For ecommerce businesses, an efficient, well-managed supply chain is crucial. Online brands can expect up to half of their business to be direct-to-consumer (DTC), which is why larger brands have continued to research and reimagine what DTC fulfillment looks like.
One of the most impactful trends in DTC is shipping directly from China fulfillment warehouses. Let’s take a look at how that compares to the history of China fulfillment, and how brands can leverage this style of fulfillment to add flexibility and dependability to their supply chain.
DTC China Fulfillment: The Biggest Recent Innovation in Logistics
As we said, one of the most recent innovations in logistics has been direct-to-consumer shipping via China-based fulfillment warehouses. To understand how big of a change this is, it’s helpful to understand how direct-from-China shipping got started.
History of China Shipping: ePacket
DTC consumer shipping really took off about 7 years ago, and it was fueled by ePacket. This shipping method, the original DTC shipping method, was affordable and dependable enough to work. Shipping through ePacket helped to start the dropshipping boom, and this early era is largely considered the golden age of dropshipping.
The process of using ePacket for dropshipping was very simple, and very easy to get started. Anyone with a base-line level of ecommerce knowledge could set up a Shopify store, advertise via social media marketing, and scale their order volume without needing to make an upfront investment in inventory. All they had to do was pass orders on to AliExpress or dropshipping agents, and order fulfillment was complete.
While ePacket wasn’t perfect (it did take several weeks for consumers to get their orders), it didn’t really matter. Consumers didn’t know any better, so they were happy to get novel products that weren’t available in western markets. Early dropshippers made a lot of money with this model, but it wasn’t a model that would be sustainable.
The Problem with ePacket
The major problem with ePacket was that it wasn’t designed for DTC shipping. It was originally developed as an agreement between post offices in different countries to be able to efficiently send mail. Since ePacket was never optimized for DTC shipping, it had major challenges for ecommerce:
Low Transparency
There was very low transparency of packages in transit. They would begin with China Post, be loaded on passenger airlines, and then they would just…disappear. Then, at some point, they would reappear with USPS, who would ship to the final destination.
If packages got lost, there was almost no way to know what happened. This was frustrating for both dropshippers and customers, since dropshippers had to eat the cost and customers didn’t know when to expect packages to arrive.
Inconsistent Shipping
Since ePacket relied on passenger flights, the shipping times were susceptible to even light disruptions, let alone major issues. Using ePacket during Q4 was always problematic, and it was impossible to predict when (or even if) packages would make it to their final destinations.
This problem was highlighted in 2020 when COVID-19 shutdowns began to occur. Passenger flights from China came to a near standstill, which collapsed ePacket. It was taking orders two, even three months to reach their destinations, which led to a deluge of order cancellations from consumers.
Chinese Tracking and Labels (a very poor customer experience)
Finally, using ePacket created a terrible customer experience. Packages would arrive with Chinese tracking and labels, which were often unexpected to western consumers. It wasn’t possible to make more appealing packaging for branding through ePacket, which made it hard, if not impossible, for businesses to cement high-end brands.
Packages also had to declare value on the packaging, which meant consumers saw the declared value (which dropshippers wanted as low as possible for tariff reasons), which clashed with the price they paid.
Overall, the consumer experience was terrible with ePacket.
Modern Services Emerged, Optimized for Cross-Border Ecommerce Order Fulfillment
Companies began to see massive demand for cross-border ecommerce, so fulfillment solutions catered to DTC shipping began to emerge. Some of the early services are popular choices that still exist today, including:
As DTC fulfillment from China continues to grow in popularity, we expect to see shipping options continue to grow.
The Difference Between Modern Shipping Lines and ePacket
These fulfillment services that were designed with DTC shipping in mind had huge advantages over ePacket. For example, these companies
- Use freight lines to inject into local couriers. This allows for easier package tracking, both for businesses and consumers.
- Optimized routing and customs processing. Customs can be cleared while products are in the air, so as soon as the plane lands, packages can immediately continue to ship.
- Apply last mail labels of local couriers in the local language. This is huge, since it helps improve the customer experience.
- Provide consistent delivery in as fast as 5-8 days. Compared to several weeks, sometimes months, consistent delivery of this speed can make DTC from China sustainable.
These benefits completely changed what it meant to ship directly from China, whether you were a dropshipper or if you were a larger brand already partnering with China-based suppliers. This has been the de facto way to use DTC shipping from China since about 2018.
How DTC China Shipping Maximizes Flexibility and Scalability
DTC China shipping is a major innovation in how orders can be fulfilled, which becomes more clear when we compare DTC shipping to traditional ecommerce. Let’s compare the two, side-by-side, to get a solid grasp on how these two fulfillment methods are different, and why DTC can offer so many benefits to ecommerce companies:
Traditional Ecommerce
Traditional ecommerce follows these steps:
- A business connects with a China-based supplier and makes a large purchase order (usually for 6-12 months worth of inventory).
- Once the order is complete, products are prepared for air or sea freight (usually, sea freight is used).
- After the order reaches the destination country, it needs to clear customs before continuing.
- When customs is cleared, the shipment is reloaded on local freight, and is delivered to a local fulfillment warehouse.
- As customers place orders, the local warehouse will fulfill those orders.
- Depending on how this was done, it could be weeks to months to your lead time.
Since it takes weeks to months to start fulfilling orders out of your local warehouse, you need to have more inventory available to get started and to support regular orders. Relying on bulk ordering for this style of fulfillment has more risk with initial cash-flow, higher holding costs, and less flexibility to react to demand.
DTC China Fulfillment
Now, let’s look at what DTC China shipping looks like:
- A business connects with a China-based supplier and makes a small purchase order (usually enough for a few weeks worth of order volume).
- Once the order is complete, products are shipped from the factory to a China-based fulfillment warehouse.
- As customers place orders, they are fulfilled from the China-based warehouse.
This process cuts out sea freight, major customs clearance, and navigating port congestion entirely. There are other huge benefits to DTC China fulfillment as well, including:
- Fast lead times between factories and warehouses. Most fulfillment warehouses, including ours, are located within Shenzhen. That means warehouses can receive inventory from anywhere in China within 1-4 days. EcommOps has access to suppliers that can get products to warehouses within a few hours.
- The ability to ship directly to U.S. customers within 5-8 days.
- Allowing for “just in time” stock planning. For example, if you have a lead time of three days to get to your warehouse, you can plan for 5-10 days of stock (instead of six months). This lowers your risk, allows for easier scaling, and factories prefer this process (it’s easier to complete small batch orders instead of rushing 6 months of inventory)
DTC China Fulfillment Case Study – Existing Brand
Case studies can provide real-world insight in the advantages of DTC China shipping. First, let’s examine an existing brand that looked to EcommOps for help, and what we were able to do with their supply chain.
Our first case study involves a brand incubator that frequently launched, developed and scaled new products, and they used China suppliers for manufacturing. When the brand reached out to us for help, they already had $100M+ in global sales.
The Problem
This brand used North American and European 3PLs, so they constantly faced two problems: either tie up too much capital in stock or face running out of stock when demand spiked. Supply chain disruptions and uncertain demand fluctuations made inventory planning almost impossible.
They asked if EcommOps could provide a fulfillment option with lower lead times that had lower costs than air freight.
The Solution
Our warehouse in Shenzhen was only two days away from the supplier the brand already used. With shortened lead times from the supplier to our fulfillment warehouse, they ended up fulfilling 50% of their orders directly from China. The result? They were able to scale up to tens of thousands of orders, per day, within just a few weeks, all at a cheaper fulfillment cost. This provided the shorter lead times they needed and was at a far lower cost than using air freight to ship bulk orders.
Case Study – Launching New Brands
A different product development and branding agency approached us for help. They often worked with major social media influencers to co-develop, market, and launch customized products.
The Problem
It would take months to launch, even after products were already manufactured. This was caused by unpredictable freight lead times, and the client regularly missed key events or sales seasons due to these delays. It also caused friction with their partner influencers, who were ready to start marketing the product and didn’t understand why they weren’t ready to launch. They needed EcommOps to provide a solution that allowed them to launch and ship products without being at the mercy of unpredictable freight times.
The Solution
When they partnered with EcommOps for the first time, the product launched a month early and sold 40,000 units within 20 minutes. Subsequent product campaigns were launched just weeks after this initial success. Using DTC fulfillment allowed this brand to avoid using freight almost entirely, which resolved the issue of missing key sales periods.
The customer now almost exclusively ships products directly from China, due to the overwhelming (and reliable) success.
Unlock New Markets: Ship Worldwide to Most Major Countries
If you already have a winning product, one of the easiest ways to increase sales volume is to break into a new, international market. However, if a business only uses local fulfillment, shipping costs will be an enormous barrier to effectively entering an international market.
Since shipping costs are so high, most ecommerce brands don’t have enough profit margins to offer free, international shipping. When a customer wants to buy from them, they’ll be faced with:
- High shipping costs
- Extremely slow shipping
- An overall poor customer experience
An expensive, slow shipping experience can kill conversions, even if you have a superior product to what’s locally available for international customers. However, DTC China shipping resolves this issue, since you ship directly to customers, skipping local warehousing. It reduces shipping costs, with companies seeing 50% less or more in shipping costs, and it allows products to ship faster, since you cut out the step of shipping to a local warehouse before fulfillment.
We have another real-word example of how using DTC China shipping can help break into international markets with excellent profit margins.
Case Study – Worldwide Shipping
We had an established beauty brand reach out to us for help. When they contacted us, they had eight-figures in annual sales, primarily focused in the U.S. market, with sales volume quickly increasing. There was also a strong interest from global markets, but international sales only made up a tiny fraction of the overall sales.
The Problem
This brand was using U.S.-based local fulfillment, which was hurting their ability to expand into international markets. They had to charge customers $15 for international shipping and it still took weeks to deliver the product. The brand couldn’t overcome this hurdle to scale international sales volume, and their international presence stagnated.
The Solution
Fortunately, this brand was already working with China-based suppliers. When they partnered with EcommOps, we began to fulfill orders directly from our China-based fulfillment centers. This cut their international shipping costs by 50% and cut delivery times to just 1-2 weeks. The brand was also able to offer free international shipping (due to the shipping cost reduction), which allowed them to grow global sales by 40% within just a few weeks.
Even though they offered free shipping to international customers, their product margins remained equitable to domestic sales, thanks to the cost savings provided by DTC China fulfillment.
Optimal Strategy to Leverage Direct From China Fulfillment
So, what’s the optimal strategy for businesses that want to leverage direct-from-China shipping? For many businesses, it’s combining DTC shipping and local fulfillment. Using a hybrid approach allows businesses to
- Use local fulfillment to take advantage of the superior price-per-unit that traditional bulk ordering usually offers.
- Use DTC fulfillment to address unexpected spikes in demand without selling out.
Businesses may decide to test a new product with DTC China shipping, and once it proves itself to be a consistent winner, they can mix in bulk ordering to take advantage of higher profit margins.
Businesses can also opt to start with DTC China shipping, and if a product proves to be a consistent winner, they can mix in bulk ordering and local fulfillment to take advantage of higher profit margins. We regularly encourage clients to leverage a hybrid strategy for maximum consistency (though whether you should will depend on the unique needs of your business).
Tips for a Mixed Model Strategy
Combining fulfillment methods can be a winning strategy, but there’s a few tips you should follow to avoid unnecessary complications:
- Be able to determine which warehouse fulfills what order. You don’t want to double fulfill an order or miss an order entirely.
- Set a hard number when the China warehouse should begin to fulfill orders. Setting the threshold of when the China warehouse should begin to fulfill orders is an easy way to avoid fulfillment confusion.
- Set appropriate customer expectations. Different fulfillment methods will have different shipping times for customers. Make sure you have a way to provide appropriate expectations for customers depending on where their order is fulfilled.
- Take advantage of lower lead times for your China warehouse. We see businesses that struggle to adjust to using DTC China shipping. You don’t need to order 6 months of stock at a time if you really only need 1-2 weeks worth of stock. This will lower your storage costs (for example, EcommOps won’t charge a storage fee for inventory held less than 30 days).
- Don’t be afraid to approach suppliers with this strategy. Remember, suppliers like regular, small orders to fulfill. Just like your business is looking for consistent demand, so are your partner factories.
Conclusion
DTC China shipping is an opportunity for all kinds of businesses. As a reminder, if you want to make the most of DTC China shipping, your business should:
- Work with a supplier in China.
- Ship consumer orders directly to customers.
If you are the kind of business that would benefit from China fulfillment, the advantages are:
- Avoiding tying up capital in large amounts of inventory.
- Having flexibility to respond to inconsistent demand.
- 50% cheaper international shipping with products delivered within 5-8 days.
- Access to international markets at high profit margins.
Here at EcommOps, we regularly use direct-from-China fulfillment to help businesses scale in ways they didn’t think possible. We would love to talk to you more about our services and whether we’re a good match for your company. Click to fill out our contact form, and our experts will be in touch to learn more about how your business operates.
FAQs
1. How can China order fulfillment work for seasonal products?
DTC China shipping is perfect for seasonal products. It provides the flexibility that a business needs to meet the inconsistent demand that seasonal products are known for. We encourage businesses to follow a hybrid strategy for seasonal goods, for example, Christmas ornaments. Have some inventory for local fulfillment and then have DTC China shipping available should your local warehouses sell out.
2. Do you recommend shipping stock to a 3PL in Mexico and using freight trucking to go over the border as a duties/taxes loophole?
If there are any legal loopholes that can help your business, use it! However, DTC China fulfillment makes this a moot point, since parcels less than $800 have no duties at all. This can make DTC China shipping attractive if your product has high tariffs.
3. Do you offer free warehousing storage services?
We offer 30 days of free warehousing. As long as your product turns within 30 days, you won’t see a warehousing fee from us (which is why we encourage businesses to take advantage of factory lead times and not overstock inventory). We help clients adjust to not needing to buy 6-12 months of inventory at a time, and 80% of our clients don’t pay any warehousing costs to us.
4. Do you offer shipping fulfillment to South America?
Yes! It can be less efficient (1-3 weeks), but there’s also not a better option to get products shipped to South America. This is due to lack of infrastructure and local inventory fulfillment, though Brazil and Chile are the easiest to ship to. If you are fulfilling orders in Brazil, make sure to have a tax ID to avoid import issues.
5. Who is responsible for customs with DTC China shipping?
In most countries, customs clearance is very simple (consumer packages are small enough that they don’t trigger duties or taxes). However, any taxes or tariffs that are present will be the responsibility of the seller (you). Common taxes you will be responsible for are point of sale taxes and VAT.
6. Are your warehousing fulfillment services integrated with Shopify or WooCommerce?
Yes! When looking at DTC shipping partners, like EcommOps, the best options will integrate with Shopify, WooCommerce, and most popular platforms. There are other options as well, like custom CRMs, custom backends, and other customized tech solutions. You’ll want to be sure to work with a fulfillment service that can offer customized tech solutions that are ideal for your business.
We offer customized tech solutions, since many of our clients are building their own custom funnels and their own custom websites.
7. How important is it for e-commerce companies to offer free shipping to increase sales conversion?
It honestly can be hard to determine how important free shipping is to sales conversions, especially for winning products. If charging shipping lowers conversions but increases revenue, it may be a good option for your business.
Generally, if you can offer free shipping, you should, and you should never move from free to paid shipping (we’ve seen clients conversion numbers tank when they do this).
8. Do you offer e-commerce order fulfillment to Australia?
EcommOps does offer e-commerce order fulfillment to Australia. Our services are available in most major countries, but if you’re unsure of if we can help your ecommerce business, we’d love to talk to you directly.
