Nowadays, most people worldwide are investing in dropshipping, and I can say that you too want to be one of them! So, first, let's understand what dropshipping is. Dropshipping is a method to accomplish retail where a store doesn't keep the products it sells in stock.
It is an order fulfillment method that lets store owners sell directly to consumers without stocking any inventory. When a customer gets hold of a product from you by paying the retail price you have set, a third-party supplier ships it directly to the customer.
With dropshipping, I can test different business ideas available to me, which has got limited downside. It also allows me to learn a lot about market in-demand products and choose accordingly. In the dropshipping business model, the retailer (in this case, I am the retailer) sells third-party products on their website under their brand name.
I shall be responsible for choosing and marketing those products. Plus, I shall also be responsible for the shipping charges and setting prices that give me a profit. Although dropshipping via Alibaba is very common in today's world, one can see that the shipping charges are continuously increasing.
Even if one is getting the product at a much lower price, the shipping charges will go beyond their budget. For general goods that weigh from 0.5 kg to 10 kgs, the shipping fee is around $20 to $100, and for goods weighing from 10kgs to 20kgs, the shipping fee is around $100 to $200.
For goods from 21 kgs to 100 kgs, the shipping fee is around $200 to $500. Now, this price is not something one can spend on shipping! So why is Alibaba shipping so expensive?
Alibaba is a B2B marketplace built with wholesale in mind. All the features and benefits they provide, including shipping charges, are beneficial for wholesale orders and not individual ones. The sellers on Alibaba work with courier partners who offer shipping discounts on bulk orders only.
In this process, let's see how Shopify helps in dropshipping and why Alibaba shipping is so expensive. You shall also get to know about the types of suppliers in Alibaba and whom to trust. Lastly, you will see how you can minimize the shipping charges of Alibaba or if there is a better option for you.
Dropshipping is a popular method nowadays because it comes with more advantages than disadvantages.
- Less capital required - The most significant advantage of dropshipping is that it requires very little money. I did not have to invest thousands of dollars in inventory upfront. I never purchase a product unless I have a buyer who has paid me the order amount. So it's not like a traditional retail business, owing me to a lesser risk.
- Broad range for selection of products - There is a wide range of products for me to select and offer to my potential customers. If suppliers stock an item, I can list it for sale on my online store at no additional cost.
- Easily accessible - All I need is an internet connection and a good communication skill to communicate with the suppliers and the buyer to carry out my dropshipping business. Thus it can be run from anywhere by anyone all around the world.
- No extra worries - It does not require physical handling or shipping of the product. Thus one doesn't have to worry about paying for a warehouse, packing the product, handing the returns (if any), or tracking inventory for accounting reasons.
Alibaba- A Deeper Look
While many of us might think Alibaba is a general online retailer like Amazon or eBay, the reality is different. The facts suggest that Alibaba is a combination of three core businesses. These businesses are:
As we know, Alibaba is a Business-to-Business(B2B) trading platform. Taobao is a Business-to-Consumer, or Consumer-to-Consumer focused marketplace. It incorporates millions of services and products from infinite sellers.
The best thing about Taobao is that it doesn't charge any transaction fee from the merchants and can endorse its products free of cost. Each of the merchants is rated using a rating software. A higher rating would suggest more number of successful deliveries and vice-versa. Rating enables consumers to make sound and wise decisions.
After assigning Taobao to small merchants, Alibaba has dedicated Tmall for all the multinational companies like Nike, Samsung, Apple, and many more. It is very much similar to other dropshipping sites, and it does deduct transaction fees on the completion of a successful transaction. Here, sellers have access to technical details like page views, customer ratings, number of visitors, etc.
Dropshipping with Alibaba
I have been dropshipping via Alibaba for a while now. I can safely say that it is an excellent platform for drop shippers because of the variety of products available on the forum. Alibaba is mostly composed of Chinese companies.
However, some Non-Chinese suppliers are also present on the platform. If you plan to order from Alibaba, you will almost certainly always receive your products as long as you follow some standard precautions.
Alibaba is the world's first Business to Business (B2B) store that laid down a Chinese e-commerce store for the global market. When one is looking for suppliers to buy private label products in China, Alibaba is the best place to go.
It is more wholesale oriented. Payment is usually by Letter of credit or some other commercial facility. However, there is no guarantee, so the buyer must have reason to trust the supplier. The products offered here are relatively at a lower price (excluding the shipping prices), and hence the profit gained from them is high.
However, the shipping cost while dropshipping via Alibaba is high because ePacket shipping is not available. Moreover, during the pandemic, air transport and postage options are also limited. It is the suppliers that charge the shipping fee, not Alibaba; therefore, one can always negotiate with them.
I feel they charge shipping to prevent people from trying to get freebies and to protect the sellers from any fraudulent activities. Alibaba demands a significant amount on shipping or figuring out who is serious about doing business with them. Once a person invests a decent amount of money in something, they should be serious about it.
However, they do send samples for free. Later in the year 2018, the Alibaba group launched the AliExpress, a Business to Business platform but for small businesses. Here the products are placed at a higher rate than that in Alibaba, but the bonus point was that it came with free or minimal shipping costs.
The main reason behind the Alibaba shipping cost being high is the distance. If someone has to buy something and have it delivered to the USA, one must keep in mind the distance between the two countries. Even if the shortest distance needs to be taken, it still adds up to 6000 miles.
Alibaba charges its customers for the distance. Some of the other factors that affect the shipping cost are the weight and the number of products ordered. However, one can wisely place orders and minimize shipping charges. Let us see how.
Ways to Minimize Alibaba Shipping Costs
Right now, you must be wondering if there is any way by which one can reduce the shipping charges? Well, yes, three options are given to anyone for handling their shipping.
The first one is to handle it by themselves, which is, of course, not a great idea. There is a tremendous amount of paperwork and many procedures to follow while moving large quantities of products from one country to another.
The second option is to let the factory do it for you. There are both pros and cons to this. The cons are that your supplier will call up their preferred forwarder, whoever that is, and they will get a higher price out of it, adding to the fact that there comes a second layer of communication.
Coming to the pros is much more comfortable as they will handle everything and most of the time the price is relatively reasonable while you get the best service, but one should keep in mind that this is not the case always.
The third option is to use a third-party service yourself, so one has to sort out their shipping agents or freight forwarder or use Alibaba's logistic service. Cons that come with this is that it is hard to find an acceptable shipping agent.
Many big companies look great and provide great features, but once someone starts using them, the truth comes out. When you need them or something has gone wrong, or something needs changing quickly, they don't do it.
Secondly, most shipping agents maintain a minimum weight of 300 kilos, and if someone's order is under this weight, they just reject it. Coming to the pros- these shipping agents try their best to provide the best service so that they get to work with you again.
Most of the time, one does not have to worry about anything as everything is taken care of by the shipping agent. This is more emphasized towards smaller companies as they are more inclined towards their clients' requirements and necessaries.
The key to get this done is by negotiating with the suppliers, and for that, one needs to know the actual market price of the desired product. One needs to keep in mind that the Chinese suppliers are very good at knowing how much their competitors are charging and therefore will price themselves competitively, especially if they want to do business with you.
If the sample has a small value, typically suppliers may provide samples free of charge, but one has to pay the shipping cost. In this scenario, to cover the sample's price, the supplier possibly charges a little bit extra shipping costs, making you think that the shipping costs are too high. When one pays the cost of a product, Alibaba will charge the service fee around 2%. Thus you can not entirely blame the suppliers for the high price.
However, if you want to reduce shipping costs, it depends on the selected merchant, Mail Company, distance, and product size. Commodities are divided into dumped goods and bulky goods, and dumped goods are relatively expensive.
Of course, you can also buy more to spread the freight. The market price of the desired product determines the way to negotiate with the supplier. If you are purchasing a singular item or sample item that is usually sold as part of a bulk shipment, you can expect to pay more for that one item.
Alibaba's business model is still fundamentally designed to benefit vendors or merchants - if one buys in bulk, one has to pay less. If you have time, you can get your products shipped by the ocean, which will be relatively cheaper, but it shall take much more time than usual.
It is advisable to be aware of suppliers with low prices relative to others because usually there is a catch. So, yes, you can reduce your charges by wisely considering every aspect and then taking any decision.