized as a highly profitable destination for startups.

Here are some reasons why dropshipping from China is preferred by most online retailers today:

A Comparatively Low Price

Historically, China has invested extensively in large-scale machinery, premises, and manufacturing technologies. With a well-established logistics structure, mass production, and low labor cost; Chinese manufacturers are able to offer a competitive discounted price on their production. Therefore, if you are looking for affordable options for filling in your store, Chinese drop shipping companies are an ideal solution.

Improved Quality Standards

As we mentioned above, China has dramatically evolved in terms of business capabilities and technological sophistication. With these advancements in the manufacturing system, dropshipping suppliers focus on quality while meeting the quantity demands of the market. Products manufactured in China can compete in the market in terms of global quality standards.  

Lower Financial Investment

If you are choosing to dropship from China for your upcoming eCommerce business model, you don't need to invest in warehouse space, a warehouse management system, inventory (stock), racking, forklifts, barcode scanners, insurance policies and other required equipment & resources. Since dropshipping suppliers are expert in production, packing and shipping methods, you don’t need to dedicate constant attention to these important aspects.

Unlimited Product Portfolio

Within the China wholesale market, you have instant access to a wide range of products supplied by a large number of wholesalers, manufacturers, and other retailers that are all set up to work with dropshipping. From manufacturing to packing and shipping, local suppliers take care of all the things so you can concentrate on other essential tasks such as marketing and improving customer relations.

Favorable Location

Bordered by 14 countries, China is known for its strategic location near the most commercially-active Asian and European markets. Besides, China has a great logistics networks of land, marine, and air transportation which makes it easy to provide immediate shipping to any location in the world.

With dropshipping, you can easily start an online venture from home. All you need to do is choose the right drop shipping company from China.

Best Drop Shipping Companies

You will find a large number of dropshipping suppliers in China, but it is your challenge to choose a trusted one. Here, we are providing a list of some of the most reliable drop shipping companies from China who are known for delivering the best wholesale products:

  • AliExpress.com

Owned by Alibaba, AliExpress is one of the most popular drop shipping companies from China which was launched in 2010. AliExpress is primarily dealing with international buyers from the United States, Brazil, Russia, and Spain while using affiliate marketing to approach new consumers. Furthermore, Alibaba is using AliExpress to challenge successful giants like eBay and Amazon and to expand its reach outside of Asia. In order to work with AliExpress, you don’t need to pay entry charges or formally build a business entity. You can start your online venture for free, and at anytime. Similar companies are specially designed for bulk purchases only. Therefore, AliExpress dropshipping is an excellent solution for an individual who is new to the market.

  • Taobao.com

Taobao is another widely-preferred marketplace in China where you can find a wide range of wholesale products at very affordable prices. From carefully inspecting each product to timely resolving issues with the supplier, the company is known for providing 100% customer satisfaction. If your customer buys multiple products which need to be purchased from different suppliers, Taobao will combine them into a single package while removing original price tags mentioned on the products. The company also supports multiple payment options such as PayPal, Western Union, MoneyGram, Alipay, WeChat Pay and bank transfers. With multiple shipping options like ePacket, DHL, SF Express, FedEx, Aramex, EMS, and many more, Taobao lets you ship to 50+ global destinations.

  • JD.com

Headquartered in Beijing, JD.com is another Chinese eCommerce company which currently has 236.5 million active consumer accounts. JD.com is known for delivering AI and high technology through robots and drones. It also holds the largest infrastructure and drone delivery system in the world. With great transaction volume and revenue, JD.com has become one of the largest B2C online retailers in China. Recently, the company has started building drone delivery airports and testing robot delivery services as well.

  • CjDropshipping.com

With a 20,000 square meter warehouse and 200 cooperated factories, CjDropshipping is another reliable dropshipping company. Some of the most popular online giants like Amazon, eBay, Shopify, WordPress, and Etsy rely on CjDropshipping for product sourcing, order processing, inspection, and shipping. The company also includes your fliers or custom cards in each package without putting any receipts or invoices. Additionally, CjDropshipping claims to offer the fastest delivery to the United States in as little as 4 days using ePacket.

So, these are some of the most trusted drop shipping companies from China that can help you get your online store up and running. As with every contract, before you choose a company, it is highly recommended to read their policies, and terms & conditions.

Risks Associated with Drop Shipping from China

Nevertheless, Dropshipping from China comes with several advantages which makes it possible to sell products that you don't physically have in stock. There’s nothing wrong with this business model, but it does have some common pitfalls compared to shipping your products domestically. Here are some of the most common risks associated with it:

Product Quality

It has been experienced that dropshipping electronic products from China involves higher risks in terms of quality when compared to sourcing other types of products, such as textiles. So, you need to consider what kind of products you plan to dropship from China before launching your online venture. It is recommended to do some research about the wholesaler to ensure that your customers will not get poor quality products.

Long Delivery Times and Delays

Another problem with Dropshipping from China is the time it takes before the buyers actually receive your products at their doorsteps. Sometimes, backorders also become a substantial problem since you are relying on a dropshipping company, the circumstance may arise where you place a shipment request but the product is sold out. Around the Lunar New Year and other Chinese festivals, the delivery time may extend up to a month. This may affect the delivery time and your reputation in the market.

Negative Impression

The most obvious risk associated with shipping products from China is the chance that potential customers may have or develop a negative opinion of your business due to their previous poor experiences with Chinese products. However, most people nowadays are disproving many misconceptions on products made in China. Besides, China is consistently proving that their products match worldwide quality and standards.

High Competition & Low Margins

Another disadvantage associated with drop shipping from China is the low margins and high competition. Since dropshipping involves little barriers, several online retailers have started doing it, leading to high competition. With Dropshipping, you can't expect high margins on products sold due to a commission charged by the dropshipping suppliers. This makes it difficult for entrepreneurs to set them apart from the crowd and make a decent profit.

As we mentioned above, drop shipping from China may take longer to ship to the consumers which may lead to more pressure on your customer support. Besides, you have to pay the bill for returned products since all the defective items will come to you, not to the drop suppliers.

Conclusion

Being a crowded industry, drop-shipping is an efficient way to boost brand reputation but you can't expect to make a lot of money out of it. The biggest advantage of dropshipping is that you don't need to hold and manage inventory as the dropshipping supplier will do that on your behalf. So, you can concentrate on sales, marketing, and other essential tasks.

With dropshipping is an ideal option for those who are less concerned about margins and prefer to keep startup costs as minimal as possible. Like most things in life, the advantages come with risks—it’s just a matter of identifying if the advantages outweigh the risks or vice versa.

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