The Cons of Choosing Chinese Suppliers for Dropshipping
The growth of the eCommerce market goes hand in hand with the growth of the dropshipping segment and it is expected to take more and more share of the whole online retail sphere. ECommerce growth had a peak of its CAGR (Compound Annual Growth Rate) in 2020 due to the effects of the pandemic when it grew 25.7% year on year. Although this growth is projected to slow down in the upcoming years and only reach 11.9% on average. Whereas the dropshipping segment was valued at about 111.28 billion USD in 2018 and expected to have a 29% CAGR between 2020 and 2025. This indicates that the dropshipping model is becoming more and more attractive to eCommerce retailers across the world.
One of the most crucial aspects of dropshipping is finding the best possible supplier for your store regardless of the niche you are targeting with your products. This is due to the fact that you are not the one managing your inventory and the fulfillment process so you have little control over how your customers receive their ordered products. If you are working with a supplier that does not ship products of the best quality or they make a mistake during the fulfillment process it can be damaging to the reputation of your business. For this reason, it is highly important to evaluate all the suppliers you could work with by both their advantages and disadvantages. Although Chinese dropshipping suppliers might offer you the best deals on the products you are looking to source there are plenty of cons of dropshipping from China. In order for you to have a clearer view of overseas dropshipping suppliers, we have listed all the aspects you have to keep an eye out for when considering a Chinese dropshipping supplier.
Uncertain transportation timelines
Although shipping companies are rather advanced in China, in order to enjoy the price advantage of products produced in China you most likely have to choose landed transport. This at the same time means that it will take quite a long time to get your products to the end customer. It is not rare that a customer has to wait up to 4-6 weeks for an order to arrive which is a major disadvantage compared to having it shipped from a supplier based in the US or the EU where shipping time would maximum be up to 7 days. You can of course choose to airship your products to the end customer but the cost of airmail is significantly higher, hence having an extensive effect on your product margin as well. In addition, when you are souring from such a long distance you have to take into consideration other external factors as well when looking at the shipping time such as natural disasters, protests, and lengthy customs inspections. Due to this uncertainty, we recommend especially for dropshippers that are new to the business to look for a supplier with a warehouse in the US or the EU.
The “Made in China” stereotype
Even if some businesses do not want to admit it, the “Made in China” stigma is still in consumers’ minds all over the world. For a long while now this tag was associated with poor working conditions in factories and low product quality. Although China has come a long way to improve both the quality of the products and the conditions of the labor force, this is still something that is here to stay for at least a couple of decades. For this reason, your business is likely to be more reputable if your source products have been manufactured in a Western country.
Language barriers and communication difficulties
Despite the English language being taught in Chinese schools, there is a very low rate of Chinese people who can actually speak conversational English. According to a study, in China, only or even less than 1 in every 100 people can speak fluent English. Considering this, the language barrier and communication difficulties can be one of the main cons of dropshipping from China. If you are not certain that you can have adequate customer service with your chosen Chinese supplier in English or you do not speak Mandarin you are likely to have misunderstandings on a regular basis that will highly affect the working relationship and your customers’ experience with your store. While you still have the opportunity to use an interpreter when communicating with your supplier, it will surely impact the timeliness of the information flow and also will cost you a copious amount that you will need to build into your profit margin.
Potential copyright and intellectual property issues
As the counterfeit market is getting more and more sophisticated in China, especially when it comes to luxury goods, it can be an actual risk for your business to accidentally run into these items. When you are dropshipping branded products through your store you have to be very cautious to always make sure that you are selling 100% authentic products. Not only because a counterfeit or fake product can put the trust and the prestige of your store into jeopardy but also due to copyright laws. If your business is caught selling counterfeit products you can face serious copyright and trademark infringement penalties the magnitude of which are dependent on the country you are operating in.
Large minimum order quantities
Although the biggest advantage of dropshipping should be that neither you nor your end customers need to buy more than the number of products they actually need, with Chinese suppliers it is not always the case. One of the possible cons of dropshipping from China is that you can come across minimum order quantities when looking at lower-priced products. The reason for this is that the only way for these suppliers to lower their production costs and offer competitive pricing is by producing and selling in bulk. This can be problematic when you are selling individual products from which your customers would only want to receive a single piece. When exploring Chinese suppliers always ensure that you are asking about their minimum order quantities to be able to make a more informed decision. If you are just starting up in the world of dropshipping and your small business can not afford to sell bundles or bulk packages of a certain product it is recommended that you look for a local, more flexible supplier.
Product quality issues
When it comes to dropshipping, the quality of your products is probably one of the most important factors to maintain the prestige and the trustworthiness of your store. When you are dropshipping products you have little or no control over the quality of goods sent to your end customers, hence it is highly important for you to be able to trust your supplier and the quality they provide. When you are sourcing products from China, they might be cheaper than the alternatives you can find locally but unfortunately many times a lower price comes with lower quality. For this reason, you might be better off by paying a premium for a supplier that is selling goods that are locally manufactured and are up to Western quality standards and regulations.
Overly complicated returns
Due to the lengthy initial delivery time, returns and replacements can be one of the major cons of dropshipping from China. When your customers need to wait several weeks for their items to arrive and if they decide to return any of them it is likely that they will not wait for a replacement. If the broken or faulty product needs to be shipped back to China that would take another 4-6 weeks and an additional 4-6 weeks for the replacement to arrive at your customers’ doorstep. Unfortunately, in the competitive economy we live in today this is just not an acceptable timeframe for most consumers. Instead, they will demand a refund from you immediately.
It is clear that if you want to keep your customers satisfied with your store and service, you need to handle returns and refunds in a professional manner. So if the return claim stands its ground you most likely have to refund your customers right away without you first receiving a refund from your supplier. You can still ask your customers to ship back the item to you and try sending it back to China to receive a refund from your supplier, later on. But when you are selling low ticket items in most cases the shipping cost will be higher or close to equal to the wholesale price of the product. That being the case, it just is not worth your time and efforts to try and get refunded by your supplier, but this way you will have to pay for the refund out of your own pocket which can negatively impact your profit margin.
As the barriers of entry to the dropshipping world are relatively low, there are numerous online retailers that choose this business model which leads to high competition. Also, many of the dropshipping stores decide to go with Chinese suppliers with the hope of earning high profits on lower-priced products. But what this results in is that many of them end up offering the same product, potentially from the same supplier. Consequently, it will be hard for them to differentiate themselves from the crowd and have their unique selling positions. This then inevitably leads to a price war between the retailers and they end up having to cut their profit margins or offer discounted prices in order to stay in the competition. Hence, you are probably better off searching for smaller, unique suppliers locally that can provide you with one-of-a-kind products that will stand out from the crowd and give you the competitive edge.
Manufacturers do not actually need your business
Chinese manufacturers are becoming more and more influential and gaining a presence on marketplaces such as Amazon and eBay as their next strategic move. Due to statistics over 40% of the top-selling merchants on Amazon are already these Chinese manufacturers and not dropshippers like yourself and this percentage is expected to rise once they figure out how to streamline their logistics operations and get goods delivered to the West faster. They are already exploring opportunities to sell products from local warehouses to American and European customers. After this happens, they will not be in need of dropshippers as middlemen and they will be either directly competing with you in the future or stop acting as a supplier and forcing dropshippers to look for other suppliers as alternatives.
With all this in mind, it takes careful consideration to decide whether or not to use a Chinese dropshipping supplier when doing business. The needs of every eCommerce store are different so it is better that you evaluate what is important for you and how you would like to differentiate yourself from your competitors before making a decision. Once you have decided to work together with a supplier, whether it is based in China or not, you will need to keep a close eye on their operations and the quality of their products supplied to your end customers. Based on time-to-time supplier reviews you will be able to adjust the list of your suppliers to your benefit.
Table of Content
- Uncertain transportation timelines
- The “Made in China” stereotype
- Language barriers and communication difficulties
- Potential copyright and intellectual property issues
- Large minimum order quantities
- Product quality issues
- Overly complicated returns
- Excessive competition
- Manufacturers do not actually need your business
- Last words