We analyzed 41,090 parcels with shipment data from ShipBob & Sourcingbro.
These parcels were shipped from both, China and the United States via different ecommerce fulfillment options.
The idea was to identify pros and cons of each fulfillment option to help merchants make the right decision.
During the course of our analysis, we looked at transit times, the cost, and even at the undelivered parcel rates.
We uncovered some very interesting statistics which we are going to share with you in this blog post.
Here is a Summary of Our Key Findings:
- The shipping data reveals that US Domestic fulfillment is 13.76 days faster on an average, as compared to dropshipping directly from China.
- If the weight of the parcel is above 1 KG, then the shipping costs from China to the US are now getting more expensive.
- The undelivered rate for US domestic shipped parcels is 0.74%. But that increases to 0.51% when shipping from China.
- On an average, sea freight shipping from China to the US takes 33.79 days & Air freight takes 13.13 days. During peak season these numbers will generally go up.
- Third party fulfillment from the US will require 4-8x times more investment on inventory planning as compared to dropshipping from China.
- If a parcel weighs 0.2 kg, International shipping to top countries in EU from the US takes approximately 52% more cost as compared to shipping from China.
- Shipping from Europe is chaper than dropshipping from China when parcel weighs above 0.5kg.
Let’s now look at each one of these statistics in detail.
US Domestic Fulfillment is 13.76 Days Faster on an Average, as Compared to Dropshipping Directly from China
As an online merchant , you always want the fastest and the most cost-effective ecommerce fulfillment that creates a satisfactory customer experience.
The three most obvious choices are:
- Dropshipping from China,
- Fulfilling the order in house
- Hiring a third-party order fulfillment service.
Each option has it’s pros and cons. What we have come to realize is that there’s no one-size-fits-all in ecommerce fulfillment.
You have to make a choice based on what your custom business model is, what your customers expect from your business and the capital investment that you bring to the table.
In this post we’ll run some comparisons about 3PL fulfillment status between the United States and China.
Here’s a quick look at some of the pros and cons of each service so that it helps you make a decision.
Cross-border Fulfillment: Dropshipping from China
Shipping directly from China is a beginner-friendly option for new merchants, but also suits larger brands who are shipping internationally. With logistics infrastructure constantly upgrading, I have no doubt that in the next few years, there will be more shipping lines built with faster and cheaper prices.
Pros
- Perfect for small ecommerce businesses who are looking to test the waters
- You do not have to make a sizeable upfront investment for inventory
- The low upfront costs allow you to sell a wider variety of products
- Perfect for testing a product before you make a bigger investment
Cons
- Transit times are a lot slower than US domestic shipping ·
- Shipping items that weigh over 1KG will be more expensive than USA domestic shipping
Domestic Fulfillment: Use a 3PL Fulfillment Service
A 3PL service is slowly becoming the new norm for large ecommerce businesses who wish to maximize their profits, and compete with massive brands such as Amazon. Just like fulfillment from China, this model also offers a plethora of pros, with some cons.
Pros
- Faster delivery times
- Better customer experience
- Inventory control
Cons
- Much bigger investment upfront
- Can get expensive or risky when you are holding too much stock and can’t sell for various reasons
What we Found
Based on our analysis, there are two key differentiators between dropshipping from China and using a third-party domestic shipping.
US Domestic shipping is 13.73 days faster than dropshipping from China. That’s an average number mind you. But it gives you a fair idea of what to expect.
If you ship a product from China using standard shipping, it can take 18.36 days on an average to be delivered within the US.
In comparison, a parcel shipped from the US takes just 4.63 days.
Here’s another important statistic.
When shipped domestically, a staggering 72% of the parcels in the United States were delivered within 3-5 days.
In comparison, 61.14% of the parcels shipped from China took 11-20 days to be delivered to the US.
Only 8.38% of the parcels arrived in 6-10 days.
Key Takeaway:
If your key target markets expect faster shipping times, you may want to consider using a 3PL service for quicker delivery times.
If you have a proven product and you’re confident that it can sell for years, then you may want to consider shipping from the states for quicker delivery times.
At some point, every dropshipper MUST evolve into a brand owner with a great shipping and customer experience to build VALUE not just cashflow and cash cows.
Alex Fedotoff – Ecommercescalingsecrets.com
Shipping Items Heavier than 1KG(2.2lb) from China to US is Expensive
According to Statista’s research, 17% of respondents stated their cross-border deliveries weighed less than 0.2kg, and 55% are around between 0.2kg to 1kg.
In other words, parcel weight under 2kg has a total 84% share.
We compared the shipping cost from both countries and found there’s not much of a pricing difference when you are shipping smaller parcels that weigh 0.1 kg or less.
But if your product weighs more than 1 kg, or 2.2 lb., then you’d be surprised to know that the shipping costs increase exponentially when shipping from China.
To understand this difference, it’s important to know the difference in shipping and fulfillment costs, between these two options.
3PL Fulfillment – Some of 3PL offers a single shipping rate that includes the fulfillment service, picking, packing, the cost of packaging material & shipping.
Shipping rates are based on the geographical zone where the customer resides and it’s proximity to the warehouse where the inventory is stored.
ShipBob’s shipping zone maps have 9 zones in total. If your target market is in Zone 1, store it in a warehouse that’s geographically close to Zone 1. You minimize the shipping cost this way.
Notes: our research is based on Zone 1 shipping price.
Dropshipping from China – Some sellers offer a single-tier pricing which includes both shipping and fulfillment. Others separate the two. A single pricing is always easier to deal with, than separate pricing for shipping and fulfillment. It depends on the seller you are working with.
What we Found
Here’s a look at the average total cost for shipping a product that weighs 0.1 kg
As you can see, shipping from China to USA is $.05 cheaper than US domestic fulfillment, but over the last few years we found the shipping price is constantly updating(10-15 times a year) from Chinese couriers like Yunexpress, 4PX etc.
Now let’s look at the costs as the weight of the parcel increases from 0.2kg all the way to 2kg.
That’s a very interesting statistic and one that can make a huge difference to your bottom line.
From 0.2kg onwards, the shipping cost from China to the USA gets more expensive compared to shipping within the United States.
And If your product weighs 2 kg or 4.4 lb., then you may actually end up paying double the shipping cost if you dropship from China.
Key Takeaway:
If you are selling a heavy product or have larger dimensional weight packages, then it might be in your best interest to invest upfront in inventory and ship the order by yourself, or hire a 3PL that provides you the best price & service combo.
The Rate of Undelivered Shipments from China to USA is 1.45%, while Domestic Shipping is 0.74%
One of the commonest problems that ecommerce businesses encounter is packages not getting delivered. They get lost in transit. There may be no updates for days.
Sometimes, they are not scanned, or failed at delivery.
What you need to realize is that when you dropshipping from China, there are two additional touch points that your package has to successfully pass through, as compared to domestic shipping from USA.
It’s quite possible that your parcel may get stuck at either one of these touch points.
What we found
The ratio of undelivered parcels is much lower when shipped using domestic US shipping.
To give you some perspective, out of all the parcels that we analyzed, only 0.74% were undelivered.
There’s one added advantage to this that’s not mentioned here in this statistic.
If the parcel is undelivered, which means that it has been in transit for a long time and there haven’t been any further updates, you can file a claim with the 3PL.
It’s generally after 30-days of the last update. But may differ from one 3PL to the other.
If the package is returned due to an incorrect address or couldn’t reach the customer for some reason, it’s counted as ‘returned to sender’. 3PL will charge you an additional fulfillment price as return management fees.
You can either ask the 3PL to dispose off the package or add it to the inventory to sell it again.
Now let’s take a look at the undelivered ratio when dropshipping from China.
As you can see, from 20,001 parcels 1.45% were undelivered due to various reasons.
What you should know, is that in case of a failed delivery as mentioned above, the customer will have to visit the local post office and pick up the parcel themselves.
Since the last mile delivery is by a courier, the package will be returned to their local warehouse. Either way, the parcel will not be returned to China.
Key Takeaway:
To weed out missing packages and to reduce your ratio of undelivered shipments, you either opt for a 3PL service if you have that kind of capital investments. Else, hire a trusted dropshipping agent who oversees the package during the entire supply chain, right from purchase to delivery.
When your parcels don’t disappear into oblivion, it adds reliability to your business, which in turn will increase trust and credibility.
Sea Freight Shipping from China to the United States takes 33.79 Days while, Air Freight takes 13.13 Days
If you’re looking to stock inventory in a 3PL fulfillment center in the US, you will have to ship the inventory using one Express Shipping, Sea Freight or Air Freight.
In this post, we will only focus on Sea and Air, which are the most popular choices.
Sea Freight – Sea Freight is cheaper than Air Freight and unless you are facing a massive inventory shortage in peak season, most merchants will use this option.
You can either rent an entire container(FCL Shipping) or share it with another shipper(LCL Shipping).
The advantage is the price.
On an average The disadvantage is the delivery times which I will discuss in a bit.
Air Freight – If you are not shipping a large volume of inventory, Air Freight might be a better choice.
It’s more expensive than sea freight. But we generally recommend it if your inventory weight is less than 500 kilos.
Sourcingbro’s shipping method
The conventional way of shipping your inventory to a 3PL fulfillment center in the US is a little cumbersome, especially if the declared order value is more than $800.
You will either have to hire an agent for customs and clearance, or do it yourself.
Paying duty and taxes at the port of customs seems like a no-brainer, until you hit a roadblock.
At Sourcingbro, we use the delivery duty paid (DDP) method to take care of the delivery costs, taxes or unexpected charges that may arise during shipping and delivery.
What we found
The average transit time for sea freight is 33.79 days(sample size 298 shipments). These numbers are consistent across regular and peak seasons (October to January).
Here’s another statistic. Just 52% of the shipments were delivered within 26-35 days via Sea Freight.
In comparison, 49% of shipments were delivered in 10-15 days via Air Freight.
Key Takeaway:
Sea Freight is a cheaper but a slightly more time-intensive delivery method. If you wish to leverage the cost saving potential that it offers, hire a sourcing agent who can use the DDP method, and plan in advance.
If you are restocking inventory during peak seasons, ensure that you account for the delay that may occur.
On the other hand, if your inventory weighs less than 500 kgs, you may want to consider opting for Air Freight for obvious reasons.
Your Investment Will be 4-8x More if You use 3rd Party Fulfillment for Products Valued More than $2
Inventory control is tricky for ecommerce.
Most clients we work with always have the same issues. They either stock too much inventory or don’t have enough product to catch up with sales.
There are lots of variables that could disrupt your inventory plan, such as production delays because the supplier is overloaded, or missing raw materials or key components to manage the production.
Dont forget that you may spot quality issues. Then you have to ask the supplier to redo the entire order.
Shipment delays can happen due to unexpected things as well.
The list goes on and on.
But based on the data we have so far, we can do some simple math to accurately help you forecast the inventory you need and the average cost for the same.
If the product that you are selling costs $2, and taking into account our current bulk order shipping time frame, you will have to invest at least 4-8x more money for third party fulfillment in the USA compared to shipping directly from China.
‘4-8’ times is a lot. But there’s more to it than what meets the eye.
US | US | China | |
|---|---|---|---|
COGS | $2 | $2 | $2 |
Product Weight | 0.1kg | 0.1kg | 0.1kg |
Shipping Option | Air Freight | Sea Freight | / |
Inventory Planning | 15 Days | 35 Days | 5 Days |
Avg Sales Per Day | 50 | 50 | 50 |
Inventory Required | 750 | 1750 | 250 |
Product Cost | $1500 | $3500 | $500 |
Freight Shipping cost | $787.5 | $455 | / |
Total cost | $2287.5 | $3955 | $500 |
As you can see, we ran some comparisons. This is for products with an average price of $2 and weighing 0.1 kilogram.
The shipping cost that we have used is $2.6/kilogram for Sea Freight and $10.5/kilogram for Air.
If you ship by sea freight, the average transit time is 33.79 days, you will require to ship at least 35-days of inventory.
If your average sales volume/day is 50 pieces, then that translates into 1750 pieces. That’s a net cost of $3955, which includes $455 for bulk order shipping.
If you ship by Air Freight, you will stock at least 15-days of inventory.
If your average sales is 50 pieces/day, you need 750 pieces. Add to that the cost of shipping by air, which is $787.5. The total cost in this situation is $2287.5
Now, if you dropship directly from China, some sellers will not require you to have a Minimum Order Quantity.
This may work initially. But if you are consistently generating sales, you may find yourself in a situation where you have pending orders and the seller does not have product in stock.
So, at Sourcingbro, we always ask our clients to stock at least 5-days of inventory to allow us to restock in time.
In the above mentioned scenario, you need 250 pieces. That amounts to $500.
Just a head up, this is definitely not the case for every business, because in different industries (category) you may have MOQ issues when you start private labelling your product
Key Takeaway:
If you’re new to ecommerce and dropshipping, then shipping directly from China is a good option.But don’t get caught unprepared with orders pending and products out of stock.
At least stock a few days of inventory. Also, once your sales volume starts to increase, consider investing in inventory and use a 3PL fulfillment center.
Parcel weighs 0.2kg International Shipping from China to EU Countries is nearly 52% Cheaper than Fulfill Order from US
With the pandemic now starting to recede globally, it’s a phenomenal time to step on to the Global Marketplace. The EU for instance, offers one of the most active marketplaces for ecommerce.
According to Research and Markets, the share of global marketplace’s cross-border online turnover in Europe was predicted to grow from 59% in 2019 to 65% by 2025.
So we compared the shipping cost both from the USA and China to European countries.
You’d be surprised to discover that shipping directly to EU from China may in fact be cheaper as compared to shipping from a 3PL warehouse in the United States.
What we found
Here’s a look at the average shipping costs(pick & pack fees were included) when you ship a 0.2kg parcel to the top EU countries from China and the US.
The average shipping cost is almost 50% less for all countries including Italy, UK, Spain, France and Germany.
Here’s the shipping cost (pick & pack fees were included) when your parcel weighs slightly less at 0.85kg. Shipping to the United Kingdom from China will be 36% cheaper than from the US, and the number for Germany is 35%.
This is not a be-all, end-all comparison mind you. There might be cheaper and pricier shipping options in both the US & China.
Key Takeaway:
If your target market is the EU, then stocking your inventory in a warehouse in China might be a most cost effective choice. You can save on the freight cost, customs cost, MOQ & the shipping cost.
At the rate at which the ecommerce industry is booming, Europe offers a lot of opportunity with less competition than the USA. If you are a small dropshipping brand or even a large one, you might want to wet your toes in this virgin market.
Shipping from Europe might be Cheaper than Dropshipping from China, with some Caveats
As part of our study, we did some research into the cost for shipping to Europe from China and compared it with domestic shipping from warehouses in Poland.
We would like to thank Omnipack, for giving us granular data that allowed us to get these comparisons to you.
The advantages of Domestic dropshipping in Europe
First things first, let’s talk about the pros of domestic shipping from the Europe.
Quicker delivery time – In modern ecommerce logistics, dropshipping from China to major European countries takes an average of 7-15 days. But if you stock your inventory within the EU, it will give you access to quicker delivery times which is 1-5 days on average.
Duties are included – When you are shipping domestically from Europe, VAT & Duties are included. So, it might result in lower product cost as opposed to dropshipping from China, which will invite the new Import One Stop Shop (IOSS) rules. In a nutshell, it will cost you extra on duties to dropship directly from China.
In case you were unaware, the IOSS is the new global VAT rule that came into effect from 1st July 2021. Before this, VAT import thresholds varied in different countries across the UK. The IOSS applies one common EU-wide threshold.
Delivering to key markets from Europe vs. from China
Here’s the interesting bit that we found based on our research into shipping costs (pick & pack fees were not included).
The shipping cost to key European markets from Poland is cheaper than dropshipping from China when the parcel weighs 1 kilogram.
This chart is for packages that weigh 1 kilogram. The difference is significant. But it starts to get even more stark as the product weight increases.
To give you some perspective, take a look at the chart below. This is for parcels that weigh 2 kg.
As you can see, the cost is exponentially higher when you are shipping products that weigh more than 1 kilogram from China. For instance, shipping to Germany costs $19.06 from China, whereas the same shipment can be shipped for $6.36 from Poland.
As you go to other destinations in the EU, the cost difference remains huge. If you are shipping to the Netherlands for instance, the difference is $18.11 for each package.
Key Takeaway:
These charts reveal that for parcels that weigh more than 1 kilogram, the shipping costs from China starts to get more and more expensive. So, if you are dropshipping from China to the EU, its ideal to pick products that weigh less than 0.5 kilogram
On the other hand, if you have a winning product for the EU market, that unfortunately weighs more than 0.5 kilogram, it would be in your best interest to stock and fulfill that from the EU, as the shipping cost difference is huge, which eats massively into your profits or drives up the product cost.
Conclusion
I hope that you found this analysis interesting and helpful while deciding whether to work with a domestic 3PL fulfillment service, or continue to dropship from China.
Don’t get swayed by binary theories of one particular fulfillment option being better than the other. Run the math. Do your research and select one that works best for your business, your customers and your bottom line.
If you need assistance with any aspect of fulfillment, I am all ears and happy to help.
