Insights / Operations / Retailer Perspective

Shipping From China – The Options

Michael Fox, Co-Founder of Online Retail Industry Award winning e-commerce website, Shoes of Prey, shares his inside experience about shipping from China and the options available to retailers.

At Shoes of Prey, we ship our shoes directly from our office in China to customers all over the world. We previously used a company called EMS, however we were very unhappy with their service and given 40% of our customers are in Australia, we decided to switch to DHL.

DHL is fantastic.  Our shoes take three days on average to be delivered to customers, the company delivers to the customer’s door and will call the customer or leave a card to arrange an alternative delivery time if the customer isn’t home. I’ve heard good reports about UPS and FedEx as international couriers too.

Our average shipping cost to Australia with DHL is around $30, so we only make a slight loss charging customers $25 shipping. And as our volumes continue to grow, our monthly spend with DHL will increase, which will result DHL passing on a reduction in prices, so it’s feasible that the average shipping cost per shoe will drop to around $20 next year. As a point of comparison, the DHL retail rate for a single shipment of a parcel of shoes to Australia is about $65, so a higher shipping volume leads to a much lower shipping price.

So, what are the alternatives for online retailers shipping product to customers?

1. Ocean freight and local delivery.

Most traditional and larger online retailers will ship goods by ocean freight to Australia. Online retailers will then warehouse the product and ship individual parcels to customers within Australia. We used ocean freight to deliver some ready-made shoes to stock in Sydney for our Westfield online store. The costs broke down as $x fixed costs for the delivery plus $y variable cost per kg. The shipment took three weeks door to door. If you’re only ocean freighting a small shipment in terms of weight it’s not cost effective because of the fixed costs, but if you’re shipping lots of heavy products it’s much cheaper to ocean freight. The costs for ocean freight drop even further when shipping whole containers of product as the large Australian retailers do.

2. Bulk airfreight and local delivery.

Another option is to bulk airfreight goods to Australia, then split out the parcels and deliver them using a local delivery service.  This can be cost effective for an online retailer when shipping lightweight goods. Courier companies like DHL charge one rate for the first 0.5kg to cover delivery, then a lower rate for each 0.5kg on top of that. If we were selling custom watches or something that only weighted 100g or 200g, rather than paying around $30 per parcel as we do now, (or slightly less given each parcel would be 0.5kg rather than our average of 1.2kg), we could bulk airfreight all the product to Australia, then reship within Australia using a local courier service. Bulk air freighting a 200g parcel would come out at around $2 per parcel, then the local courier fee should be around $10-$15 – a reasonable saving.

The downside is the additional day for local delivery on top of the international delivery, and the costs of repackaging the products locally, though individual parcels could potentially be labelled in China so they’re ready to be unpacked and shipped immediately in Australia.

We actually use this option for our customers in Japan. There’s not much of a cost saving in doing this because our parcels average 1.2kg anyway, however our Japanese partners repackage the shoes in line with the very high packaging standard expected by Japanese consumers.  We use a very cool local Japanese courier company that literally runs the shoes to the customer’s door and provides an amazingly high level of service in delivery, which an international firm couldn’t provide in Japan.

3. Airfreight direct to the customer.

As described above, this is the option we use for Shoes of Prey. Ocean freight wouldn’t make sense for us as our shoes are individually handmade in China. We’ve done the calculations and bulk airfreight with local delivery ends up costing around the same as air freighting direct to the customer and it takes longer. In addition our delivery expenditure would be split across an international then a local courier company, so the discount offered to us based on our volume would be less. Air freighting direct to the customer works best for us.

If you’ve had experience shipping goods from China,I’d love to hear your thoughts.

Michael Fox also has his own blog 22 Michaels, which is a diary of the adventures, successes, failures and everything he has learnt, in the attempt to start his online retail business.

Michael Fox

Article by

Michael Fox managed Google’s online sales and operations agency team for Australia and New Zealand before co-founding online retail startup Shoes of Prey (www.shoesofprey.com) which allows women to design their own shoes. Prior to Google he worked for the retailer Supercheap Auto Group. He blogs in detail about the process of running Shoes of Prey at his blog www.22michaels.com. Follow Michael on Twitter and Google+ or connect with him through LinkedIn

Benchmarking Banner

6 Comments

    • Alice
    • 19th January

    Hey Mike,
    how do you solve the problem, that customers in the european union have to pay extra customs when the shoes are delivered from china? Because in the EU we have an anti-dumping duty of 16.5% for chinese shoes.
    Regards
    Alice

    Reply
    • Hi Alice, it’s a great question and one we’re still working to resolve. At the moment we communicate to our customers that they’re responsible for paying customs duties and VAT on the shoes when they’re delivered to Europe but this is far from an ideal customer experience. We’re able to pay the duty and VAT for the customer when shipping with DHL, however DHL charge a US$30 admin fee on top of the duty and VAT for doing this which makes it very expensive. We’re in discussions with DHL about billing the taxes to a third party European company to avoid their US$30 fee and if they’re able to do this we’ll set up a European company to have the taxes billed to on each shipment, while the shoes are delivered directly to the customer.

      If that doesn’t work we may need to look at establishing an office in Europe and shipping all the shoes via that office so we can pay the duty and VAT. Longer term that may be the best approach anyway because the duty will only be billed to us on the cost price of the shoes rather than the full retail price.

      Reply
  • Hi Michael,

    Great article. I’d like to add another means of distribution that for retailers shipping from overseas to Australian customers directly. This is the hybrid bulk airfreight-direct delivery model whereby individual consignments are labeled at origin, collected and airfreighted in bulk, invidually reported to customs and delivered to direct customers. Its a best of both worlds model with the visibility and speed of the direct air courier option, with the cost savings of the bulk airfreight model.

    Reply
    • Dr Marnie Blewitt
    • 13th October

    Rob’s comments are bang on but they don’t also highlight the need to utilize Free Trade Zones inside the EU for direct entry lodgement. The Hybrid model is what Amazon and many other online retailers now use to gain higher visibility, at the same time gaining reductions by reducing consts through consolidation

    Reply
  • Woah! I’m really loving the template/theme of this site. It’s simple, yet effective. A lot of times it’s very hard to get that “perfect balance” between usability and appearance. I must say you’ve done a great job with this. Also, the blog loads very quick for me on Chrome. Exceptional Blog!

    Reply
  • I’m a small business handbag online store trying out manufacturing in
    China, I have been quoted $3000 with ups. I am after a cheaper but
    still secure postal service option.

    Any advice would be appreciated.

    Reply

Leave a Reply

  • (Required)

  • (Required but will not be published)

Power Retail Ecommerce Resources