Drop shipping from China – is it a reasonable way to make money?
The internet is filled with stories about successful drop shipping enterprises, and many of them are basing on products imported from China. Several websites also offer cheap products of worldwide brands. But is it reasonable to engage in drop shipping practices, especially when import from China is concerned?
Drop shipping is the business model, in which the retailer does not keep goods in the stock, but transfers customer orders and shipment details to either the manufacturer or a wholesaler. One who deals in drop shipping receive money before making the final order, so can keep financial liquidity. Drop shipping doesn’t require “freezing” a big amount of cash while ordering big shipment. But the problem arises when the order is transnational: from the legal point of view, if the Chinese company sends you a cell phone or a fur coat, you are supposed to pay a duty fee / value added tax. Many people think that marking items as “gifts” or “low-to-no value” may work in their case – it depends on the country’s Customs official policy and their diligence, but you will be caught sooner or later. Another thing is that if your Chinese supplier sends the product directly to the customer, it will be the customer who is sought by the Customs and he will certainly blame you.
And if you are a customer, follow the saying “grasp all, lose all”. If you see the products of big brands with very attractive pricing (less than 20% of normal retail price), then you are dealing with the scammer for sure. The sites with these products appear and disappear, and it is quite easy to recognize them: all are written in broken English and have a typical template structure. But for those less tech-savvy among customers, these webpages look legitimate enough to place an order, and later on nobody is willing to file a suit about $100 spent on sneakers.
Usually the customer is not fully aware that the shop is following the dropshipping model. If the shop is drop shipping from China, an obvious sight is the long delivery time (sometimes up to three weeks). If the shop had its own warehouse, the delivery would not take that long. Sometimes small drop shippers are using eBay or similar webpages to sell products sent from China and at the bottom of their advertisement you will see small note such as “Please be understand that buyers should take care of any duties or local taxes if it occurs at destination customs”. Keeping in mind that in most Western countries VAT ranges from 10 to 25%, and some of the products are also subjected to duty. When those costs will be added to the initial price, the whole purchase won’t be profitable.
If you are a business person and you are considering drop shipping from China – just don’t do that. Drop shippers take responsibility for the merchandise that they won’t even see, they often run out of stock on popular items and lose reputation, and the growing customer awareness means that you will be the person blamed for everything that goes wrong. China drop shipping businesses appear and quickly disappear not without a reason. The aforementioned financial liquidity of the model may be also compromised, because of various PayPal policies, which are largely in favor of the customers. So – the import from China is not that hard, better invest more, place bigger order, and as a result – get bigger profits.