Let’s say you plan to sell consumer electronics online as a dropshipper. There’s an above-average chance that your supplier (the company who produces the products) is in China. The same can be said for fitness equipment, kitchenware, garden furniture, and the list goes on and on… So, if your suppliers are already there, let’s explore how to dropship from China.
What is dropshipping?
Dropshipping is a delivery approach in which the vendor sends the products individually to each end customer (typically, directly to their home or office). An example of this would be where dropshippers have an online store and, as soon as an order is placed, the item is shipped to the customer directly from where it was made.
It may be that the customer will pay for shipping from China to their location and delivery times may be around 2 weeks given that the item is coming from China, not their own country.
The dropshipper may either store the goods they sell in a local Chinese warehouse and fulfil them from there or it’s also possible that their suppliers may take care of all of this for them.
How dropshipping usually works
There are 2 models that we typically encounter:
The small-scale dropshipper
On a small scale, it’s possible for vendors to place orders piece by piece with certain wholesalers who specialize in serving dropshippers (they are effectively a middleman).
If you sell consumer electronics, you’ll work with a wholesaler of Chinese electronics and cherry-pick the items you want to sell on your site. As and when orders come in, you order from them for dispatch to your customer from your supplier.
As is usually the way when dealing with a middleman who has their own relationship with manufacturers, you’ll pay an inflated price which covers their margin, storage costs, etc, above and beyond that which you’d pay if you went directly to the factory.
This model is still workable due to the low cost of many goods from China, and there are some benefits if you find the right wholesaler, for instance for beginners, as they will have more contacts with factories in China, have numerous products on offer, and may take care of the warehousing and fulfilment for you.
However, in the long-term, due to the costs, it’s usually not as sustainable a business model for dropshippers who aspire to build as profitable business as possible as building your own relationship with manufacturers directly.
Here’s an illustration of how this dropshipping business model works:
The larger-scale dropshipper
This is a more hands-on approach and is really the opposite of how to dropship from China than the prior example of using a wholesaler.
An example of this would be that you have developed a new product and are working directly with a Chinese manufacturer who produces it for you. You’ll be marketing and pre-selling the products to your consumers before the first batch is complete. It may be that you need to advance money to get to this point via investment or presales as most manufacturers will give you an MOQ (Minimum Order Quantity).
A good example of this kind of dropshipper is someone who invents a new product and presells it on indiegogo or kickstarter.
As soon as your manufacturer finishes production on your first batch, you’ve inspected the products’ quality, and everything is passed and ready to ship, the products are ready to be drop-shipped out from China to the waiting consumers who had pre-ordered.
(Note: We usually work with this kind of dropshipper 👌 )
The question is, how do you get your new product from China to your customers?
Different fulfilment methods for dropshippers from China
If you’re lucky, your Chinese manufacturer may be able to handle fulfilment in-house from their own facility.
Another option is to use a local Chinese fulfilment center who will be able to receive your products from your suppliers when they’re ready, store them, kit and assemble them (if needed), package them, and fulfil them globally to your customers as and when required.
Next, it’s wise to visit them and dictate your requirements, such as:
- Shipping method & cost
- Packaging type to be used
- Any special details per order – for instance, certain orders may qualify for a free gift which would be added to the package before shipping
- Their ability to connect their system to your e-commerce software, for instance, Shopify, so they can fulfil orders as they arrive and you can seamlessly order more stock if levels of inventory reach a certain point
- How they should handle returns
As orders come in, they ship the packages one by one from China. It often takes about 2 weeks for orders to reach the customer, but the cost can be pretty reasonable for small and light packages of around 1-2kgs.
How about shipping to fulfilment centers in the West?
These kinds of fulfilment centers exist in the West, for instance in the USA, but why pay extra to use them when your products are being made in China anyway? Also, many dropshippers enjoy the flexibility to sell globally; for example, an American dropshipper may have customers in the UK, Germany, Australia, Canada, etc. In this case, shipping to an American fulfilment center from China, only for them to ship to other countries adds unnecessary costs and time to your deliveries over handling this at source in China.
👉 Related: I wrote more about this in this blog post over on QualityInspection.org: Why Amazon FBA Prep Services Should Be Done in China (not the USA)
How about large companies that place very large orders?
They probably won’t dropship from China directly. They are more likely to sell through a retail network or fulfil direct orders domestically.
They handle fulfilment in the following ways:
- They send entire batches of products from China to a local distribution center, say in Canada, and then dispatch domestically to customers or retailers from there.
- They have several regional distribution centers, for example, one in Nevada, one in New Jersey, and one in western Canada, and then dispatch to the areas they cover. The international freight is a bit more expensive, but the domestic freight is cheaper and much faster once the goods are in the country.
How can dropshippers compete?
If you’re trying to sell generic products online and dropship them in competition with vendors who have local stock, local customers will choose to buy local and not pay the extra shipping and wait 2-3 weeks for your products.
However, as is the case with many hardware startups creating unique products and building buzz with canny marketing online on platforms like Kickstarter, customers are prepared to wait for delivery and pay a little extra as they’re excited by your new product.
Look at Oculus Rift, arguably the greatest success story in Kickstarter’s history. This gained around $2.5m in backing from over nine and half thousand backers and was subsequently purchased for $ 2 billion by Facebook. This shows that unique products can be very desirable to consumers, even if they know they need to wait for delivery.
Tips for would-be dropshippers
If you’re interested in fulfilling your orders via dropshipping from China here are some tips:
- It’s critical that your fulfilment center in China has a direct and immediate pipeline into your online sales system so they can dispatch orders as quickly as possible and follow your shipping guidelines (especially important for FBA sellers who must abide by Amazon’s strict regulations about packaging, etc). This means that they need to be familiar with your store, whether that be your own site using Shopify, eBay, Amazon, etc.
- Use your platform to create demand for your products, even if the consumer has to pay extra for shipping and wait for a couple of weeks, by providing ‘extras’ for them.
Anyone familiar with crowdsourcing sites will have seen that backers gain improved packages based on how much they spend – this may be an enhanced version of the product, personalized engraving, extra merchandise, fancy packaging, etc.
Any dropshippers can do this, too, even if it’s on your own site. After all, if the customer feels that they’re getting something unusual, they’re more likely to accept the shipping fee and delivery time.
- If you source from a number of manufacturers managing your inventory and orders can be hard. A local fulfilment center can act as a hub which receives products/components from different suppliers, combine them, and ship them as a single order rather than needing to ship multiple packages, for example.
Dropshipping Pros & Cons
When exploring how to dropship from China we need to be aware of the pros & cons of this fulfilment method, so here’s a quick summary:
- Beginners can make some money by dropshipping via a Chinese wholesaler.
- No need to have a warehouse and its associated costs and time to manage
- Someone else packs and ships your orders
- Someone else handles your inventory and can even track its levels etc for reordering
- You don’t need to handle returns in case of an issue
- You can ship importing products to your country, store them there, and then fulfill them domestically
- Your products can be stored in China, which is probably quite a lot cheaper than in your own country
- Products can be manufactured, inspected, packaged, and shipped from one location
- Shipping small packages from China isn’t actually expensive
- A specialist China fulfilment center is affordable, knowledgeable about many e-commerce and online sales platforms, and can source packaging, conduct QC product inspections, etc for you
- Customers may not like paying extra shipping and other costs over vendors with local stock
- Packages often take 2 weeks to reach Western customers from China
- If unable to travel to China, it may be difficult for you to manage the fulfilment if working with your manufacturer. The language barrier may lead to shipping mistakes etc
- Companies who import large numbers of products and fulfil locally may be more desirable as they provide ‘local stock’
- You have to put a lot of faith and trust in Chinese partners
What’s your take?
Do you have any questions about how to dropship from China? Perhaps you’re already dropshipping and have some thoughts and experiences to share. All are welcome, so leave a comment to let us know, please!
Get up-to-speed with the types of packaging you should use when dropshipping
If you’re a dropshipper, you should take a keen interest in the types of packaging used for holding and shipping your orders.
So, to make your decisions smoother, we’ve created a guide to the many different types of packaging you can choose from, including:
- 9 key packaging materials
- Retail Packaging
- Sustainable options
- and more…
Read it right here (no downloads required 😉 ):