Dropshipping is an excellent way to start making money online. It has fewer risks than your typical brick and mortar store or inventory managing e-commerce store. It also has a lot more flexibility and potential for growth than affiliate marketing.
One concern some new dropshippers have is that most, if not all of the wholesalers you’re recommended are based out of China.
Patriotic souls might be wondering why dropshipping from wholesalers in the US isn’t just as feasible.
Let’s then compare the two and see which wins!
Price Therefore Profit
While money isn’t the only reason for becoming an entrepreneur, money is the lifeblood of any business.
The price of products affects dropshippers in 2 ways.
Firstly it affects cash flow because you have to pay for the products that people buy from you while not always having the cash from the buyer available to you.
Secondly the price of a product affects how much you can charge for it and therefore your profit margin. This not only dictates the amount of profit per product but also how low you can go when fending off competition.
For this factor China generally wins: they simply have lower costs than US based companies and as such can produce products for a lower price.
Manufacturing costs and other factors on both sides are always fluctuating, but in the grand scheme of things the US hasn’t been able to compete on cost consistently though this may change ion the future.
The quality and craftsmanship of a product can differ from business to business, let alone country to country, but if we take things at a high level then on average the quality of products coming out of China is usually lower than items manufactured in the US.
That being said, we use products every day that are made in China (on average the US imports $40 billion worth of Chinese products per month!) and a lot of these products are high enough quality to be satisfactory at the very least.
US based manufacturers can also be just as mixed quality wise.
As well as that a US based wholesaler is likely to still have sourced a large number of their products from Chinese manufacturers, so when it comes down to quality you’ll often have the same issues whether the wholesaler is US or China based.
For me, one of the main reasons to choose a US based wholesaler for your dropshipping business is the shipping times.
Obtaining goods from China means that the average shipping is 14 days (with epacket) to 30 days, which is a deal breaker for some customers. Even clearly outlining your shipping policy can still result in complaints and refunds.
Whereas shipping from a US based wholesaler is much, much faster: on average it takes 3-5 days to ship in continental USA. This means one (or both) of two things: faster delivery to your customers, and the option to deliver to yourself first to swap to branded packaging.
On the subject of packaging, delivering from China also has the added downside of potentially poor packaging, damaged packaging and numerous Chinese labels and stamps dotted all over the parcel.
This sort of thing leads me to the next topic.
People’s perceptions color everything they see and do, and sadly China has a bad rep in a lot of peoples minds.
WE all want to be patriotic and support our country’s manufacturers and businesses, and as such “Made in China” has almost become a curse word, with products being derided as poor quality just because they come out of China.
“Made in the USA” however, evokes feelings of quality that often go beyond the products actual quality, because most of peoples purchasing decisions are made based on feelings rather than logic.
As a dropshipper your portfolio of products will constantly be in a state of flux as products go out of stock or even completely withdrawn, and new products become available.
And this is the key: China is just so much better at getting new products created and out there than the USA.
Take the production of counterfeit products (I know, it’s illegal etc., but there’s a point here).
As soon as a product becomes popular or even the idea of a product comes out, there’s already 10 different versions of it coming out of China.
That’s wrong, of course it is, but it goes to show how quickly Chinese manufacturers can get new products out there, which gives Chinese wholesalers an advantage over US based wholesalers simply due to locality.
This locality also means that Chinese wholesalers have access to smaller manufacturers that US based companies might not even know exist.
From your point of view this means that Chinese wholesalers have access to a larger pool of products as well as the ability to list new products much sooner.
Reliability & Support
A lot of people would instantly think that this section is a no brainer, USA wins surely?
Well, no, sadly that’s not always the case.
The fact is that both countries have their fair share of companies that provide high quality service and are reliable to boot. And both have companies that are terrible.
It’s not just the wholesalers either, as manufacturers can let down wholesalers when it comes to both quality and availability of products on both sides of the Pacific.
The only way to make sure that you and your customers are not affected by a lack of reliability, is to diversify your wholesalers. This in itself can cause more work, but having multiple sources available can help quickly plug holes when service goes down the drain.
When it comes to choosing a US or China based wholesaler, there are a few other factors to take into consideration.
Firstly, is customs and duty. Unless you’re shipping a single large order or expensive products out of China, then this really doesn’t matter as the threshold for duty is a value of $800.
Secondly is language. Working with wholesalers in China can be more problematic when you need to discuss an issues or request. That being said they try their hardest to speak English and with a little perseverance communication isn’t that hard.
In fact, regardless of language, a lack of communication can be a problem regardless of the wholesaler location.
While the US might have a slight lead in this section, these issues crop up so rarely I’m considering it a draw.
At a Glance Results
The Bottom Line
Choosing a wholesaler for your dropshipping business ultimately comes down to your own personal thoughts, they type of products you sell and your audience.
For low value, impulse purchases a Chinese wholesaler is definitely the way to go. For higher priced or delicate items, a US based wholesaler just makes more sense.