September 1, 2021
The growth of the eCommerce market goes hand in hand with the growth of the dropshipping segment and it is expected to occupy an increasingly large share of the overall online retail space. Ecommerce growth had peaked in its CAGR (Compound Annual Growth Rate) in 2020 due to the impact of the pandemic, when it grew 25.7% year over year. However, this growth is expected to slow down in the coming years and reach an average of only 11.9%. While the dropshipping segment was valued at around $ 111.28 billion in 2018 and an annual growth rate of 29% is expected between 2020 and 2025. This suggests that the dropshipping model is becoming increasingly attractive to ecommerce sellers around the world.
One of the most important aspects of dropshipping is finding the best possible supplier for your business, no matter what niche you are targeting with your products. This is because you aren’t the one managing your inventory and the fulfillment process, so you have little control over how your customers get their ordered products. If you work with a supplier who is not delivering the best quality products, or if they make a mistake during the fulfillment process, it can damage your company’s reputation. For this reason, it is very important to evaluate all suppliers that you might work with on their advantages and disadvantages. While Chinese dropshipping providers may offer you the best deals on the products you are looking for, there are many downsides to dropshipping from China. To give you a better understanding of overseas dropshipping providers, we’ve listed all the things to look out for when considering a Chinese dropshipping provider.
Insecure transportation schedules
Although shipping companies in China are quite advanced, you will likely have to opt for land transportation to enjoy the price advantage of products made in China. At the same time, this means that it takes a long time for your products to reach the end customer. It is not uncommon for a customer to have to wait up to 4-6 weeks for an order to arrive, which is a major disadvantage compared to a supplier based in the USA or the EU, where the delivery time is a maximum of 7. would be days. Of course, you can air freight your products to the end customer, but the cost of airmail is significantly higher, which also has a significant impact on your product margin. In addition, when feeding from such a great distance, you also need to consider other external factors in shipping time, such as natural disasters, protests and lengthy customs controls. Because of this uncertainty, we particularly recommend dropshippers who are new to the business to look for a supplier with a warehouse in the USA or the EU.
The “Made in China” stereotype
Even if some companies refuse to admit it, the stigma “Made in China” is still in the minds of consumers around the world. For a long time this label was associated with poor working conditions in factories and poor product quality. Although China has come a long way to improve both product quality and working conditions, it will continue to do so for at least a few more decades. Because of this, your company is likely to be more reputable if your base products were made in a western country.
Language barriers and communication difficulties
Although English is taught in Chinese schools, there are very few Chinese who can actually speak conversational English. According to a study, only or less than one in 100 people in China can speak English fluently. With that in mind, the language barrier and communication difficulties can be one of the main drawbacks of dropshipping from China. If you are unsure about whether you have adequate customer service in English or not speaking Mandarin with your chosen Chinese supplier, then there are likely to be frequent misunderstandings that will severely affect the working relationship and your customers’ experience of your business. While you still have the option of using an interpreter when communicating with your supplier, it will surely detract from the timeliness of the information flow and also cost you a significant amount to build into your profit margin.
Potential copyright and intellectual property issues
As the counterfeit market in China becomes more sophisticated, especially when it comes to luxury goods, accidentally encountering these items can be a real risk for your business. When dropshipping branded products through your store, you need to be very careful to always ensure that you are selling 100% authentic products. Not only because a counterfeit or counterfeit product can compromise the trust and reputation of your shop, but also because of copyright laws. If your company is caught selling counterfeit products, you could face severe penalties for copyright and trademark infringement, the amount of which depends on the country in which you operate.
Large minimum order quantities
While the biggest benefit of dropshipping should be that neither you nor your end customers have to buy more products than they actually need, this is not always the case with Chinese suppliers. One of the possible downsides to dropshipping from China is that you can run into minimum order quantities for cheaper products. The reason for this is that these suppliers can only reduce their production costs and offer competitive prices if they produce and sell in bulk. This can be problematic if you are selling individual products that your customers only want a one-off. When researching Chinese suppliers, always make sure to ask about their minimum order quantities so you can make a more informed decision. If you are just getting into the world of dropshipping and your small business cannot afford to sell bundles or bulk packs of a particular product, it is recommended that you look for a local, more flexible supplier.
Product quality problems
When it comes to dropshipping, the quality of your products is probably one of the most important factors in maintaining your store’s prestige and trustworthiness. When you dropshipping products, you have little or no control over the quality of the goods sent to your end customers. So it is very important that you can trust your supplier and the quality they offer. If you are sourcing products from China, they may be cheaper than the alternatives you can find locally, but unfortunately, a lower price often comes with a lower quality. Because of this, you may be better off paying a premium for a supplier who sells locally made goods that meet Western quality standards and regulations.
Returns are too complicated
Due to the long initial delivery time, returns and replacements can be one of the main drawbacks of dropshipping from China. If your customers have to wait several weeks for their items to arrive and decide to return one of them, they probably won’t be waiting for a replacement. If the defective or faulty product needs to be returned to China, it will take another 4-6 weeks and another 4-6 weeks for the replacement to reach your customers. Unfortunately, in the competitive economy we live in today, this is not an acceptable time frame for most consumers. Instead, they will request a refund from you immediately.
It is clear that if you want to keep your customers happy with your business and service, you need to handle returns and refunds professionally. So if the claim is valid, you will most likely need to reimburse your customers for the purchase price immediately, without first having received a refund from your supplier. You can still ask your customers to return the item to you and try to return it to China later for a refund from your supplier. However, if you are selling items with low ticket sales, in most cases the shipping cost will be higher or equal to the wholesale price of the product. In this case, getting a refund from your supplier is not worth your time and effort, but this way you will have to pay the refund out of pocket, which can negatively affect your profit margin.
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Since the barriers to entry into the dropshipping world are relatively low, there are numerous online retailers who are opting for this business model, which leads to high competition. Also, many of the dropshipping stores choose Chinese suppliers in the hopes of making big profits on cheaper products. However, this results in many of them ending up offering the same product, possibly from the same supplier. As a result, it will be difficult for them to stand out from the crowd and adopt their unique selling points. This then inevitably leads to a price war between the dealers and they end up having to reduce their profit margins or offer discounted prices in order to survive in the competition. Therefore, you are probably better off looking locally for smaller, unique suppliers who can offer you unique products that stand out from the crowd and give you a competitive advantage.
Manufacturers don’t really need your business
Chinese manufacturers are gaining more and more influence and, as the next strategic step, will be present on marketplaces such as Amazon and eBay. According to statistics, over 40% of the top-selling retailers on Amazon are already these Chinese manufacturers and not dropshippers like you, and that percentage is expected to rise once they figure out how to optimize their logistics and deliver goods to the West faster. They are already exploring ways to sell products from local warehouses to American and European customers. After that, they don’t need dropshippers as middlemen and in the future they will either compete directly with you or stop acting as a supplier and force dropshippers to look for other suppliers as alternatives.
With this in mind, it is important to consider carefully whether or not you plan to use a Chinese dropshipping provider when doing business. The needs of every ecommerce store are different so it is better that you weigh what is important to you and how you want to stand out from your competitors before making a decision. Once you have decided to work with a supplier, whether or not they are based in China, you need to keep a close eye on their operations and the quality of their products that you are supplying to your end customers. On the basis of regular supplier evaluations, you can adapt the list of your suppliers to your advantage.