The growth of the eCommerce market goes hand in hand with the growth of the dropshipping market, and it is expected that dropshipping will take up a bigger and bigger part of all online retail. Due to the effects of the pandemic, e-commerce growth reached its highest CAGR (Compound Annual Growth Rate) in 2023, when it grew by 25.7% year on year. Even though this growth is expected to slow down over the next few years and average out at 11.9%. In 2018, the dropshipping segment was worth about 111.28 billion USD, and between 2020 and 2025, it is expected to grow at a rate of 29% CAGR. This shows that eCommerce retailers around the world are becoming more and more interested in the dropshipping model.
One of the most important parts of dropshipping is finding the best supplier you can for your store, no matter what niche you are selling in. This is because you don’t handle your inventory or the fulfilment process, so you don’t have much say over how your customers get the things they’ve ordered. If the products your supplier sends aren’t of the best quality or if they make a mistake during the fulfilment process, it can hurt your business’s reputation. Because of this, it is very important to look at the pros and cons of all the suppliers you might work with. Even though Chinese dropshipping suppliers might have the best prices on the products you want to buy, there are a lot of bad things about dropshipping from China. So that you can get a better idea of dropshipping suppliers from other countries, we’ve made a list of all the things you need to watch out for when thinking about a Chinese dropshipping supplier.
Uncertain times for transportation
Even though shipping companies in China are pretty good, you’ll probably have to choose landed transport if you want to take advantage of the cheaper prices of products made in China. This also means that your products will take a long time to get to the end customer. It’s not uncommon for a customer to have to wait up to 4–6 weeks for an order to arrive, which is a big downside compared to having it shipped from a supplier in the US or EU, where it would take no more than 7 days. You can choose to ship your products to the end customer by air, but the cost of airmail is much higher, which has a big effect on your profit margin. When you are shipping from so far away, you also have to think about things like natural disasters, protests, and long customs inspections. Because of this uncertainty, we suggest that dropshippers who are just starting out find a supplier with a warehouse in the US or the EU.
The stereotype of “Made in China”
Even if some businesses don’t want to admit it, consumers all over the world still think of “Made in China” as a bad thing. This label has been linked to bad working conditions in factories and low-quality products for a long time. Even though China has made a lot of progress in improving both the quality of its products and the conditions of its workers, this is still going to be the case for at least the next two decades. Because of this, your business is more likely to have a good name if your source products were made in the West.
Language barriers and trouble talking to each other
Even though English is taught in Chinese schools, there aren’t many Chinese people who can speak English well enough to have a conversation. A study found that only or even less than 1 out of every 100 people in China can speak English well. When you think about it this way, the language barrier and trouble communicating can be one of the biggest problems with dropshipping from China. If you aren’t sure if your chosen Chinese supplier can provide good customer service in English or if you don’t speak Mandarin, you are likely to have frequent misunderstandings that will hurt your working relationship and how your customers feel about your store. Even though you can still use an interpreter to talk to your supplier, it will definitely slow down the flow of information and cost you a lot of money, which you will have to figure into your profit margin.
Possible problems with copying and intellectual property
As the fake market in China gets more and more sophisticated, especially when it comes to high-end goods, it can be a real risk for your business to come across these items by accident. When you dropship branded items through your store, you have to be very careful to make sure you are always selling 100% real items. Not only because a fake or fake product can hurt your store’s reputation and trust, but also because copyright laws say so. If your business is caught selling fake goods, you could face serious copyright and trademark infringement penalties. The size of these penalties depends on the country in which you do business.
Large minimum order quantities
Even though the main benefit of dropshipping should be that neither you nor your customers have to buy more products than they need, this is not always the case with Chinese suppliers. When looking at lower-priced products, you might find that there are minimum order quantities. This is one of the things that could be bad about dropshipping from China. This is because making and selling in bulk is the only way for these suppliers to lower their production costs and offer prices that are competitive. This can be a problem if you sell single items that your customers only want one of. When looking for Chinese suppliers, you should always make sure to ask about their minimum order quantities so you can make a better decision. If you are new to dropshipping and your small business can’t afford to sell bundles or bulk packages of a certain product, you should look for a local supplier who is more flexible.
Problems with product quality
When it comes to dropshipping, one of the most important things to keep your store’s reputation and trustworthiness is probably the quality of the products you sell. When you dropship products, you have little or no control over the quality of the goods your customers receive. Because of this, it is very important that you can trust your supplier and the quality they provide. When you buy things from China, they might be cheaper than similar things you can find in your own country, but often a lower price means lower quality. Because of this, you might be better off paying more for a supplier who sells goods that are made in the country and meet the quality standards and rules of the West.
Too hard to get your money back
One of the worst things about dropshipping from China is that returns and replacements can be hard to do because the first delivery can take a long time. When your customers have to wait several weeks for their items to arrive, and if they decide to return any of them, they probably won’t wait for a replacement. If the broken or faulty product has to be sent back to China, it will take another 4–6 weeks, and then it will take another 4–6 weeks for the replacement to get to your customers. In the competitive economy we live in today, this is just too long of a wait for most customers. Instead, they will ask you for a refund right away.
It’s clear that you need to handle returns and refunds in a professional way if you want your customers to be happy with your store and service. So, if the return claim is valid, you probably have to give your customers a refund right away, even if you haven’t yet gotten a refund from your supplier. You can still ask your customers to send the item back to you, and you can try sending it back to China to get your money back from your supplier. But when you sell low-priced items, the shipping costs are usually higher than or close to the wholesale price of the item. If that’s the case, it’s not worth your time and effort to try to get a refund from your supplier, since you’ll have to pay for it out of your own pocket, which can hurt your profit margin.
Excessive competition
Since it’s easy to get into dropshipping, there are a lot of online stores that use this business model, which means there’s a lot of competition. Also, a lot of dropshipping stores choose Chinese suppliers in the hopes of making a lot of money off of low-priced products. But because of this, many of them end up selling the same thing, possibly from the same source. Since this is the case, it will be hard for them to stand out from the crowd and have their own unique selling points. This leads to a price war between the stores, and the stores end up having to cut their profit margins or lower their prices to stay in the game. So, you might be better off looking for smaller, more unique suppliers in your area. These suppliers can give you one-of-a-kind products that will make you stand out from the crowd and give you an edge over your competitors.
The truth is that manufacturers don’t need your business.
Chinese manufacturers are getting more and more powerful, and their next move is to start selling on marketplaces like Amazon and eBay. Statistics show that more than 40% of the best-selling sellers on Amazon are already Chinese manufacturers, not dropshippers like you. This number is likely to go up once they figure out how to speed up their shipping to the West and streamline their logistics. They are already looking into ways to sell goods from local warehouses to customers in the United States and Europe. After this happens, they won’t need dropshippers as middlemen, and they will either directly compete with you in the future or stop being a supplier, forcing dropshippers to look for other suppliers.
Final words
Taking all of this into account, it takes careful thought to decide whether or not to do business with a Chinese dropshipping supplier. Every eCommerce store has different needs, so before you make a decision, you should think about what’s important to you and how you want to be different from your competitors. Once you’ve decided to work with a supplier, whether it’s in China or somewhere else, you’ll need to keep a close eye on how they run their business and the quality of the products they send to your customers. Reviewing your suppliers from time to time will help you make changes to your list of suppliers.
