Shipping from China Fulfillment Center vs USA Fulfillment (How to Gain an UNFAIR Advantage)
In this blog post, we will explore how to gain an unfair advantage over your competition by shipping from China, and choosing the right strategy for your business by comparing China fulfillment centers to local USA fulfillment.
Whether you're just starting out or are already using a US or local 3PL (Third-Party Logistics), this guide will help you make better supply-chain decisions for your ecommerce business.
Popular Ecommerce Fulfillment Models & Their Risks
In the world of ecommerce, if your products come from China, you've likely been advised to follow one of two models:
Dropship from AliExpress or similar platforms.
Bulk order products to a local 3PL and ship them from there.
However, today, I'll present another model that can significantly reduce the risks associated with the aforementioned options.
The Risks Involved
Before we delve into the alternative model, let's understand the risks associated with AliExpress and local 3PLs.
AliExpress is known for its slow shipping times and unreliable quality control, which can negatively impact customer satisfaction and retention.
On the other hand, local 3PLs often have long lead times, meaning it takes longer for products to arrive from your Chinese supplier than they would if you were using a Chinese fulfillment center.
This poses challenges in terms of managing inventory and cash flow. Buying months' worth of products in advance increases the difficulty and risk involved, putting a strain on your cash flow.
Benefits of Shipping from China Fulfillment Centers (DTC)
Now, let's explore the benefits of using a Chinese fulfillment center to ship products directly to your customers:
Faster shipping: Compared to AliExpress, shipping times can be significantly reduced. For example, shipping direct to consumer from our warehouse in China, you’ll get times of
5-8 business days to the US
3-5 business days to the UK
5-8 business days to Australia
Improved Quality Control: Unlike some AliExpress suppliers, Chinese fulfillment companies often offer meticulous quality control services to ensure you’re sending high quality products to your customers.
Affordable international shipping: Shipping costs from China to international destinations are often more cost-effective compared to using a local 3PL.
Shorter lead times: With China fulfillment, you can maintain shorter lead times than those of local 3PLs, allowing you to hold less stock. This reduces cash flow issues and minimizes inventory risk.
China Fulfillment vs USA Fulfillment Prices
To illustrate the cost differences between China fulfillment and US 3PLs, let's examine some examples based on current shipping rates and times.
So here we have Product A to product F. Product A is 50g, and Product F is 5kg.
All these products are standard, non-special goods. So, no electronics or liquids.
With China Express shipping we can get product A to the US in 5-10 calendar days for $4.07.
For 6-14 day (slower) shipping the rates are cheaper.
The prices for local US shipping are split into, USPS 2-5 day, 1-3 day, and 1-2 day shipping. FYI, some of these rates are cheaper than standard commercial rates.
At a glance the USPS 2-5 day shipping on its own is slightly cheaper than the China shipping.
But to compare both properly we need to also consider the bulk shipping cost per item, to get the product from China to the US 3PL, because that is a cost you will not have to incur shipping directly from China.
To do that I’ve taken the current costs of shipping to the east and west coast, then taken the average for each shipping method.
There are 5 shipping methods, 3 ocean shipping from slowest to fastest, and standard air freight + express air freight.
Below that I’ve put down the customs costs, receiving costs and storage costs as a question mark because those are costs you will have to consider when making your decision, but for simplicity we won’t be including those today.
Under that we have two tables which show the total US to customer shipping costs including the bulk freight cost per item too.
And we use those to create the last two tables, which show the difference between the cost to ship direct to consumer from China vs a US 3PL. (This does NOT include fulfillment/extra fees, only shipping costs)
In the first table we’ve got China Express (5-10 Day) VS. US (2-5 Day).
The green is where China fulfillment is cheaper, and the yellow is where the US fulfillment is cheaper.
For this comparison you can see that shipping from China or the US is pretty similar in cost, with only a few cents difference, unless you’re bulk shipping by air express to your US 3PL for product C which is 300g.
Now for the 5-10 day shipping fulfilled by China vs the 1-3 day shipping fulfilled by the US, you can see the lighter products are cheaper to fulfill via China and the heavier products cheaper to fulfil via the US.
By analyzing the shipping costs (and bulk freight expenses per item), it becomes evident that shipping directly from China and using a US 3PL are similar in most cases. However, specific scenarios may favor one option over the other based on product weight and shipping method.
At this point, you may already be making some conclusions about where to fulfill from, BUT there is one very important factor that we need to consider before making a decision.
And it has everything to do to do with lead times…
China Fulfillment vs USA Fulfillment Lead Times
One crucial factor to consider before making a decision is lead time. It's important to note that lead times for Chinese products to reach a US 3PL are longer compared to using a China fulfillment company.
Due to the extended shipping duration from China to the US, it's necessary to purchase a larger quantity of product in advance when using a US 3PL.
Why is that?
This is to ensure you have sufficient inventory and to avoid running out of stock before the next shipment arrives. However, this strategy ties up a significant amount of capital (money) in excess inventory.
In contrast, with China fulfillment, the lead times are shorter, allowing you to maintain lower inventory levels. You can order products in smaller quantities and have them shipped directly from the Chinese fulfillment center to your customers. This reduces the risk of inventory obsolescence and frees up your capital for other business needs.
Example
If we take the cheapest bulk shipping option (sea freight) from China to the US, which is currently 30-40 days, and you want to make sure you do NOT run out of stock, then you might want to plan for 70 days of inventory.
That means you have to buy 70 days worth of inventory in one go.
Whereas with China fulfillment the lead times are usually less than a week, so you could order 2 weeks worth of inventory to be ultra safe, which is just 14 days worth of inventory instead of 70 days worth.
Let’s see how that actually looks in monetary terms.
If your product costs $10, and you’re selling 50 units a day, then you need $500 worth of product a day.
For 14 days worth of stock you’d just need to spend $500*14 = $7,000.
Whereas for 70 days worth of stock you’d need to spend $500*70 = $35,000 + Bulk shipping.
That’s $35,000 you’ve tied up in inventory.
With fulfillment from China you only have to spend 20% of the amount you’d have to spend up front with US fulfillment because of the lead times, (and that’s not including bulk shipping) which also means you only have 20% of the inventory risk.
That’s 700 units worth of inventory risk instead of 3,500 units because you ordered 14 days worth inventory instead of 70 days worth. (50*14=700 units 50*70= 3,500 units).
Not to mention, if you had the $28,000 extra ($35,000-$7,000), you could probably use it to scale your business.
Example Extended
Let’s say you’re close to running out of stock due to a sudden sales-spike. In that case, you are going to have to wait for a new bulk shipment to arrive from China.
If you want to save money, you ship by sea, but you’ll be waiting 20-40 days at the very least as we saw before. If you ship by air which is faster, you’ll pay quite a bit more.
Whatever the case may be, you’ll have to spend a lot more money up-front with US fulfillment.
All of which doesn’t ensure you get the shipment to your 3PL in time, which would mean you have to mark your product out of stock and turn off your ads.
If however you have direct to customer order fulfillment from China, your lead times are going to be just a few days. Which means in the very WORST-case scenario, you’d just have to wait a few days to start fulfilling orders again.
What are the Benefits of USA Fulfillment?
Up until now we’ve been giving US fulfillment a bit of a hard time, but the truth is that if you can afford a 3PL in the US and all the costs associated with it, they can be extremely beneficial to your ecommerce business.
Benefits include:
Fast shipping
You can establish yourself as a local brand with local shipping
Fulfillment during Chinese holidays such as Chinese New Year
Very large or heavy or dangerous products are often better off being fulfilled locally
Hybrid Model: USA Fulfillment & China Fulfillment (Combined)
If you’re already using a US or local 3PL, and don’t want to be one sales-spike away from running out of inventory, I usually suggest a hybrid model, where you use both a local 3PL and China fulfillment.
You get all the benefits of using a local 3PL with the benefits of China fulfillment on top.
Meaning you no longer have to overstock as much because you can always fall back on fulfillment from China if you run out of inventory for any reason with your local 3PL.
That not only takes the risk out of the equation, but also frees up your capital (because you’re not tying it all up in inventory) meaning less-cash flow issues for your business.
How do you implement the Hybrid Model?
There are two options you can choose from:
1. You use a business like ours (E-commpanion) to source the product. We then bulk ship it to the US 3PL for local fulfillment, while we fulfill international DTC orders from China. Then, if the US 3PL runs out of inventory, we can temporarily fulfill those orders from China too.
2. You source the product yourself, be it through Alibaba or your own connections, and you organize the bulk shipping to the US 3PL via your supplier. You can also organize a bulk shipment to E-commpanion for us to fulfill international customer orders, from China. While international orders are fulfilled by our China fulfillment center, you can also use us to temporarily fulfill US orders if the US 3PL runs out of inventory.
The main difference between options 1 and 2 being who sources the product.
What should you do? (Beginners vs Advanced)
In today's competitive ecommerce landscape, choosing the right fulfillment strategy can give you an unfair advantage.
While AliExpress dropshipping and local 3PLs have been popular options, private China fulfillment offers distinct benefits such as faster shipping, affordable international shipping, shorter lead times, and better control over product quality and sourcing.
Beginners who are looking alternatives to AliExpress may want to consider larger, mass-market dropshipping agents/platforms like CJ Dropshipping which have faster shipping times than AliExpress as well as low MOQs. This allows you to test new products and fulfill orders without having any prior order volume.
For those that are more advanced however, they may not treat your business with the focus and care that you need to continue to scale, which a good private fulfillment company would.
Finally, for those considering working with either a China fulfillment, a local 3PL or all of the above, you’ll have to consider your options depending on a number of factors.
By considering factors like product type & weight, target market, and inventory management you can make an informed decision that aligns with your business goals.
Whether you're just starting out or looking to optimize your current fulfillment process, exploring China fulfillment as a solution can help you achieve greater efficiency and customer satisfaction.
